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HomeMy WebLinkAboutStaff Report 2501-40025.Review and Recommend Utilities Advisory Commission FY 2025 – 2026 Work Plan for City Council Approval​ 8:30PM – 9:00PM Item No. 5. Page 1 of 2 Utilities Advisory Commission Staff Report From: Kiely Nose, Interim Utilities Director Lead Department: Utilities Meeting Date: March 5, 2025 Report #: 2501-4002 TITLE Review and Recommend Utilities Advisory Commission FY 2025 – 2026 Work Plan for City Council Approval RECOMMENDATION Staff recommends the Utilities Advisory Commission (UAC) to review, provide feedback, and recommend City Council approval of the FY 2025 - 2026 Annual Work Plan. BACKGROUND In accordance with the 2020 City Boards, Commissions, and Committees Handbook, each Board and Commission should prepare an annual work plan for proposal to the City Council by the second quarter of the calendar year. The Council will review the work plan and provide feedback annually at a dedicated City Council meeting. The annual report should include the results of the prior year’s plan. When applicable, the City Council would like to see metrics of community involvement and participation in meetings and activities included in the work plan. Council expects Boards and Commissions to work on items in the approved workplan. In addition, Council may refer additional items to the Boards and Commissions in response to new developments. Boards and Commissions should refrain from expending their time and that of the staff liaison on items that have not been approved by the City Council. If the Board or Commission would like to add an issue for review after an annual workplan has been approved by the City Council, a prompt request by the Board or Commission Chair to the City Council is required and the item will then be addressed by the City Council as a whole. ANALYSIS Staff prepared attachment A, a draft UAC workplan for FY 2025-2026 based on standing items for the Commission. In addition, Utilities Advisory Commissioners were surveyed for proposed FY 2025-2026 priorities for the UAC to consider. Below are the responses received at the publishing of this report, in no specific order. Upon development and approval of the UAC workplan by the Commission, it will be brough forward to the City Council for review and approval to ensure alignment of priorities and resources in Spring 2025. Potential UAC Workplan Items received to date: Item No. 5. Page 2 of 2 •Emergency Preparedness: Examples that may be covered could include long term power outages and wildfire mitigation plan •Advocacy Letters: Examples that have been previously discussed: One Water Advocacy Letter and Bay Area Water Supply & Conservation Agency Advocacy Letter [currently agendized for March 2025 commission meeting] Staff will issue an additional supplemental item with any additional feedback from Commissioners by March 3, 2025 to support the UAC discussion and development of the workplan. City Council Priority Setting Process Status: On January 25, 2025, the City Council adopted its priorities for 2025: •Economic Development & Retail Vibrancy •Climate Action and Adaptation & the Natural Environment Protection •Implementing Housing Strategies for Social and Economic Balance •Public Safety, Wellness & Belonging As has been the City’s practice for the past few years, staff has followed the City Council approval of its priorities by developing and recommending for City Council approval a set of objectives to advance each priority throughout the calendar year. The City Council is scheduled to review these objectives (68 recommended) and City Council workplans for 2025 at its February 24, 2025 meeting, guiding and prioritizing resource allocation for 20251. RESOURCE IMPACT The UAC recommended workplan does not have an immediate fiscal impact; however, resources may be needed to be allocated to implement workplan items the Commission wishes to recommend. Opportunities to allocate resources to projects include the FY 2026 annual budget process, with adoption scheduled for June 2025. In addition, the City Council may amend the budget throughout the year. ATTACHMENTS Attachment A: DRAFT Utilities Advisory Commission FY 2025 – 2026 Workplan AUTHOR/TITLE: Kiely Nose, Interim Director of Utilities Staff: Kaylee Burton, Utilities Administrative Assistant 1 City Council, February 24, 2025, Agenda Item #10; https://cityofpaloalto.primegov.com/meetings/ItemWithTemplateType?id=7064&meetingTemplateType=2&comp iledMeetingDocumentId=13223 7 1 0 0 Utilities Advisory Commission 2025-2026 Workplan Staff Liaison: Kiely Nose, Interim Director of Utilities Lead Department: Utilities About the Commission The Utilities Advisory Commission (UAC) is charged with providing advice on long range planning and policy matters, acquisition, development, and financial review of electric, gas and water resources; joint action projects with other public or private entities which involve electric, gas or water resources; environmental implications of proposed electric, gas or water utility projects; and conservation and demand management. Additionally, the UAC is charged with providing advice on the acquisition, development and financial review of the dark fiber network and wastewater collection utilities. As a highly regulated industry, there may be matters not listed below that will be presented to the UAC in accordance with current or future (local, state, or federal) legislative requirements. The Commission is composed of 7 members. Terms are for 3 years and commence on the first meeting in April. See Palo Alto Municipal Code (PAMC) Sections 2.23.010 (Membership), 2.23.030 (Term of Office), 2.23.040 (Officers), 2.23.050 (Purpose and Duties), and 2.23.060 (Meetings). Current Commissioners •Greg Scharff (Chair) •Meagan Mauter (Vice Chair) •Phil Metz •Rachael Croft •Robert Phillips •Utsav Gupta •Chis Tucher Mission Statement The purpose of the Utilities Advisory Commission shall be to advise the City Council on present and prospective long-range planning, policy. major program, and project matters relating to the electric, gas, water, wastewater collection, fiber optics utilities, and recycled water matters, excluding daily operations. The Utilities Advisory Commission shall have the following duties: •Advise the City Council on long-range planning and policy matters pertaining to: Joint action projects with other public or private entities which involve, affect or impact the utilities; Environmental aspects and attributes of the utilities; •Water and energy conservation, energy efficiency, and demand side management; and Recycled water matters not otherwise addressed in the preceding subparagraphs; •Review and make recommendations to the City Council on the consistency with adopted and approved plans, policies, and programs of any major utilities; 7 1 0 0 •Formulate and review legislative proposals regarding the utilities, to which the city is a party, in which the city has an interest, or by which the city may be affected; •Review the utilities capital improvement programs, operating budgets and related reserves, rates, and the recycled water program, budget, rate, and thereafter forward any comments and recommendations to the finance committee or its successor; •Provide advice upon such other matters as the City Council may from time to time assign. The Utilities Advisory Commission shall not have the power or authority to cause the expenditure of city funds or to bind the city to any written, oral, or implied contract. The Utilities Advisory Commission may, subject to its City Council-approved bylaws and at the discretion of the City Council, foster and facilitate engagement with the general public, not excluding representatives of commerce and industry, in regard to the utility matters referred to in subsections above. Prior Year Accomplishments Advanced Heat Pump Water Heater (HPWH) Pilot Program: -Over 500 customers have installed a heat pump water heater using the City’s rebate, full service, or emergency replacement program to-date, and the pace of installations is approximately 20% of annual water heater replacements. Advanced Meter Infrastructure (AMI) -21,492 gas customers have had completed installs -18,035 water customers have had completed installs -21,411 electric customers have had completed installs Renewable Energy Credit (REC) Exchange Program -Approved by Council on 12/12/2022 to continue the program and return to the UAC and Council in 2025 -Sold 161,900 PCC1 RECs and purchased 160,000 PCC3 RECs, yielding $10.86 million in net revenue for 2024 Fiber-to-the-Premises (FTTP) -Began coordinating grid mod project with FTTP -Identified and began addressing key challenges -Pilot to align grid mod project with FTTP -CEQA Initial Study for FTTP Electric Grid Modernization (Grid Mod) An Electrification Study was performed by a consultant with the goal of identifying any electric system upgrades needed across the electric distribution system. The focus of the Study resulted recommendations for upgrades to line transformers, feeder capacity, increasing the number of switches and connections on the system between feeders and substations, and upgrading substation equipment. Staff prepared plans and construction drawings to a Pilot area selected within the Phase 1 boundary, Construction on the first modernization project is started in Q2 2024 in a 1200-home neighborhood pilot area bounded by Louis, Amarillo, 101, and Embarcadero. The modernization projects will be coordinated with fiber to the premise (FTTP) construction. To capitalize on synergies between GridMod and FTTP, a Pilot area combining both GridMod and FTTP project was identified, and the joint Pilot project boundary was fixed. The GridMod design was contracted with consultant Entrust, and the construction of the Pilot was started in Q3 of 2024, and completion of the construction work is anticipated at the end of Q2 7 1 0 0 2025.As of January 9, 2025, , 60 of 74 poles have been replaced, 51 new transformers have been installed, and the service to over 500 households in the Pilot area have been prepared and are ready for electrification. Engineering staff has started the planning and design work for the remainder of the Phase 1 area, which Staff expects the construction of to be completed by Q4 of 2025. Sewer System Replacement 31 (SSR31) -Conducted successful outreach meeting with Barron Square HOA residents who have been impacted by the activity at the project’s laydown yard. The on-going communication has been effective to keep the Barron Square residents informed. -The portion of the work requiring 2-lane closure on El Camino Real was performed at night. No more nighttime work is anticipated on this project, unless unexpected condition dictates. -Continue with daytime work. The remaining work will be performed on El Camino Real between Fernando and Sheridan and on Page Mill Road between El Camino Real and Ramons Way. -Project is currently on track to be completed in May 2024, before Caltrans and County of Santa Clara’s paving projects start. Water main replacements 9,893 Feet of water main replaced 252 services replaced 7 1 0 0 STANDING TOPIC 1:Annual Budget - Rate changes to Water, Gas, Electric, Wastewater collection, and Fiber services. BENEFICIAL IMPACTS TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED / LOCAL LAW / COUNCIL-APPROVED The community will have a better understanding of the rates and why they are being charged. Rates are reviewed annually and each rate change is determined by the COSA reports. UAC review is in March, FCM review is in April and CCM approval is in June Staff time, Legal team review time, Consultant time to create the COSA report. Council approval of budget N/A HIGH PRIORITY LOWER PRIORITY COUNCIL-DIRECTED POLICY UPDATE Rates are always a high priority. The change has an impact on the community and economy.N/A N/A STANDING TOPIC 2:Water Supply: Consider potential future sources of water supply. This includes recycled water, demand management programs, grey water, treatment efforts, and use of effluent. BENEFICIAL IMPACTS TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED / LOCAL LAW / COUNCIL-APPROVED The benefit to the community is to have ample water source and supply when needed in the event of a drought or for basic uses This is not a single effort or project; however, a year-round effort Staff time, Legal team review time, Consultant time for development of the One Water Plan which is a holistic 20-year water portfolio Council approval of the One Water Plan which includes adaptable, dynamic, water supply portfolios. N/A HIGH PRIORITY LOWER PRIORITY COUNCIL-DIRECTED POLICY UPDATE Having knowledge of where the City's water supply is coming from and how we maintain that supply is a maintained priority.. N/A N/A 7 1 0 0 STANDING TOPIC 3:Electric Supply: Consider updates to the electric supply portfolio and issues relating there to. BENEFICIAL IMPACTS TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED / LOCAL LAW / COUNCIL-APPROVED Reliability for customers, health benefits, and clean energy responsible for the vast carbon reduction the City has achieved over the past decade This is an ongoing regularly monitored effort and does not have a start or completion time Approved budget, staff time, legal review time, consultants as needed, and technology Release of RFP for more renewable energy supply options in the Integrated Resource Plan (IRP). Have the IRP near completion to present to the UAC for review and approval. Maintaining and expanding the zero emissions portion of the portfolio and carbon neutral plan. N/A HIGH PRIORITY LOWER PRIORITY COUNCIL-DIRECTED POLICY UPDATE The health and well being of the community is a high priority for Council and Utilities N/A N/A STANDING TOPIC 4:Gas Supply: Consider aspects of the gas supply portfolio and issues relating thereto BENEFICIAL IMPACTS TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED / LOCAL LAW / COUNCIL-APPROVED Gas is a type of energy used to provide some residences and businesses in Palo Alto with heat for their facilities and some cooking appliances. This is not a single effort or project; however, a year-round effort Staff time, Legal team review time, Consultant time when necessary Utilities on average are 10% below PG&E's rates year round N/A HIGH PRIORITY LOWER PRIORITY COUNCIL-DIRECTED POLICY UPDATE The health and well being of the community is a high priority for Council and Utilities N/A N/A 7 1 0 0 STANDING TOPIC 5:Utilities CIP's: Discuss CIP projects. BENEFICIAL IMPACTS TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED / LOCAL LAW / COUNCIL-APPROVED There are multiple CIP's throughout the Utilities, each with their own benefits to the City and the community from rebuilding the water reservoirs, repairing and replacing sewer lines or water mains, maintaining street lights, building out the fiber backbone, upgrading the meter system to upgrading the outage management system Utilities has multiple projects in their Council approved CIP budget. Most of these projects are multi year based. Staff time, Legal review time, Procurement time for setting up contracts, contractors for work completion Utilities CIP success is completion of the project within the timeline and budget that was approved by Council. N/A HIGH PRIORITY LOWER PRIORITY COUNCIL-DIRECTED POLICY UPDATE Maintaining quality of life for the community creates the priority for Utilities projects N/A N/A STANDING TOPIC 6:Reliability, Resiliency and adaptation: Ongoing discussions regarding the reliability and resiliency of the utilities. BENEFICIAL IMPACTS TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED / LOCAL LAW / COUNCIL-APPROVED This matter encompasses a number of situations including but not limited to the S/CAP program. The benefit of any of the reliability or resiliency projects is to support the City and community now and into the future with reliable, safe connections, water, electricity, fiber and natural gas These programs and projects are year round and do not have a beginning or an end. For example the S/CAP is set to accomplish the goal by 2030 Budget approval, staff time, additional staff, and some use of consultants Maintaining a high level of efficient, safe, economic, and reliable services. YES HIGH PRIORITY LOWER PRIORITY COUNCIL-DIRECTED POLICY UPDATE The S/CAP is a Council priority and therefore a High priority for the Utilities Advisory Commission to focus on N/A N/A 7 1 0 0 STANDING TOPIC 7:Legislative Initiatives: The Utility tracks many local, state and federal bills that touch on utilities. Should any new laws, regulations, or ordinances pass during the year, the UAC may need to discuss the changes. BENEFICIAL IMPACTS TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED / LOCAL LAW / COUNCIL-APPROVED Staff tracks the possible changes in laws and regulations and presents the proposed changes to the UAC for review and consideration to the Council. Legislature meets throughout the year and possible changes can occur at any point that effect utilities Staff time, travel, and legal review time This is a non-measurable project State Mandated HIGH PRIORITY LOWER PRIORITY COUNCIL-DIRECTED POLICY UPDATE N/A The level of priority is based on the particular legislation being proposed and how it effects the regulated utilities N/A STANDING TOPIC 8:Council Driven Initiatives: The UAC will address any matter assigned by the City Council. BENEFICIAL IMPACTS TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED / LOCAL LAW / COUNCIL-APPROVED The UAC is made up of a diverse group with insight of the innerworkings of and vast knowledge in the utilities arena. Timeline will be addressed once assigned UAC, Staff and legal review time Council approval of completed task YES HIGH PRIORITY LOWER PRIORITY COUNCIL-DIRECTED POLICY UPDATE Typically when Council requests a review of an item it is considered a priority N/A N/A 7 1 0 0 Standing Topic 9: S/CAP Support: Discuss community engagement, technology (current & emerging), finance, and community scaling of S/CAP plans to meet the City’s goals for sustainability and climate action. This includes electrification efforts, possible code modifications, potential full or partial retirement of the gas distribution system, and electrification of gas appliances. It also includes permitting and inspection processes for customers wishing to upgrade panels, electrify appliances, or install solar PV, energy storage, and/or EV charging systems. BENEFICIAL IMPACTS TIMELINE BENEFICIAL IMPACTS TIMELINE BENEFICIAL IMPACTS UAC expertise will help the Council S/CAP Committee make progress on achieving S/CAP goals with benefits to reducing the impacts of climate change. In these areas: Ongoing support to the S/CAP Committee UAC expertise will help the Council S/CAP Committee make progress on achieving S/CAP goals with benefits to reducing the impacts of climate change. In these areas: Ongoing support to the S/CAP Committee UAC expertise will help the Council S/CAP Committee make progress on achieving S/CAP goals with benefits to reducing the impacts of climate change. In these areas: HIGH PRIORITY LOWER PRIORITY COUNCIL-DIRECTED POLICY UPDATE Support S/CAP Committee goals to develop plans and improve processes for building electrification Discussions of other forms of emissions reduction besides building electrification Support S/CAP Committee goals to develop plans and improve processes for building electrification Item No. 5. Page 1 of 5 Utilities Advisory Commission Supplemental Report From: Kiely Nose, Interim Director of Utilities Meeting Date: March 5, 2025 Item Number: 5 Report #:2502-4220 TITLE Supplemental Information: Review and Recommend Utilities Advisory Commission FY 2025 – 2026 Work Plan for City Council Approval RECOMMENDATION Staff recommends the Utilities Advisory Commission (UAC) to review, provide feedback, and recommend City Council approval of the FY 2025 - 2026 Annual Work Plan. This supplemental report transmits proposed workplan items submitted by UAC commissioners subsequent to the release of the original staff report to assist in facilitation of the UAC discussion and recommended workplan for Council consideration. BACKGROUND In accordance with the 2020 City Boards, Commissions, and Committees Handbook, each Board and Commission should prepare an annual work plan for proposal to the City Council by the second quarter of the calendar year. The purpose and duty of the UAC is outlined in the City of Palo Alto Municipal Code Chapter 2.23.050. “The purpose of the utilities advisory commission shall be to advise the city council on present and prospective long-range planning and policy and major program and project matters relating to the electric utility, gas utility, water utility, wastewater collection utility, fiber optics utility and recycled water matters, excluding daily operations.” ANALYSIS The Commission is recommended to consider its purpose as defined in the Palo Alto Municipal Code, the City Council Priorities, the City Council Priority objectives, and Council approved workplans and strategic plans as some of the variables when deciding on recommended workplan items to the work of the Commission for 2025. This will ensure alignment with the City Council activities and resource allocation. The UAC may add a workplan topic, amend an existing topic on the draft workplan to address a desired topic more explicitly, and may choose Item No. 5. Page 2 of 5 to consider items for future years. As a reminder, the workplan is intended to reflect activities to be completed in a 12-month period, specifically identifying the UAC role and actions. This workplan will be forwarded for City Council review and approval by recommendation of the UAC. UAC Commissioner Workplan Feedback Item No. 5. Page 3 of 5 13. Emergency Preparedness: Prepare CPAU and the Palo Alto community it serves for emergencies, such as earthquakes, cyber-attacks, wildfires, and floods, in coordination with Palo Alto’s Office of Emergency Services (OES). 14. Grid Modernization Strategy: successfully address the key issues that will affect the design and cost of CPAU’s future distribution Grid. Annual update on project. Proposed Topics and Current Status: To assist the UAC in finalizing it’s recommended workplan, staff have provided the following information to assist in identifying any existing alignment with standing UAC workplan topics and or the current status or schedule of items suggested by various Commissioners. Title UAC Standing Topic Current Status / Schedule 1. Long-Term Strategy for CPAU’s Natural Gas Utility Topics 8 & 9 Decommissioning of the CPAU natural gas utility is an action item both in the Council 2025 priority objective and S/CAP approved workplan and falls under these two standing topics. Specifically, ‘Share preliminary analysis of strategies for a physical and financial transition of the gas utility to relevant policymakers and stakeholders’ is the expected work for 2025. 2. Feasibility of Purple Pipe Expansion & Establishment of a Recycled Water Utility N/A New Workplan Item Purple pipe has previously been explored in the Northwest County Recycled Water Strategic Plan which included a business plan for a system expansion1 with discussion at the UAC2 and City Council3 in 2018. Information from this study was recently updated for use in the One Water Plan. Current Regional Water Quality Control Plant improvements are focused on rehabilitation of the over 50-year-old regular sewage treatment functions. 3. Universal Access N/A New Workplan Item 4. Regional Collaboration on Water Supply N/A Advocacy letters both discussing the One Water Plan framework and engagement with SFPUC and BAWSCA are agendized for the March 2025 UAC meeting for recommendation to City Council. 5. Credit Card Fees N/A New Workplan Item This topic relates to Standing Topic 1, review of the annual budget and rate changes for utility services though can be considered off cycle by the Commission from the typical rate setting process. 1 Northwest County Recycled Water Strategic Plan https://www.cityofpaloalto.org/files/assets/public/v/1/public- works/water-quality-control-plant/recycled-water/2021/tm-6.5_30dec2020.pdf 2 UAC October 2018; https://cityofpaloalto.org/civicax/filebank/blobdload.aspx?t=72210.49&BlobID=68055 3 City Council November 2018; https://cityofpaloalto.org/civicax/filebank/blobdload.aspx?t=72210.49&BlobID=68054 Item No. 5. Page 4 of 5 Title UAC Standing Topic Current Status / Schedule 6. Fiber to the Premises (FTTP) Pilot & Phase 1 Topic 1 FTTP is an action item in the Council 2025 priority objectives ‘Complete build-out of fiber-to-the-premises (FTTP) pilot Phase 1 with grid modernization…and work to establish internet service provider operations’ in 3rd quarter (Q) of CY 2025. In alignment with the Standing Topic 1, rates for fiber services are scheduled for UAC review in Q2 of CY 2025. 7. Federal Issues and Collaboration Topic 7 Standing Topic 7 addresses legislative initiatives, tracking local state and deferral bills that impact utilities operation and regulations and review of changes needed with the UAC to the extent needed. These actions support the real time tracking of issues a recognize alignment with existing legislative guidelines for City operations as adopted by the City Council annually. Considering the recent federal administrative actions, the City Council has taken action to create a Council ad hoc committee to draft a resolution that ‘underscores the Council’s Commitment to Sustaining Palo Alto Values and Interests’ in the face of the federal administration. 8. Data Center Competitiveness N/A New Workplan Item 9. Microplastics and Forever Chemicals in Water Supply and Wastewater N/A New Workplan Item As part of the City’s operating activities, testing of wastewater and water occur in accordance with state and federal laws and regulations as well as with applicable permits issued by regulatory agencies. During 2023, the City tested for PFAS and all results were below reporting limits and were presented in the City’s 2023 Water Quality Report.4 During 2022, the State Water Board issued an order for certain agencies to begin testing for microplastics.5 SFPUC is one of initial agencies required to monitor surface water for microplastics and staff are waiting for the results of the state’s investigation. 10.Time of Use Rates (Electricity) Topic 1 In alignment with the Standing Topic 1, rates for electric utility service pilot time of use rates are scheduled for UAC review in 2025 including implementation plans and the rates recommended for feedback and recommendation to the Finance Committee and City Council. 11.Demand side management (DSM) Topics 2, 3, 4, & 9 Standing Topics 2-4 facilitate discussion of demand side management of utility commodities. Annually as part of the 2nd quarter Utilities Quarterly Report, the annual DSM report is prepared and transmitted for the UAC review. In addition, 4 City’s 2023 Water Quality Report https://www.cityofpaloalto.org/files/assets/public/v/1/utilities/water- quality/pal108cpauwaterannual2023.pdf 5 Water State Board Begin Testing for Microplastics https://www.waterboards.ca.gov/drinking_water/certlic/drinkingwater/documents/microplastics/rs2022- 0032.pdf Item No. 5. Page 5 of 5 Title UAC Standing Topic Current Status / Schedule the 10-year Energy Efficiency goals are scheduled to be reviewed by the UAC in spring 2025. Discussion of technologies to advance demand management are included as part of the Reliability and Resiliency Strategic Plan reviewed by UAC and approved by Council and part of the approved S/CAP plan outlined in Standing Topic 9. 12.Stanford Interconnection N/A New Workplan Item The City and Stanford have explored interconnection between the agencies as recently as January 2021, however, discussions concluded due to parties unable to reach agreement on price and terms. Resources were refocused and have continued to work on establishing a second transmission corridor with PG&E. 13.Emergency Preparedness N/A New Workplan Item The Office of Emergency Services is updating the City’s Emergency Operations Plan (EOP) in 2025. The EOP will be in alignment with the 2023 Santa Clara County Multijurisdictional Hazard Mitigation Plan. Additionally, two work initiatives are underway relating to this topic, an audit by the City Auditor (as provided by Baker Tilly) regarding wildfire preparedness and the recent wildfire maps as released by the State of California Fire Marshall. Both are scheduled to be reviewed by the Policy & Services Committee and City Council by the conclusion of FY 2025. 14. Grid Modernization Strategy Topics 5 & 6 The significant investments for Grid Modernization capital improvements - in alignment with activities under Standing Committee topics 5 and 6, Utilities Capital Improvement Program and reliability and resiliency activities respectively - are next scheduled to be reviewed by the UAC in early FY 2026 to support review of financing authorization for issuance of debt including a project update. Studies recently reviewed by UAC inform future implementation of grid management systems to improve situational awareness, operational efficiency and Distributed Energy Resources (e.g. rooftop solar, battery storage, and electric vehicles). ATTACHMENTS Attachment B: Proposed Topics Submitted by UAC Commissioners APPROVED BY: Kiely Nose, Interim Director of Utilities Proposed Topic 1: Long-Term Strategy for CPAU’s Natural Gas Utility - Develop a comprehensive 5–20 year plan to align the gas utility with climate goals, financial stability, and regulatory changes, while evaluating options for electrification, biogas integration, and long-term infrastructure strategy. BENEFICIAL IMPACTS TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED / LOCAL LAW / COUNCIL-APPROVED Provides a comprehensive, future-focused plan for CPAU’s natural gas utility over the next 5, 10, and 20 years. Integrates climate impact, regulatory environment, and evolving market conditions (e.g., supply, building electrification trends). Ensures financial stability by addressing costs, procurement strategies, tariffs, revenues, and the utility’s contribution to the City. Identifies how best to align the gas utility with Palo Alto’s sustainability goals and community expectations over the long term. Short‐Term (6–12 mo.) Define scope and objectives of the long‐term gas utility strategy. Gather data and costs on externalities (supply constraints, regulatory changes, climate impacts, cost of compliance). Engage stakeholders (residents, businesses, environmental groups) to identify concerns/goals. Medium‐Term (12–24 mo.) Develop draft plan outlining potential pathways (e.g., maintaining gas utility with partial electrification incentives, exploring advanced biogas/hydrogen blends, pricing in true cost of gas and its externalities, or phasing down distribution). Conduct financial analyses (cost, revenue, rates, capital investment, utility payment to City) and regulatory feasibility. Long‐Term (24+ mo.) Finalize and adopt a formal strategy for the next 5–20 years. Begin implementing policy, infrastructure, and rate changes as approved by Council. Staff analysis (Utilities, Finance, Sustainability) and potential consultants for policy, engineering, and market assessments. Legal counsel for evolving regulations and potential litigation (e.g., building electrification mandates). Stakeholder outreach resources for public engagement. Completion and Council adoption of a 5–20 year gas utility strategy. Clear articulation of how externalities and climate goals are addressed (e.g., cost of carbon, supply reliability, how pricing of gas rates should be adjusted to reflect externalities). Stable or well‐managed utility finances, including City payment, without undermining broader climate goals. Positive feedback from community stakeholders on transparency and alignment with City values. Gas regulation intersects with state and federal laws (CPUC, etc.). Local ordinances or building codes may require revision (Council approval). Council likely to be involved if new rate structures, code changes, or litigation decisions arise. HIGH PRIORITY LOWER PRIORITY COUNCIL-DIRECTED POLICY UPDATE High Priority, but not urgent—designed for a 2–3 year planning horizon. N/A Likely, if changes to local ordinances, building codes, or rate structures are proposed. Proposed Topic 2:Feasibility Study of Purple Pipe Expansion & Establishment of a Recycled Water Utility - Assess the potential for expanding Palo Alto’s recycled water system BENEFICIAL IMPACTS TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED / LOCAL LAW / COUNCIL-APPROVED Maximizes the City’s significant capital investment in the wastewater treatment/recycling plant. Reduces reliance on potable water by expanding the purple pipe system and usage within Palo Alto. Creates potential for a Recycled Water Utility to govern, finance, and manage distribution effectively. Enhances sustainability, resilience to drought, and local water independence. Short‐Term (6–12 mo.) Map and assess the existing purple pipe infrastructure, including the small system running down East Bayshore to the golf course and Greer Park. Quantify the volume of recycled water currently sent to Mountain View vs. local use. Initiate a feasibility study addressing technical, regulatory, and financial aspects of expanding the purple pipe system within Palo Alto. Medium‐Term (12–24 mo.) Evaluate costs/benefits of expansion scenarios, including potential revenue models or cost-sharing agreements. Benchmark other cities’ successful recycled water programs to explore best practices and potential governance structures. Engage stakeholders (residents, businesses, other agencies) on feasible expansion routes and priorities. Long‐Term (24+ mo.) If recommended, establish a formal Recycled Water Utility to govern distribution, set rates, and manage infrastructure. Begin phased construction of new pipelines or retrofits based on study findings and Council approval. Engineering/Consulting services for infrastructure assessment and expansion design Financial analysis to assess cost recovery, potential rate structures, or grants Legal/regulatory review to align with state requirements on recycled water Stakeholder outreach resources for community engagement Completion of feasibility study with clear recommendations for expansion Increased local recycled water usage within Palo Alto, reducing reliance on potable supply Viable business model for a Recycled Water Utility (if pursued) that covers O&M costs Positive feedback from City Council, stakeholders, and regulatory bodies on the expansion plan Council approval for capital investments and new utility formation. Subject to state and regional regulations. HIGH PRIORITY LOWER PRIORITY COUNCIL-DIRECTED POLICY UPDATE High priority due to current, substantial capital investment in recycling plant, to ensure City maximizes use of its investment. In addition, aligns with City’s sustainability goals. N/A Yes, major capital expansions may require formal Council action. Proposed Topic 3:Universal Access - Enhance CPAU accessibility beyond ADA compliance to ensure equitable service for all customers. BENEFICIAL IMPACTS TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED / LOCAL LAW / COUNCIL- APPROVED Ensures customers with disabilities can fully access CPAU services (billing portal, communications, facilities). Goes beyond minimum ADA compliance to adopt best practices in universal design. Builds equity and trust among all community members. Short‐Term (3–6 mo.) Conduct accessibility audit of CPAU platforms (e.g., billing portal, website, physical sites). Launch customer surveys & focus groups specifically for disabled customers. Medium‐Term (6–12 mo.) Implement identified improvements (e.g., user interface changes, alternative format billing). Provide staff training on universal design & inclusive communication. Long‐Term (12+ mo.) Ongoing monitoring & periodic re‐evaluation via user feedback surveys. Internal staff time Possible budget for any identified changes Higher user satisfaction among disabled customers ADA compliance is federally mandated but these efforts go beyond to provide universal access. HIGH PRIORITY LOWER PRIORITY COUNCIL-DIRECTED POLICY UPDATE High priority given equity considerations. N/A May require council policy changes (e.g., new design standards). Proposed Topic4:Regional Collaboration on Water Supply - Advocate for accurate drought planning, strengthen regional partnerships, and explore alternative water supply solutions to enhance resiliency, cost efficiency, and long-term water security. BENEFICIAL IMPACTS TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED / LOCAL LAW / COUNCIL- APPROVED Enhanced drought resiliency & diversified water supply. Accurate design drought and cut back scenarios to advise current and future planning. Stronger position in regional decision‐making. Potential cost savings via joint projects. Short‐Term (6–12 months): Advocate for regional partners, e.g. BAWSCA and SFPUC, to provide accurate design drought and cut back scenarios. Seek to bolster BAWSCA to advocate for accurate drought planning. Work with regional partners to identify and study feasibility of alternative water supplies. Medium‐Term (12–24 months): Work with regional partners to communicate to public potential planning around alternative water supply. Staff time for interagency coordination Possible consulting studies (supply forecasting, demand modeling) Incorporation of Palo Alto’s interests in regional water plans. Tangible progress on shared infrastructure or alternative supply solutions. Improved drought planning data. N/A HIGH PRIORITY LOWER PRIORITY COUNCIL-DIRECTED POLICY UPDATE High priority. BAWSCA has a new CEO/General Manager that the City and UAC should work with. SFPUC has just begun its own alternative water supply planning process, with a primary focus on purified water projects. Its recently approved 10-year capital improvement plan allocates $260 million toward alternative water supply programs within its $3.16 billion total budget, but much of this planning remains in the early stages. The UAC recently considered and did not proceed with the city’s One Water Plan, advising focusing on regional partnership to enhance our understanding of the drought planning scenarios for future regional and local planning and to seek a comprehensive regional strategy to alternative water supply. N/A N/A Proposed Topic 5:Credit Card Fees - Implement a fee pass-through to reduce City costs, improve transparency, and allow larger credit card payments while monitoring customer impact. BENEFICIAL IMPACTS TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED / LOCAL LAW / COUNCIL- APPROVED Potential $1.2M/year savings for the Utilities budget by shifting transaction fees to customers who choose credit cards. Encourages cost transparency and may incentivize lower‐fee payment methods. Allow for customers to charge larger bill amounts (>$5,000) to their credit cards, as fees are transparently passed on. Short‐Term (3–6 months): Implement updated fee pass- through structure and billing system changes. Develop communication plan for customers. Medium‐Term (6–12 months): Monitor and review impact on customer satisfaction and payment behavior. Billing software updates & staff training Customer communication/outreach Reduction in City’s transaction‐fee costs (targeting $1.2M savings). Customer acceptance measured by complaint levels or payment method shifts. Minimal negative impact on delinquency rates. N/A HIGH PRIORITY LOWER PRIORITY COUNCIL-DIRECTED POLICY UPDATE N/A Lower priority but also low-hanging fruit that can save $1.2 million annually. May require policy update. Proposed Topic 6:Fiber to the Premises (FTTP) – Pilot and Phase 1 - Review and evaluate pilot results, recommend to Council ISP rates, refine business and operations plan for Phase 1 rollout, and inform decision on further investment after Phase 1. BENEFICIAL IMPACTS TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED / LOCAL LAW / COUNCIL- APPROVED Enhances high‐speed internet access for residents & businesses. Ensure equitable access to high- speed and high-quality internet across the City, its neighborhoods, and its residents. Future‐proofs City’s communications infrastructure. Short‐Term (6–12 mo.): Complete pilot, begin marketing, gather data on take‐rate. - Medium‐Term (12–24 mo.): Evaluate pilot results, refine business and operations plan for Phase 1 rollout. Capital investment for fiber deployment Marketing budget Ongoing operations & maintenance funding Demonstration of operational success from pilot. Meeting or exceeding pilot and phase 1 goals Positive customer feedback and subscription growth. Sustainable model to cost‐recovery or revenue. Likely needs Council approval for budget allocations, rate structures, or bond financing HIGH PRIORITY LOWER PRIORITY COUNCIL-DIRECTED POLICY UPDATE High priority. The Council has approved a FTTP pilot and phase 1 to study eventual build-out to the city. In the coming year, the pilot will be started and studied. N/A N/A Proposed Topic 7:Federal Issues and Collaboration - Monitor federal policy changes, informational item regarding impact, secure critical funding, advocate for beneficial legislative or regulatory actions to protect City resources, and strengthen federal partnerships. BENEFICIAL IMPACTS TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED / LOCAL LAW / COUNCIL- APPROVED Helps the City mitigate negative effects from federal policy changes (e.g., budget cuts, shifting regulations). Identifies resources (e.g., federal grants) that City utilities rely on, ensuring continuity of funding & compliance. Positions the City to advocate effectively for beneficial regulatory or legislative changes. Strengthens relationships with federal representatives and agencies. Short‐Term (3–6 mo.) Inventory federal resources/programs used by the City (funding, permits, land, etc.). Develop risk assessment of potential federal cost‐cutting impacts. Identify immediate federal legislative or regulatory priorities for City advocacy. Medium‐Term (6–12 mo.) Engage regularly with federal representatives (e.g., staff briefings, letters, visits). Develop strategies to safeguard critical grants or programs. Long‐Term (12+ mo.) Propose any desired federal law/regulation changes for long‐term City benefit. Formalize ongoing mechanism for monitoring and responding to federal actions. Staff time to compile inventories and coordinate advocacy Possible outside lobbyist or legal counsel for federal issues Budget for travel/meetings in Washington, D.C. or regionally Timely identification of potential federal funding shortfalls or policy changes. Number of successful federal grants retained or newly secured despite cost‐cutting. Positive engagement/feedback from federal reps on City’s positions. Incorporation of City concerns into relevant legislative proposals or regulatory rulemaking. Council approval might be required for formal policy positions or lobbying expenditures. HIGH PRIORITY LOWER PRIORITY COUNCIL-DIRECTED POLICY UPDATE High priority given the potential budget or regulatory impacts. N/A May require council policy changes, including city resolutions or official stances on federal issues. Proposed Topic 8:Data Center Competitiveness - Review and recommend policies and incentives to attract data centers to Palo Alto BENEFICIAL IMPACTS TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED / LOCAL LAW / COUNCIL- APPROVED Potential to attract new data center developments or expansions, boosting local economic activity and job creation. Leverages Palo Alto’s carbon-free energy to market a more sustainable data center environment versus competitors. Increases City revenue streams (utility sales, property taxes, etc.) Increased sales may lead to reduced rates for our customers. Builds on existing tech reputation of Palo Alto/Silicon Valley. Short‐Term (1–3 mo.) Conduct market analysis comparing Palo Alto’s electricity rates, real estate availability, permitting processes, and data center–friendly policies to those of neighboring cities (e.g., Santa Clara). Identify key barriers or advantages (e.g., cost competitiveness, clean energy, land use constraints). Medium‐Term (3–9 mo.) Develop targeted policy or rate options to attract data centers (e.g., special electricity rate packages, expedited permitting zones). Collaborate with real estate developers and property owners to address space constraints or lease structures. Long‐Term (9+ mo.) Implement pilot incentive programs or updated rates if Council-approved. Monitor outcomes, refine strategies, and continue marketing Palo Alto’s advantages. Staff time (economic development, utilities, planning) for market research and policy review. Potentially consultant to assess market if needed. Legal counsel if changes to rates or zoning require new ordinances. Budget for outreach/marketing materials. Clear, data-driven competitiveness report identifying Palo Alto’s position vs. neighbors. If implemented, new or expanded data center developments within city limits. Revenue growth from increased utility sales. Favorable feedback from the tech community regarding Palo Alto’s data center environment. Council approval for new electricity rates or zoning changes. HIGH PRIORITY LOWER PRIORITY COUNCIL-DIRECTED POLICY UPDATE High priority due to opportunity to compete in exploding data center market due to the rise of artificial intelligence. N/A Yes, if altering utility rate structures or zoning/permitting processes for data centers. Proposed Topic 9:Microplastics and Forever Chemicals in Water Supply and Wastewater - Assess and mitigate forever chemical (PFAS etc.) and microplastic contamination in drinking water and wastewater. BENEFICIAL IMPACTS TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED / LOCAL LAW / COUNCIL- APPROVED Improved public health and environmental protection by studying and reducing PFAS (and other forever chemicals) and microplastics in drinking water and discharged wastewater. Compliance with California and federal regulations (keeps the City ahead of regulatory curves). Potentially reduced long‐term infrastructure costs by addressing contaminants early. Builds community trust in water quality. Short‐Term (6–12 months): Initiate sampling of wastewater and water distribution system to quantify microplastics and PFAS. Conduct feasibility for solutions, such as for installing filters on residential/commercial laundry machines. Medium‐Term (12–24 months): Evaluate pilot programs for retrofitting or upgrading treatment processes. Assess whether plastic-based service lines and mains contribute microplastics to the water/soil, and study alternative pipe materials. Staff time for feasibility studies & sampling Funding for pilot mitigation projects Reduction in PFAS/microplastic levels to target thresholds. Subject to CA and potential future federal regulations on PFAS/microplastics May need Council approval if new local ordinances or major capital investments are required. HIGH PRIORITY LOWER PRIORITY COUNCIL-DIRECTED POLICY UPDATE High priority in determining baseline microplastic and forever chemical contamination and studying mitigation given increased awareness of extent of contamination and detrimental health effects. N/A May require policy update (e.g., if requiring certain filters or changing procurement standards). Proposed Topic 10: Time of Use Rates - bring TOU to UAC early to give us a chance to discuss and advise on options before they are rolled out. Then, once TOU rates are in place, report out on how it is going at least once a year BENEFICIAL IMPACTS TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED / LOCAL LAW / COUNCIL- APPROVED •Discuss what are our goals as a city? Reduce GHG use within PA? Minimize cost of electricity? Reduce stress on grid from vehicle charging? •How many and what rate structures would we consider? •What rate structures are in use in other comparable areas and how are they performing? Staff, Legal, •Suggestions for top level KPIs: o Fraction or bar chart incorporating all customer classes: __ signups / __ customers in customer class o chart: % of customers uptake (cumulative by quarter by customer class)- this would reflect performance over time o chart: % of total PA electricity on TOU rates (cumulative by quarter)- this would reflect performance over time o Measures of GHG reduced / cost saved (depending on what the goal was) Cost-of-service requirements set forth in the California Constitution and applicable statutory law HIGH PRIORITY LOWER PRIORITY COUNCIL- DIRECTED POLICY UPDATE Proposed Topic 11:Demand side management: annual update and discussion on programs and performance BENEFICIAL IMPACTS TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED / LOCAL LAW / COUNCIL- APPROVED •What are the city's goals of demand side management? Reducing load / water use? Electrification? Load shifting? •What are our strategies / programs and how are they performing? (beyond TOU rates) •(this part may overlap with grid mod / SCAP projects): What technologies does CPAU recommend to customers to help with these changes? What are the steps to determine what these recommendations will be? How will we communicate them? (Examples: circuit sharing panels, batteries, management of vehicle charging, vehicle to grid) Staff and Legal •Create KPIs and report against them (in a numeric form, not in a paragraph description) •Suggestions for top level KPIs o Annual electric, gas, and water savings as a percent of total load o Pie charts breaking down annual electric and gas savings by end use as a percent of total energy savings o Charts showing historical electric, gas, and water savings over time o Charts showing historical adoption of EVs, solar, and storage over time HIGH PRIORITY LOWER PRIORITY COUNCIL- DIRECTED POLICY UPDATE Proposed Topic 12:CPAU – Stanford Interconnection BENEFICIAL IMPACTS TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED / LOCAL LAW / COUNCIL- APPROVED Greater grid reliability/resilience if either Palo Alto’s or Stanford’s system fails. Integrated emergency planning for critical services. Short‐Term (6–12 mo.): Feasibility/engineering study on interconnection points, cost sharing. Medium‐Term (12–24 mo.): Implementation planning, permitting, construction approach. Joint technical consultants Infrastructure investment funding Coordination team (City & Stanford) Successful interconnection or backup capability in actual or simulated emergency. Minimal downtime and rapid recovery in a crisis. Positive cost‐benefit compared to not having interconnection. Likely requires formal agreement or MOU between City and Stanford. Council approval for major infrastructure investments or cost‐sharing arrangements. HIGH PRIORITY LOWER PRIORITY COUNCIL-DIRECTED POLICY UPDATE Stanford and CPAU each currently have only one transmission line. CPAU has expressed concern over long-term power loss in the event of an accident at this transmission line (e.g., airplane crash), or upstream power loss due to disaster. CPAU power supports residences, businesses, and three major hospitals, including Stanford Hospital. Stanford has experienced power-loss events due to impacts to their PG&E transmission line, most recently in March 21, 2023. An interconnection between the grids will allow for greater grid reliability and resilience if either Palo Alto’s or Stanford’s system fails. N/A Possibly (for final agreements, budget approvals) Proposed Topic 13:CPAU Electrical Emergency Preparedness BENEFICIAL IMPACTS TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED / LOCAL LAW / COUNCIL- APPROVED CPAU emergency preparedness is essential for the preparedness of the entire Palo Alto community and a key aspect of CPAU’s reliability / resilience activities. This initiative is geared to prepare CPAU and the Palo Alto community it serves for emergencies, such as earthquakes, cyber- attacks, wildfires, and floods, in coordination with Palo Alto’s Office of Emergency Services (OES). 2025-2026: Initial assessment and coordination with OES. (See “Measures of Success”) 2027 & ongoing: Implementation and regular updating. 2025-2025: CPAU staff time for establishing initial objectives and planning with OES. OES staff to work with CPAU. 1. Determination of the “design emergencies” to be used as the basis for CPAU emergency preparedness. 2. Establishment of CPAU’s risk assessment framework in coordination with OES. 3. Determination of CPAU’s roles and specific actions in each such emergency. 4. Completion of action planning and implementation in coordination with OES. N/A HIGH PRIORITY LOWER PRIORITY COUNCIL-DIRECTED POLICY UPDATE Highly important and urgent. CPAU emergency preparedness is essential for the preparedness of the entire Palo Alto community. CPAU has invested to reinforce water system operation during an emergency, for example water main upgrading and wells with emergency power. But CPAU has focused its electrical reliability efforts only on short-term interruptions. With the risk of earthquakes and other events that could cause long-term disruption to CPAU’s electricity delivery, it is essential that we develop equivalent plans for electrical resilience and CPAU responsibility during a severe emergency. CPAU needs to develop its emergency preparedness consistent with the OES “design emergency” in collaboration with OES. N/A N/A Proposed Topic 14: CPAU Grid Mod Strategy BENEFICIAL IMPACTS TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED / LOCAL LAW / COUNCIL- APPROVED Grid Mod represents an expenditure of $300M+. Multiple technologies and other exogenous factors will impact distribution grid design and implementation in major ways. To address those issues, the Grid Mod plan needs to include: 1. The goals that grid modernization is intended to achieve and the strategy for achieving those goals. 2. A detailed plan and roadmap articulating what will be done, and when: Anticipated “external environment” impacts over the life of the plan; key milestones and decision points for actions and expenditures; which technologies will be accommodated and when; estimated capital and operating costs; and opportunities to mitigate, reduce, or delay expenditures. With major Grid Mod expenditures already underway, CPAU needs an intensive strategic planning focus starting immediately and continuing from 2025 through 2027. 2025-2027: CPAU staff time and external experts to map out the CPAU distribution grid evolution and impacts of key exogenous factors. (See “Measures of Success.) To succeed, Grid Mod must successfully address the key issues that will affect the design and cost of CPAU’s future distribution Grid: 1.New technologies: Technological advances mean that the future grid will not be an incremental extension of today’s grid. So, Grid Mod needs to anticipate and incorporate those changes, for example, local distributed energy resources (DER) such as solar + storage; microgrids; active demand side management (DSM); electric vehicles (EVs), and advanced metering (AMI). 2.SCAP: How will the grid deliver the electricity called for by the City’s SCAP plan? 3.Resilience: When the grid is operating (reliability, up time, repairability) and during emergencies (as CPAU does for water). 4.Other exogenous factors: Especially energy supply, future regulations, and shifts in demand, such as proliferation of large data centers. N/A HIGH PRIORITY LOWER PRIORITY COUNCIL- DIRECTED POLICY UPDATE Highly important and urgent. With a planned expenditure of $300M+ Grid Mod is CPAU’s largest capital investment. To succeed and employ this capital effectively the Grid Mod plan and implementation must explicitly address and incorporate key technological and other exogenous factors. N/A N/A