HomeMy WebLinkAboutStaff Report 2508-51101.Approval of the Minutes of the Utilities Advisory Commission Meeting Held on July 9,
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Utilities Advisory Commission
Staff Report
From: Alan Kurotori, Director Utilities
Lead Department: Utilities
Meeting Date: September 3, 2025
Report #: 2508-5110
TITLE
Approval of the Minutes of the Utilities Advisory Commission Meeting Held on July 9, 2025
RECOMMENDATION
Staff recommends that the Utilities Advisory Commission review and approve July 9, 2025
minutes.
Commissioner ______ moved to approve the draft minutes of the July 9, 2025 meeting as
submitted/amended.
Commissioner _____ seconded the motion
ATTACHMENTS
Attachment A: July 9, 2025 Draft Minutes
Attachment B: Commissioner Metz Comments on Item #5 From July 9, 2025 UAC Meeting
AUTHOR/TITLE:
Alan Kurotori, Director of Utilities
Staff: Kaylee Burton, Utilities Administrative Assistant
Utilities Advisory Commission Minutes Approved on: Page 1 of 30
UTILITIES ADVISORY COMMISSION MEETING
MINUTES OF JULY 9, 2025 SPECIAL MEETING
CALL TO ORDER
Chair Scharff called the meeting of the Utilities Advisory Commission (UAC) to order at 6:02
p.m.
Present: Chair Scharff, Vice Chair Mauter, Commissioners Croft, Gupta, Metz, Phillips, and
Tucher
Absent: None
AGENDA REVIEW AND REVISIONS
None
ORAL COMMUNICATIONS
Jeff Hoel asked if the permit had been granted for the hut going in at the Colorado Substation
for the FTTP project, and if not, when will it be granted and what was causing the delay. Mr.
Hoel visited the hut site and wondered who was responsible for moving the breakers,
transformers, and canisters before the concrete slab is poured for the hut, when it will happen,
and when the hut can be shipped from South Dakota.
Becky Sanders, Co-Chair of Palo Alto Neighborhoods (PAN) mentioned that she and other PAN
members followed up on their emails sent to the paloalto.gov email address but discovered
that the UAC did not receive the messages, which upon further investigation were found in the
spam folder. Ms. Sanders wanted to know when this issue is resolved and would appreciate it if
commissioners would check their spam folders to ensure they were not missing anything from
the public.
Chair Scharff was unaware of any email issues and will check his spam folder.
APPROVAL OF MINUTES
ITEM 1: ACTION: Approval of the Minutes of the Utilities Advisory Commission Meeting Held on
May 7, 2025
Utilities Advisory Commission Minutes Approved on: Page 2 of 30
ACTION: Commissioner Croft moved to approve the UAC meeting minutes for May 7, 2025, as
submitted.
Vice Chair Mauter seconded the motion.
The motion carried 7-0 with Chair Scharff, Vice Chair Mauter, and Commissioners Croft, Metz,
Phillips, Gupta, and Tucher voting yes.
ITEM 2: ACTION: Approval of the Minutes of the Utilities Advisory Commission Meeting Held on
June 4, 2025
ACTION: Commissioner Metz moved to approve the UAC meeting minutes for June 4, 2025.
Commissioner Croft seconded the motion.
Commissioner Gupta wanted the highlighting of the word “Daniel” removed from the minutes.
The motion carried 6-0-1 with Chair Scharff, Vice Chair Mauter, and Commissioners Croft, Metz,
Gupta, and Tucher voting yes. Commissioner Phillips abstained.
UTILITIES DIRECTOR REPORT
Utilities Director Alan Kurotori announced the approval of an exchange agreement with
Midpeninsula Open Space District allowing the City access to complete the utility
undergrounding project in the foothills. Midpeninsula, AT&T, and the FAA are among the
handful of customers remaining to be undergrounded in the foothills.
Staff and City Council have been looking to purchase a property within Palo Alto for storage. In
the past, property was leased in Mountain View to store items for the AMI project. The Utility
needed enclosed storage for transformers and other equipment for the upcoming grid
modernization project.
Mr. Kurotori noted that the One Big Beautiful Bill Act passed by Congress would result in a
significant impact to tax cuts, renewable energy and EV credits, and energy efficiency among
other things. Staff will take this into account in addition to the impact of tariffs when
considering future power purchase agreements.
The water utility is sending out its 2024 Consumer Confidence Report.
The MSC Open House will be held on Saturday, July 26. Mr. Kurotori was one of the judges for
the 4th of July Chili Cook-Off and saw a good turnout for the event.
NEW BUSINESS
ITEM 3: Design Principles for Gas and Electric Rates
Utilities Advisory Commission Minutes Approved on: Page 3 of 30
Karla Dailey, Assistant Director of Utilities Resource Management Division, sought the UAC’s
feedback on the proposed design principles meant to apply broadly to gas and electric rates.
Ms. Dailey stated it was best practice to start with design principles but this step was skipped in
the 2025 COSA. On June 16, Council took action to raise gas rates the same percentage for all
customer classes effective July 1, which will serve as the baseline for this new analysis. COSAs
allocate costs fairly and ensure the rates are defensible and there is no cross-subsidizing
between customer classes. When talking about gas rates, this only applied to distribution rates.
The gas commodity cost was passed through to all customer classes based on market prices
each month. The cap-and-trade climate credit for the 2025 COSA was not part of tonight’s
discussion nor will staff propose a climate credit in the upcoming analysis but it was possible for
the Council or UAC to consider a climate credit in the future.
Commissioner Tucher asked staff to comment on the rationale behind the Finance Committee’s
and Council’s motions to remand this back to the UAC. Ms. Dailey mentioned that staff’s and
the UAC’s proposal had been to accept the 2025 COSA and use some cap-and-trade funds to
provide a climate credit to residential customers. The Finance Committee wanted to keep the
current rate structure but use a climate credit for small and medium commercial customers to
help offset the impact of not accepting the 2025 COSA. The Council agreed with the Finance
Committee’s recommendation regarding the rates but voted to not apply a climate credit to
small and medium commercial customers. During Council’s discussion, several council members
voiced feeling uncomfortable with approving a climate credit based on the understanding that
staff would obtain a new COSA in a relatively short timeline.
Utilities Director Alan Kurotori mentioned the Finance Committee wanted to use non-rate
revenues first and then potentially supplement with cap-and-trade funds. As part of the
direction from Council, staff’s intent was to bring this report and expedite the work for a 2026
COSA to bring to the UAC and Council for action by the beginning of calendar year 2026.
Lisa Bilir, Utilities Senior Resource Planner, presented the 4 design principles for gas and electric
rates:
Design Principle 1: Evaluate rates to ensure they are cost based. The goal of any COSA is to
develop accurate and equitable allocation of costs. All other rate design considerations are
subsidiary to Design Principle 1.
Design Principle 2: Evaluate rate schedules for continuation or redefinition. The 2026 Gas COSA
will evaluate whether Utility Rate Schedule G-2 (small commercial and master-metered
residential customers) should be subdivided or otherwise redefined to allocate costs within that
customer class. Study the impacts on customers who use different amounts of energy or have
different meter configurations or meter capacities.
Design Principle 3: Determine the proper allocation of fixed and variable costs and how those
can be implemented in various rate designs. Gas and electric utilities incur costs for billing,
metering, and system maintenance for each customer. Consider cost allocation and collection
Utilities Advisory Commission Minutes Approved on: Page 4 of 30
among customer classes using the City’s revenue requirements and industrywide best practices.
Examine appropriate rate designs, including volumetric, tiered, flat, and demand-based
charges, to determine which rate deign best recovered costs for each customer class.
Design Principle 4: Review non-rate revenue sources that may be available for rate discounts or
rebates. Staff will work with the City’s consultant to identify and evaluate available non-rate
revenue sources for each of the utilities.
The proposed design principles for gas and electric rates will be presented to the Finance
Committee on August 5, 2025, and to Council for acceptance on August 18, 2025. Staff planned
to use the design principles accepted by the Council for the development of a gas COSA. The
gas COSA study and proposed gas rate changes will be brought to the UAC in September of
2025, the Finance Committee in October of 2025, and the Council in November of 2025, for the
rates to become effective January 1, 2026.
Public Comment:
1. Hamilton Hitchings believed that staff’s July 9 draft of the design principles did not
address the COSA’s failure to deliver rate stability, transparency, and climate action. The
Palo Alto Neighborhoods’ June 22 letter to the UAC provided a detailed summary of the
Council’s concerns along with PAN’s annotations of 5 points. (1) A proposed 49 percent
increase in Tier 1 gas local distribution rates, despite an overall 8.7 percent distribution
rate increase. (2) Lack of explanation of what asset allocation methodology changes
were made, why, and how much was the impact. (3) Using cap and trade and LCFS funds
for gas rebates instead of their intended purpose of permanent greenhouse gas
reduction. (4) Shifting 54 percent of demand-related costs onto residential Tier 1
customers in the draft of the 2025 COSA moved the burden from high-usage Tier 2
households to basic users and penalized the City’s most efficient gas customers. (5)
Replacing the Net Plant methodology in place when voters approved Measure L.
California Proposition 26 does not require utility rates to be based on the most accurate
cost allocation (a subjective and unattainable standard), only that rates be reasonably
related to the cost of providing service. Mr. Hitchings strongly urged the UAC to avoid
creating winners and losers by shifting costs based on different theories about who
should pay for past expenses, which would result in creating political problems for the
City Council. Mr. Hitchings supported Commissioner Gupta’s proposed revisions to
staff’s Design Principles 1 and 4.
2. Jeff Levinsky shared the concerns expressed by the Council about the recent gas rate
proposal. Mr. Levinsky believed the 4 proposed design principles in tonight’s staff report
did not address some core issues and will lead to more controversy, wasted staff time,
and overspending on consultants. It was not apparent why the 2025 gas COSA shifted
cost from businesses to residents. Page 24 of the COSA offered 5 drivers for the shift but
did not include the dollar amounts associated with each driver. The first driver stated
distribution revenue had risen by 171 percent since 2019-2020 but that did not explain
why residents should be charged more than businesses. The third driver said the shift of
cost to residents stemmed from higher meter and billing costs. Mr. Levinsky could not
Utilities Advisory Commission Minutes Approved on: Page 5 of 30
find enough details on the meter cost but he calculated the increase due to higher billing costs
was $30,000/year to G-1, roughly $1/year per residential customer. Knowing which driver was
responsible for most of the proposed cost shift would help in prioritizing them. Mr. Levinsky did
not have time to explain his problems with Drivers 2 and 4. Driver 5 seemed to argue there
should not be a rate shift to G-1 and G-3 customers. Levinsky urged the UAC to add a design
principle on transparency and proposed the following elements a COSA should provide: (1) The
reason for each proposed rate change. (2) The magnitude of that change in dollars. (3) Enough
information to trace the calculations. (4) Alternatives.
Commissioner Gupta previously submitted his thoughts in a memo. Commissioner Gupta
thought the UAC was at a disadvantage when the gas COSA first came before the Commission.
The 2025 gas COSA yielded a 49 percent increase on Tier 1 residential distribution rates and
penalized conservation. The significant methodological changes from the 2020 COSA were not
detailed in the COSA report, discussion in the budget subcommittee, or the UAC meeting
thereafter. The UAC was not made aware of the City’s policies in Resolutions 9487 and 10077
that called for the use of cap-and-trade funds to reduce greenhouse gas emissions permanently
rather than in the form of rebates. The UAC was under the mistaken impression that they had
to approve the consultant’s findings. In other Cities, COSAs were often revised, rejected, or
repealed, especially when a COSA faced public opposition or if flaws were revealed in the COSA.
Proposition 26 did not mandate a timeline in which to complete or approve a new COSA. Our
current COSA was updated in 2022. The Finance Committee asked critical questions about the
2025 COSA that remain unanswered. Commissioner Gupta quoted Councilmember Burt’s
question on whether the rate hikes for some residents were due to a different consultant’s
viewpoint and Councilmember Reckdahl’s comments about not understanding how the
accounting could be so different and not being convinced the new COSA was correct.
Commissioner Gupta cited Councilmember Reckdahl’s and Councilmember Burt’s hesitancy to
use cap-and-trade funds for gas rebates.
The City Council remanded the COSA back to the UAC for detailed analysis but Commissioner
Gupta noted the UAC was being asked to approve new design principles tonight that will start a
new COSA process without having first done the work that the Council requested. There was
not a clear understanding or justification of the methodological changes from the 2020 COSA.
Commissioner Gupta urged transparency and to ensure any changes were justified and in line
with the City’s values. The City’s decisions impact our residents and our climate goals. The
proposed design principles contained essentially the same inputs as before, which would result
in repeating the past mistakes. Commissioner Gupta proposed amendments to the design
principles. The amendments were endorsed by Carbon Free Palo Alto, Palo Alto
Neighborhoods, Friends of the Climate, and many residents. Commissioner Gupta stated his
proposed changes would promote transparency, be climate-minded within the reasonable cost
framework required by Proposition 26, and eliminated consideration of subsidizing gas using
funds meant to reduce greenhouse gas emissions. Commissioner Gupta thought Carbon Free
Palo Alto raised an interesting point about declining the proposed COSA and waiting about 2
years until the S/CAP Committee completed their study on the cost to end gas.
Utilities Advisory Commission Minutes Approved on: Page 6 of 30
Commissioner Phillips said the COSA had enough information to figure out the reallocation of
costs. Commissioner Phillips believed the average-and-excess methodology was applied to
equipment in the general plant, which composed a large fraction of distribution cost, so that
shifted cost from the relatively flat commercial to peaky residential. Since 2010, our gas usage
had been declining, which meant our infrastructure was not being fully used. Therefore, using
the excess or peak to allocate extra cost to a particular group was not justified. Commissioner
Phillips noted these methodologies were usually applied in growth scenarios but did not make
sense in a scenario where usage was shrinking. The proposed design principles included the
idea that there was an accurate or best practice way of doing this when in reality it was a
fundamentally judgmental allocation. Commissioner Phillips will not support a new COSA that
uses an average-and-excess methodology to allocate costs because he felt the methodology
was fundamentally flawed and unfairly penalized one group by assigning costs to customers
that were not causing additional costs and the costs were incurred long ago. Commissioner
Phillips did not feel strongly about the proposed design principles and thought some of them
added a burden for staff.
Chair Scharff clarified that the Council wanted the UAC to comment on the design principles but
he did not think the UAC could make the determination to not support the new COSA until
design guidelines were set on how the COSA should be developed. Chair Scharff acknowledged
the question of transparency and understanding of what goes into a COSA, and noted it had
always been a black box.
Commissioner Croft’s impression of the design principles was that they were very vague and it
did not give her a lot of confidence that anything would come out differently. Commissioner
Croft was in support of making the design principles more specific. Commissioner Croft voiced
that she lacked a full understanding of the COSA methodology, what was different versus the
last COSA, and there were no computations to support the various levers that were claimed to
have been changed in the new COSA. The UAC was told that residential gas use was decreasing
yet the Tier 1 estimate forecast was higher, so Commissioner Croft wondered if gas use was
increasing, which seemed unlikely. With regard to the public commenter’s 4 proposed
elements, Commissioner Croft was happy to work on building in specific elements of
transparency if her fellow commissioners were in support. Commissioner Croft liked the Design
Principle that stated COSAs should examine all appropriate rate designs.
Vice Chair Mauter asked if the design principles in staff’s proposal would lead to separate gas
and electric rate COSAs or a joint COSA looking at gas and electric rates as a single energy basis
for cost allocation.
Ms. Dailey answered the gas and electric COSAs were separate at this time; however, the
guiding principles would apply to both processes. We are not undertaking an electric COSA
now, only a gas COSA.
Utilities Advisory Commission Minutes Approved on: Page 7 of 30
Chair Scharff felt that the design principles should only apply to gas. Chair Scharff thought
electricity use was rising and there was less gas usage. In comparing against the 2017 COSA
guiding principles, Chair Scharff did not believe the proposed guiding principles would make any
difference because they were vague and Chair Scharff does not think that was what Council
wanted. The Council requested the UAC to review the COSA and in the interest of transparency,
Chair Scharff suggested that the UAC form a subcommittee to meet with the consultant,
monitor, and report back to the full Commission to discuss inflection points.
Commissioner Tucher said Chair Scharff’s idea was interesting but would be a months-long
process to work iteratively with staff and the consultant. Staff had a tight timeline to deliver a
COSA and proposed rates for Council adoption by the end of the year.
Chair Scharff stated the consultant could prepare the first draft and then meet with the
subcommittee. Chair Scharff invited staff to suggest a process that worked for them and
allowed UAC input.
Assistant City Attorney Amy Bartell explained that the design principles were vague and applied
to gas and electric because Proposition 26 simply said rates needed to be cost-based.
Proposition 26 did not provide guidance about cost allocation methodologies, how to divide
customer classes, or what to do about climate change. Cities could have additional policy
considerations but if their rates were challenged, a Court will determine if it was a cost-based
rate structure. Adding new requirements added elements that were subject to interpretation,
making it challenging for the ratemaking consultant and staff to comply with the law, which
resulted in more money, time, and potential problems with defensibility.
Commissioner Phillips stated the UAC could recommend reverting back to our previous cost-
based COSA if they desired.
Ms. Bartell pointed out the problem with using an old COSA was that things change over time,
such as differences in customer characteristics, system characteristics, capital programs, and
revenue requirements. COSAs reflected the current cost to serve and provided a reasonable
estimate of the cost to provide service to customers from here on out, which shifts over time.
Commissioner Gupta noted COSAs do not have expiration dates nor was it mandated how often
a COSA needed to be updated before it was considered too old. Generally, it was probably time
for a new COSA if it had been more than 5 years or you had a big system change or a huge
change in your load. Commissioner Gupta thought it may be fine to use the 2020 methodology
if you could explain why it was still applicable based on today’s scenario.
Commissioner Phillips wanted confirmation of his belief that the change was not inspired by
any of the things Ms. Bartell mentioned, rather the change was inspired by the use of a
different mathematical formula.
Utilities Advisory Commission Minutes Approved on: Page 8 of 30
Ms. Bartell felt the best way to protect the City from Proposition 26 challenges was to update
the COSA based on today’s inputs and be able to explain it in a way that laypeople could
understand.
Ms. Dailey noted a big reason why staff felt like we needed to do a new COSA was because of
inflation and increased costs in the past 5 years, and the underlying costs in the different
buckets increased at different rates; therefore, you cannot simply raise rates by the same
amount across all customer classes.
Vice Chair Mauter believed there was a fundamental need to use different methodological
approaches for the gas and electric utilities to reflect the status of gas shrinking and electrical
growing. Vice Chair Mauter expressed her concern that the proposal of the UAC to form a
subcommittee risked usurping staff’s role in overseeing COSAs but she thought the UAC could
clearly articulate to staff what the Committee wanted to explore as a series of methodological
and value-based inputs to the process. Staff could then bring to the Budget Committee and the
UAC a variety of scenarios and sensitivity analyses. Vice Chair Mauter wanted to explore the
following: The need for greater tier differentiation, incentivizing lower gas usage from a climate
perspective, and using a greenhouse gas subsidy allocation to offer rebates to customers who
fully or almost fully electrify and were very low natural gas users. Vice Chair Mauter wanted the
potential COSA to explore whether additional tiers could be added to reflect desired
electrification such as heat pump water heater adoption, heat pump for space heating or
thermal management.
Utilities Director Alan Kurotori reminded the UAC that the Budget Subcommittee typically
dissolved at the end of the fiscal year. The UAC could form a subcommittee defined strictly
toward this gas COSA. Chair Scharff agreed.
Commissioner Gupta thought it was a good idea to form a UAC subcommittee or have the
budget subcommittee work on the COSA closely with staff, which would help promote
transparency and understanding of the methodology.
Vice Chair Mauter questioned what preserving rate structures meant and if it was legally
allowable.
Ms. Bartell explained that Proposition 26 talked about reasonable costs. In Design Principle 1,
Commissioner Gupta proposed adding the following language: Evaluate rates to ensure they
cover reasonable costs while preserving the rate structure. Ms. Bartell noted that preserving
the rate structure could be interpreted as keeping what we have now. Ms. Bartell thought the
UAC would want to evaluate the rates to ensure they recovered the reasonable cost to provide
service and therefore would not want to be locked in a design principle that was wordier and
more detailed.
Instead of a lengthy document, Vice Chair Mauter wanted concise, general design principles to
avoid legal challenges.
Utilities Advisory Commission Minutes Approved on: Page 9 of 30
Commissioner Gupta wanted to ensure that the language in the design principles was well
defined, which was allowable as long as the language was compliant with Proposition 26.
Commissioner Gupta clarified the red portions were his amendments, about 1 or 2 paragraphs.
The black portions were proposed by staff. Commissioner Gupta pointed out that the staff
proposal used the words “accurate and equitable” without definition but those words were not
used by Proposition 26. Commissioner Gupta wanted to change the design principles because
changing the inputs that go to the consultant will result in different outputs.
Assistant City Manager Kiely Nose thought it was fair for the UAC to request to see a
reconciliation of the new allocation methodology compared to the prior but the design
principles were not intended to be specifically for the prospective COSA.
Chair Scharff inquired which COSA would be kept. Chair Scharff wanted a list of what other
Cities have put in their design principles.
Ms. Bartell said it was okay to use words such as equitable, reasonable, and fair. Palo Alto can
add granular design principles but it will impact the length of the process, the restrictions on
staff and the ratemaking consultant, and the City potentially having to defend the design
principles if challenged. Ms. Bartell stated the design principles could include looking at various
rate schedules (tiers, flat rate, TOU) as well as fixed and variable costs. Design principles that
talk about conservation and efficiency have to comply with Proposition 26, which was difficult.
Ms. Bartell had never seen another City do design principles, possibly due to concerns about
attracting legal attention.
Mr. Kurotori felt it was beneficial for the UAC to describe the areas for the subcommittee to
investigate. For example, consider being more granular on the customer classes for multifamily
residential within the confines of cost-based rates.
Vice Chair Mauter reiterated her earlier comment about having a different class or tier and
offering a carbon subsidy to help offset costs for ultra-low gas consumers with mostly
electrified homes. Consumers may have an outdoor gas grill because they do not want to buy
propane or may have a gas fireplace for backup heating during electric power outages. Vice
Chair Mauter was concerned that large rate increases had the possibility of creating
disincentives to electrification.
Ms. Dailey said staff can look at ultra-low gas users. Ms. Dailey wanted commissioners to keep
in mind that many times the customers who use a lot of gas were low income and some
customers have many people living in a household and therefore have higher energy use.
Commissioner Croft supported the addition of the following design principle: Any
methodological change(s) must be explained and either shown side-by-side or computationally
against what they were in the previous COSA.
Utilities Advisory Commission Minutes Approved on: Page 10 of 30
Ms. Bartell pointed out the difficult position that the City Council would be put in if they were
brought 3 different methodologies with 3 different rate structures, for example, and trying to
explain why all the alternatives were reasonable and valid. In years past, the process focused on
1 methodology and 1 rate structure and its justification. Customers will not be satisfied with
every alternative because there will be winners and losers. Ms. Bartell cautioned staff, the
ratemaking consultant, and the Commission to be careful about bringing too many options. In
theory, there should be 1 valid, reasonable option for the current scenario.
Ms. Nose noted that when staff brings forward multiple options on a policy matter before
Council or the UAC, oftentimes the Commissioners or Council Members want to combine
portions from each option to create a new option.
Staff recommends the UAC recommend that the Council accept the Design Principles for gas
and electric rates in alignment with Proposition 26.
Design Principle 1: Evaluate rates to ensure they are cost-based.
Design Principle 2: Evaluate rate schedules for continuance or redefinition.
Design Principle 3: Determine the proper allocation of fixed and variable costs and how those
can be implemented in various rate designs.
Design Principle 4: Review non-rate revenue sources that may be available for rate discounts or
rebates.
ACTION: Vice Chair Mauter moved to approve the design principles as presented by staff, and
that the UAC form a subcommittee to work with staff and the consultant to explore and ensure
transparency around the implementation of those design principles in the calculation of a gas-
specific COSA, and the subcommittee will have regular check-ins with the full UAC body.
Chair Scharff seconded the motion.
Commissioner Phillips preferred having no design principles because he did not think they
added anything substantive to this process. Commissioner Phillips did not like the use of the
wording “accurately and equitably” in the design principles, which were not in Proposition 26.
Chair Scharff and Commissioner Metz inquired if design principles were needed.
Ms. Bartell answered no further design principles were needed. It was the UAC’s decision to
have or not have design principles, either way was legally okay. Proposition 26 was the main
design principle.
Vice Chair Mauter wanted to change her motion.
Utilities Advisory Commission Minutes Approved on: Page 11 of 30
Ms. Bartell said the proposed subcommittee could either be set up as a Brown Act body or a
non-Brown Act body. A non-Brown Act body needed to be temporary, have a defined single
purpose, and a limited time period.
Chair Scharff stated the subcommittee will be a non-Brown Act body composed of 3
commissioners who will have regular check-ins with the UAC. The subcommittee will work with
the consultant and staff. The subcommittee will not make decisions. Decisions will be made
transparently in public UAC meetings.
Commissioner Gupta suggested the first question for the subcommittee be whether or not a
new COSA was needed. In 2 years, S/CAP will provide a report on the cost of retiring the gas
utility and at that time it may make more sense to do a new COSA.
Vice Chair Mauter sought advice on if it was legally risky to ignore a more recent COSA.
Ms. Bartell stated Proposition 26 and the court cases do not give an answer on what to do if
you have 2 COSAs. Ms. Bartell recommended updating the COSA, which was the best way to
protect the City against Proposition 26 challenges. It had been 6 years since the last COSA, so it
was time to take a fresh look.
Ms. Nose mentioned it was Council’s direction to relook at the assumptions in the 2025 data-
driven COSA and make sure the assumptions were most accurately aligned. Council did not say
to shelve the 2025 COSA. Council wanted new rates effective in January because of the time
and associated risks. If nothing was done, rates would be based on the 2020 COSA with general
cost escalations associated with the system.
ACTION: Vice Chair Mauter motioned to move forward with Proposition 26 as our design
principle, and to form a non-Brown Act subcommittee to work with staff and the consultant to
develop a new 2026 gas COSA and provide regular report-outs to the full UAC.
Commissioner Phillips seconded the motion.
Commissioner Gupta emphasized that this motion did not address Council’s request for the
UAC to figure out what went wrong with the old process, and make adjustments to the COSA
design process and ensure it is more climate friendly before starting a new consultant process.
Commissioner Gupta said the UAC had the opportunity to guide the next COSA design process
by changing the design principles to consider climate effects, ensure cap-and-trade funds do
not subsidize gas, and consider including the 4 principles suggested during public comment.
Motion carried 6-1 with Chair Scharff, Vice Chair Mauter, and Commissioners Croft, Metz,
Phillips, and Tucher voting yes. Commissioner Gupta voted no.
Chair Scharff asked who would like to be on the subcommittee.
Utilities Advisory Commission Minutes Approved on: Page 12 of 30
Part of the reason Commissioner Tucher was willing to be on the subcommittee was to ensure
transparency and an explanation for the numbers the COSA gives. Commissioner Phillips, Croft
and Commissioner Gupta wanted to be on the subcommittee. Chair Scharff will select the
subcommittee members.
Ms. Bartell left the meeting.
Chair Scharff expressed his appreciation for Commissioner Gupta’s memo.
ITEM 4: Approval of a Third Phase Agreement with Northern California Power Agency for the
Purchase of Battery Energy Storage Capacity from Trolley Pass Project LLC, Over a Term of up to
20 Years for a Total Not-to-Exceed Amount of $161.7 Million; CEQA Status: Not a Project Under
CEQA Guidelines Section 15378(a)
Utilities Director Alan Kurotori mentioned it was staff’s intent to bring two contracts to the UAC
but unfortunately the project with solar and battery did not go through, as mentioned in detail
in the staff report.
Jim Stack, Senior Resource Planner, delivered a presentation. If approved, the Trolley contract
will be the City’s first energy storage agreement. In 2024, Northern California Power Agency
(NCPA) issued an RFP for renewable energy and storage contracts, resulting in almost 30
proposals for solar and/or storage resources but no baseload renewables or wind as Staff had
hoped to see. After the evaluation process, Palo Alto considered 3 proposals but 2 fell away.
Palo Alto has had a 12 percent electric load growth since hitting the bottom during COVID from
2022 through 2024. Palo Alto has had some data centers come in. Staff projected the load to
continue increasing due to electrification and additional data center projects. Some legacy
contracts signed between 2005 and 2010 will expire in the coming years. The Independent
System Operator has an extensive backlog of resources trying to get onto the grid. The
interconnection timeline takes 5 to 6 years from when a project joins the interconnection
queue to coming on line and beginning operation, which was creating challenges for the
industry. The federal budget bill passed last week created challenges especially for solar and
wind resources by eliminating available tax credits within the next year and adding uncertainty
for other resources around provisions that affect whether tax credits can be utilized by
projects. A lot of solar and storage components come from countries heavily impacted by
tariffs.
Commissioner Tucher questioned if the interconnection timeline was trending worse and if it
impacted whether or not Palo Alto wanted to lean more toward battery storage, if federal
policy changes would result in more expensive pricing, and if Palo Alto sought out the RFPs.
Commissioner Tucher was confused by the link in the staff report to a 2017 or 2019 study that
was unfavorable on battery storage.
Mr. Stack explained that all the proposals came into NCPA and were available to all NCPA
members to pursue. Palo Alto was almost at the end of contract negotiations on a solar and
Utilities Advisory Commission Minutes Approved on: Page 13 of 30
storage project but Palo Alto and other NCPA members were not willing to accept the terms
that were proposed about 2 weeks ago to share risk due to federal uncertainty, interconnection
delays creating uncertainty about when the project will come online, and the little remaining
available tax incentives created uncertainty for the sellers to obtain financing. Mr. Stack
thought Commissioner Tucher was referring to the 2018 Integrated Resource Plan that
recommended adding storage to the portfolio in the late 2030s or early 2040s. At the time the
study was done, storage prices were not very competitive and market prices were less
favorable because there was less solar on the grid. A lot more solar has come on the grid in the
last few years, which has exacerbated the duck curve and made storage more financially
attractive.
Mr. Kurotori noted that utilities were now finding it favorable to enter into storage agreements
because the economies have changed. All the major NCPA members were joining into this
Trolley storage project because they found it favorable.
Mr. Stack displayed load growth projections through 2045. The actual load roughly matched the
load growth projections presented during the IRP process in 2023.
Commissioner Gupta recalled staff previously presented other load growth projections with
wide error bars and the maximum load growth projection went off the chart, and he wondered
if today’s projection was staff’s revised understanding of load growth.
Mr. Stack stated that a high-load scenario was evaluated when pursuing the second
transmission line to show ISO that Palo Alto’s potential for significant load growth justified the
new transmission project, so the UAC might have seen a higher projection in that presentation.
The higher load line was a sensitivity case that reflected the possibility of getting a significant
amount of new data center growth and more aggressive electrification whereas the load
growth projections on today’s slide depicted the expected case. There was a lot of uncertainty
about what the load will be in 2030 or 2040, so staff was tracking this very closely and
continuing to revise the projections.
Mr. Stack said the Trolley storage project was an energy storage agreement between Aypa and
NCPA for ~320 MW BESS. Trolley was one of several storage resources that Aypa was
developing in Southern California. Trolley will be a ~400 MW project consisting of 4-hour
energy storage. The NCPA members that proposed signing up for shares included Palo Alto for
50 MW, Santa Clara will be the majority stake in the project at about 200 MW, and Lodi,
Redding, and Alameda will also receive shares. It was a 20-year contract term projected to start
in June of 2029. The negotiated contract price was $12.71/kW-month. Aypa (as most sellers in
the market) negotiated flexibility with the contract price. If Aypa’s costs increase due to tax law
changes, supply chain issues, or tariffs, Aypa has until July 2026 to come back and receive a 6
percent price increase after going through an audit process by an independent evaluator to
verify the cost increases were attributable to the allowed reasons in the contract (tax law
changes, supply chain issues, or tariffs).
Utilities Advisory Commission Minutes Approved on: Page 14 of 30
The contract will allow Palo Alto to cycle the battery up to 1½ times per day as long as it
averages no more than 1 cycle per day over the course of the year. The battery can be charged
up to 4 hours and discharged up to 4 hours but does not have to be all 4 hours at once. Storage
resources and RA capacity resources were expressed typically in dollars per kilowatt-month
because they do not charge on the energy going in our out. It can be thought of as leasing the
battery. Palo Alto would pay a flat rate per month based on the capacity we signed up to lease
from the seller. Palo Alto decides how much of our contracted capacity we use, then we pay for
the energy we charge the battery with, and receive revenue for the energy we discharge to the
grid.
Commissioner Metz wanted to confirm if this contract meant that Palo Alto would pay
$12.71/kW-month multiplied by 50,000 kW, pay for the energy we put into storage, and pay
transmission charges to get the energy from storage in Southern California to Palo Alto.
Commissioner Metz wondered if there was any concern about congestion with the battery
being located far away.
Mr. Stack confirmed that Palo Alto would pay $12.71/kW-month multiplied by 50,000 kW under
the proposed contract terms. Palo Alto pays transmission costs on the load we bring in through
our Citygate connection. Palo Alto does not pay transmission for any of its resources on the
grid. This storage resource will help alleviate congestion because it is located in San Bernardino
County where there is a lot of solar development, which results in very low prices during the
middle of the day and much higher prices at the end of the day.
Commissioner Croft asked if the proposed battery was available now or in the future, if the City
or someone else will decide when the battery is charged and discharged, and if this battery
storage project had any effect on the way the City purchases its power from the market.
Commissioner Croft viewed this contract as an investment in a battery or an arbitrage
opportunity. Palo Alto is investing for additional storage to be put on the grid but not to
discharge the battery for local power needs. Commissioner Croft inquired if tariffs and taxes
could result in more than a 6 percent price risk.
Mr. Stack said NCPA was the scheduling coordinator for this resource, meaning NCPA will make
the charging and discharging decisions. This contract was like a hedge against market price risk
and an investment in a resource that will be beneficial to the grid and help mitigate the City’s
price exposure to low midday prices and high evening prices because our portfolio is full of
solar resources. Power purchase decisions were independent of battery storage. There will not
be a physical connection between this battery resource and the City. This project is 4 years into
the future. Aypa has not made any big purchases yet but will probably buy the hardware within
the next 2 years. There was still a significant risk around prices. Prices could possibly increase by
the time Aypa purchases everything and the 6 percent contract price increase will not be
financially feasible for Aypa, and if that is the case, Aypa will come back to NCPA and the
participating members to potentially renegotiate a higher rate or walk away.
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Commissioner Gupta questioned what the City’s financial risk was if Aypa started construction
but it failed for some reason or if the organizer defaults.
Mr. Stack replied that Aypa was required to put down a significant deposit, which Mr. Stack
thought was about $20 million for NCPA’s share of this resource. If Aypa defaulted, Palo Alto
could keep their portion of the deposit and use it to sign up for another resource.
Mr. Stack continued his slide presentation. At $12.71/kW-month, a 50 MW share would cost
Palo Alto about $7.6 million annually. Staff estimates that this resource would generate an
energy value of about $11-13/kW-month by buying at low prices and selling at high prices. This
is a fully deliverable resource, meaning it counts toward our Resource Adequacy (RA)
compliance needs and has an expected system RA value of $4-11/kW-month. Adding those
value streams together and based on the current price, the analysis showed this resource will
provide an estimated net value of ~$8/kW-month ($2.8 million per year) to the City.
Mr. Stack displayed a graph of the City’s annual load-resource balance for energy through 2045
that depicted the projected load and a higher scenario. Some of the City’s contracts for older
resources will start expiring and a gap begins to form around 2029 and the gap grows over
time. NCPA will issue an RFP for renewable and storage resources probably early next year and
Palo Alto will actively participate in that process. Staff learned about other projects that might
be available to the City through NCPA members who have contracted for more than they may
need, so staff will have discussions with those members. Staff was actively pursuing discussions
with some existing suppliers around extending contracts that were slated to expire.
Mr. Stack showed a graph on Average System Capacity Balance (RA balance). Palo Alto has a
surplus of RA capacity in its portfolio, although potentially that could change and was one of
the reasons this 50 MW slice of the battery project was recommended. Palo Alto might lose RA
capacity from its existing portfolio starting in 2027 due to risks from regulatory changes, ISO’s
day-ahead market structure expanding, and rule changes that might take place with resources
that are currently outside the ISO but might become part of the ISO.
Mr. Stack showed a chart of California’s projected energy market dynamics through 2050,
depicting RA market price projections for a 4-hour battery and a 24-hour resource such as a gas
plant or geothermal plant, solar PPA prices, and 4-hour battery storage prices. The slide was
created before the recent legislation that impacted solar resources and available tax credits, so
the solar prices probably needed to be revised upwards.
The NCPA Commission approved the contract in June of 2025. Participating members were
going through their respective approval processes to get this contract signed. Staff will take this
to the Finance Committee for their review in August or September of 2025, then to City Council
for review in mid-September 2025.
Public Comment: None.
Utilities Advisory Commission Minutes Approved on: Page 16 of 30
Commissioner Phillips inquired if there was an inflation increase or any other price escalators in
the $12.71/kW-month other than the 6 percent potential contract price increase.
Commissioner Phillips was in favor of moving forward with this contract.
Mr. Stack responded there was no inflation increase. It was a flat price over the 20-year
contract term with the 6 percent being the only potential increase in the contract price.
Commissioner Gupta wondered how this price compared to other battery storage projects and
what the rate impact was to CPAU customers if the City agreed to this storage project.
Mr. Stack had seen prices for similar resources typically in the range of $15/kW-month, so this
contract compared very favorably to other storage proposals. If the projections were correct,
this contract will result in a net benefit of a little less than $3 million to the City and a rate
reduction of about 1 percent to 1½ percent.
Commissioner Tucher wanted to hear about how this fits into our battery and storage strategy,
will the City do more, and why not invest 10 times as much in battery capacity. Commissioner
Tucher wondered if battery storage was in the City’s grid modernization plan within the next 5
years. This battery project is far away but grid-scale batteries can be deployed in Palo Alto on
our grid.
Mr. Stack said that staff had evaluated storage proposals in the past but had not found them
attractive enough or they fell through. Mr. Stack thought this was a big first step in the water,
so the City would probably want to see how this played out before jumping further in. If Palo
Alto signed up to buy a great amount of storage more than the portfolio needed, it carried the
risk of it being seen as speculating.
Mr. Kurotori mentioned that Commissioner Tucher’s question will be addressed during the
Reliability and Resiliency Plan discussion on looking at local commercial or residential batteries.
Understanding there was capacity available and not wanting to speculate, Chair Scharff
wondered why staff chose 50 MW instead of a smaller or larger amount, and what the risks
were over the next 5 years. To see if Palo Alto was being too conservative, Chair Scharff wanted
to know how Santa Clara’s 200 MW compared to Palo Alto’s 50 MW on a percentage basis
given the size of the Utilities. Chair Scharff inquired when the loss of tax credits will occur, and if
this project was likely to get tax credits and thus be cheaper than future projects that will not
have tax credits. Chair Scharff asked how much this battery storage would offset the potential
loss of RA for hydro.
The contract was not signed yet, so there was flexibility on the total volume the City could
commit to. Mr. Stack stated the reason staff recommended 50 MW was because anytime you
have a large investment in something where the value is speculative and the future costs of the
asset are unknown, you run the risk of prices coming down significantly in 2 or 3 years. Some of
the City’s early solar PPAs looked like amazing deals but prices dropped in half a few years later.
Utilities Advisory Commission Minutes Approved on: Page 17 of 30
Another risk is that the City signs this contract and foregoes other opportunities but the
resource does not materialize, although the security deposit provides protection it might not be
enough to fully replace it with another resource if contract prices for storage have significant
increased. Based on Mr. Stack’s initial reading of the recently passed legislation, it was highly
punitive toward solar and wind but other resources largely kept their tax credits. Mr. Stack
thought storage resources were spared from tax credit cutbacks through 2033; however, the
legislation included language around foreign entities of concern, which meant the tax credits
were in jeopardy if the resources for this project came from China or Russia or certain other
countries. Storage resources were heavily involved in the Chinese market. Mr. Stack said the
City was estimated to lose about 50 MW of RA from hydro, so this battery storage was a one-
to-one replacement based on current RA rules.
Mr. Kurotori stated that Santa Clara’s peak was around 760. Santa Clara’s RA needs were
different than Palo Alto. Santa Clara was much more invested in wind. Palo Alto was heavy in
hydro. Santa Clara was heavy in geothermal, which provided 24-hour RA similar to a gas plant.
Palo Alto’s entire demand was roughly 200 MW. NCPA looks at contracts all the time. A number
of NCPA members have selected this project, so Palo Alto was not just leveraging its own
expertise but also that of NCPA, Santa Clara, Roseville, Redding, and others. Because of Palo
Alto’s need to have additional carbon-neutral resources, staff was looking for other solar
contracts and anticipated more solar and storage projects coming forward in the next RFP.
Commissioner Croft did a quick search for the biggest battery projects and the results showed
Moss Landing at 400 MW and the next biggest was in Australia, so this was a big project. Moss
Landing had a high-profile fire recently but Commissioner Croft believed they were back online.
Generally, Commissioner Croft supported batteries and believed a lot more battery storage
needed to be built. Commissioner Croft questioned who was responsible for the financial risk if
something like a fire occurred. Regarding the $2.8 million net value per year, Commissioner
Croft asked if staff did sensitivity on the high/low net value.
Mr. Stack stated this contract insulated the City from the risk of fire because the City only paid
for capacity that was available to use. If there was a fire and the battery was offline, the City did
not have to pay for the period it was offline. Over time, storage resources lose their
effectiveness, so we are allowed to run a test of the battery anytime to assess the usable
portion of the battery. The contract price applied to the usable portion of the overall capacity,
not the full 50 MW share. Regarding sensitivity analysis, staff had ranges on estimates of energy
value and RA value with wide error bars. On an expected basis, this contract looked very
attractive but there was potential for it to turn upside down.
Vice Chair Mauter commented that we should be thoughtful about the price arbitrage and
carbon arbitrage opportunities being misaligned and therefore some of the operational
principles of the battery itself.
ACTION: Vice Chair Mauter moved for the UAC to recommend that City Council:
Utilities Advisory Commission Minutes Approved on: Page 18 of 30
1. Authorize the City Manager, or their designee, to execute a Third Phase Agreement with
NCPA to purchase the output of a 50 MW share of a battery energy storage system
(BESS) owned by Aypa, over a period of 20 years, at a total cost not to exceed $161.7
million;
2. Authorize the City Manager, or their designee, to execute on behalf of the City all
related documents or agreements necessary to administer the Third Phase Agreement
that are consistent with the Palo Alto Municipal Code and City Council approved
policies, and take all actions to administer the Third Phase Agreement; and
3. Authorize the City Manager, or their designee, to approve and execute amendments to
the Third Phase Agreement, as may be required from time to time, so long as the
contract price and length of the agreement remain unchanged.
Commissioner Metz seconded the motion.
Motion carried 7-0.
ITEM 5: Status Update on Studies Related to the Electric Utility’s Reliability and Resiliency
Strategic Plan (RRSP) Strategies 4 and 5 and Request for Feedback on Draft Proposals for
Implementation. CEQA Status: Not a Project.
Jonathan Abendschein, Assistant Director for Climate Action, delivered a presentation. This
update on the implementation of Strategies 4 and 5 of the Reliability and Resiliency Strategic
Plan involved a cost-benefit analysis of the different ways that flexible technologies can provide
value and developing programs for consideration. Staff was seeking guidance from the UAC on
what programs, if any, to include in the final report on Strategies 4 and 5. The analysis
performed to date showed 1 technology package had benefits exceeding costs based on supply
and short-term resiliency. Based on the preliminary analysis, there were not strong
opportunities to use these technologies to defer distribution investment. Given that the Utility
benefits for solar and storage do not exceed the cost, which will worsen as the ITC expires, staff
wanted clear guidance on whether and how to pursue solar and storage for long-term resiliency
purposes. The preliminary results from the airport microgrid analysis did not look great, so staff
was seeking guidance on how and whether to continue pursuing Utility partnership. The study
provided insights on when neighborhood-level microgrids might be useful and staff wanted the
UAC’s feedback on those policies.
Mr. Abendschein reviewed the technologies being studied, which were divided into the
following 5 categories. Time of Use (TOU) rates (residential and commercial) can reduce Utility
supply cost, have some tangential distribution benefits, and little or no overhead cost. Demand
response can reduce utility supply cost but had a lot of overhead cost. Standalone batteries
(e.g., ESS, V2G) can reduce utility supply cost, provide short-term resiliency, could defer
distribution investment but did not provide long-term resiliency because there was no attached
generation. Battery and solar microgrids can reduce utility supply cost, provide short-term
resiliency, could defer distribution investment, and provide long-term resiliency. Efficient
electrification could defer distribution investment and provides maybe some ancillary benefit in
Utilities Advisory Commission Minutes Approved on: Page 19 of 30
supply cost savings in peak demand periods. Efficient electrification was usually electrical
infrastructure within the home to reduce peak loads and panel sizes, such as circuit sharing,
circuit pausers, and smart panels.
Commissioner Gupta asked if the technologies studied were available to the City now or in the
future.
Mr. Abendschein answered vehicle to grid (V2G) was assessed in this study and could be
available in the near future.
Commissioner Tucher wanted clarification on the difference between short-term and long-term
resiliency.
Mr. Abendschein replied short-term resiliency was a few hours, usually within a day. Long- term
resiliency was multi-day and multi-week outages such as from natural disasters.
Mr. Abendschein stated the UAC had asked staff to include evaluation of TOU in the scope of
this study to understand the potential impact of TOU. The consultant reviewed literature on
TOU rate programs and their results but did not model TOU for Palo Alto. Shiva Swaminathan
had been working on this and was present in the audience. The consultant (Buro Happold) and
their subcontractor (AESC) were available online to answer questions about these studies. In
the Buro Happold and AESC research, the literature they reviewed found that TOU resulted in 1
percent to 6 percent peak demand reduction for residential and 1.5 percent to 5 percent
reduction in peak demand for commercial. Peak demand reduction was not energy reduction.
Energy reduction was typically a lot lower with TOU rates. Some literature specific to California
investor-owned utilities (IOU) showed a 4.6 percent peak period load reduction. Most of the
population served by IOUs was in the Central Valley or Southern California and therefore had a
lot of air conditioning use, so the peak period load reduction was not expected to be as high for
Palo Alto. A large differential between on-peak and off-peak rates can drive greater reductions.
Buro Happold analyzed the cost and benefits of the following programs: 250 residential
demand response projects, 75 commercial demand response projects, 100 residential battery-
only projects, 100 residential V2G projects, 35 commercial V2G projects, 35 commercial
thermal storage projects, 35 commercial battery projects, 100 residential solar + battery
projects, and 35 commercial solar + battery projects. A chart was shown of the community-level
cost versus the supply savings and short-term resiliency benefit for each program type. Only the
commercial solar + battery program was found to have benefits that exceeded the cost;
however, the cost of solar was expected to rise after the ITC expires.
Since commercial solar + battery was a public-private partnership, Commissioner Phillips asked
if it was evaluated as being partly sponsored by the City and partly sponsored by the company.
Mr. Abendschein explained that the charts did not prescribe a specific program design. This was
an evaluation of the cost and benefits for the technology from a societal perspective, which
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meant it addressed whether the technology would result in a net benefit for the community as
a whole. This community perspective was calculated based on the cost of the technology and
the savings realized by the entire community in energy supply, including transmission and
capacity, as well as short-term resiliency benefits. The evaluation did not include factors that
affect only the Utility or the program participants, such as rate designs, incentives, and program
costs. The final report will include those other perspectives.
The 2 technologies looked at for deferring distribution investment were residential standalone
batteries and residential solar + batteries. The 2 technologies evaluated for long-term resiliency
were residential and commercial solar + batteries. Building large-scale commercial solar +
batteries in Palo Alto was considered but the challenge was that a commercial property owner
would not want to make the investment because of the very long payback period for the cost-
benefit ratio, so a public-private partnership was needed. The City may want to pull back on
public-private partnership due to the recent passage of changes in federal policy.
Commissioner Metz questioned what was meant by the cost of residential batteries and
residential V2G. Commissioner Metz did not think it was the right way to do the math because
the battery is in the home and people were buying cars that will eventually be V2G, so it should
be an input to the analysis, not a cost.
Mr. Abendschein explained a residential battery had a total capital cost of putting a battery in a
home and the benefits were the supply cost savings. Strategy 3 of the RRSP says that when
people want to put in V2G, the City will encourage it and make it easier for them, remove
barriers, and educate them in ways they can manage that technology to be most compatible
with the grid. Staff had been asked to see whether it made sense to provide incentives or spend
money on consultants to provide technical assistance, so that was taken into consideration in
the evaluation presented tonight. Staff was happy with Strategy 3 but thought that maybe the
City should not go further than that.
Since the final report will include the perspective of the consumer and CPAU, Vice Chair Mauter
wondered if a graph could depict the provision of very small incentives for residential batteries.
Mr. Abendschein clarified that the implication of the chart presented was that any incentive for
residential batteries will raise rates for people broadly and you will not get benefits to repay
those incentives. The participant can get a positive cost benefit but everyone else will have to
pay for it. A technology may possibly have a free, positive benefit for the Utility but have an
extremely negative benefit for the customer who paid a lot of money. A customer who values
short-term resiliency can install a residential battery, as long as they operate the battery in a
way that is favorable for the Utility, the Utility could see a positive benefit but the customer will
never get paid back for their investment.
Commissioner Metz thought the graph looked at reliability and resiliency for CPAU incorrectly.
Commissioner Metz believed the correct way to look at benefits was to ask what was CPAU’s
objectives in reliability and resiliency and how to leverage the homes in Palo Alto that have EVs
Utilities Advisory Commission Minutes Approved on: Page 21 of 30
with 70 kWh batteries. Commissioner Metz was concerned that people who look at this chart
will conclude that things with a low cost benefit were bad ideas but some of them were good
ideas if the analysis had correctly assessed their value to achieve CPAU’s reliability and
resiliency goals and the math was done using cost benefits that accrue to CPAU instead of the
community. For example, if V2G provided several tens of megawatts of storage, CPAU could use
some of that energy to reduce its peak load and peak capacity, increase reliability, and reduce
the duration and frequency of short-term outages. Commissioner Metz felt the information was
hard to evaluate because it was very high level and the appendices were high-level summaries,
and not enough analysis was provided to know what was being concluded.
Mr. Abendschein explained that the vehicle analysis did not include the cost of the vehicle; it
looked at the benefits achieved from installing equipment needed for V2G and getting people
to respond to price signals. The analysis found there was not a positive cost benefit. The
amount of work to install the V2G equipment and run the program was not worth the effort, so
the recommendation was to not act on V2G now. V2G was a very early technology, so staff will
monitor it very closely and will act on it in the future if a positive cost benefit is seen. Staff was
vetting the results from this study.
Mr. Abendschein continued his presentation. The analysis looked at whether residential V2G or
residential solar + storage could defer distribution investment such as transformer upgrade
costs for grid modernization. A complex analysis would be expensive because the distribution
system varied widely. Therefore, a small, low-cost, preliminary analysis was performed to
evaluate whether a more expensive, in-depth analysis was warranted. Based on the preliminary
findings, staff recommended against doing further analysis of distribution deferral. The 4 kV to
12 kV upgrade required a different transformer type, so transformers less than 20 years old and
not in a 4 kV to 12 kV upgrade area were assessed for deferral. Out of about 1750 transformers,
362 transformers met the criteria for consideration. Most transformers had between 4 and 13
homes connected. The more homes that were on a transformer made it harder to defer an
upgrade because of transformer overload as people electrify, regardless of the number of
batteries or efficient electrification. About 95 of the 362 transformers had 6 or fewer homes. If
362 transformer replacements were deferred at no additional cost, it would avoid financing
about $16 million in up-front capital investment, which was about $1 million per year in
avoided debt service (0.55% avoided rate increase). An in-depth analysis may find more savings
on feeders or substation equipment but staff did not think the savings would be much.
Over 2400 batteries at a cost of about $1.3 million per year were needed to avoid 362
transformer replacements. Therefore, the cost exceeded the savings, not including program
expenses, the cost of microgrid controllers needed to operate the batteries to track distribution
transformer loads, and ongoing operational costs to manage those systems; and those systems
were not generally in use by Utilities although some may be running pilots. The risk of
operational failure was challenging for a small utility. If you defer distribution investment but
construction costs increase faster than inflation, then you risk greater cost in the future. The
batteries considered in this analysis were the size of a Powerwall battery. Efficient
electrification might lower cost but was not anticipated to save enough, was complicated, and
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had to be in every home to have an effect, although more analysis was needed. Staff believed it
was important to encourage efficient electrification and batteries adopted voluntarily without
incentives but staff recommended against committing $150,000 to $200,000 to do a more in-
depth analysis of a distribution investment deferral program.
Commissioner Metz inquired if the analysis included the possibility of incentivizing people to
restrict their total peak, which can be done by agreeing to limit their main panel size.
Mr. Abendschein said Commissioner Metz’ suggestion was efficient electrification, which was
not analyzed in depth but thought to be challenging, and not likely to provide enough peak
savings and enough people to follow through on those practices to defer transformer
investment. Efficient electrification did not seem to be a huge opportunity considering the
amount of staff time and effort to run an efficient electrification program and the small
potential net benefit.
Commissioner Gupta asked if there was consideration of potential cost saving in avoiding 4 kV
to 12 kV upgrades.
Mr. Abendschein replied that the 4 kV to 12 kV upgrade was being done for a different reason
other than electrification upgrades, so he was not sure that any of the strategies studied could
avoid those upgrades.
Utilities Director Alan Kurotori mentioned that Terry Crowley, Assistant Director of Electric
Engineering and Operations, was present to answer the UAC’s questions.
Mr. Abendschein presented a slide on solar + storage microgrids. A microgrid provides power
generation. You can value a microgrid by comparing the avoided costs of non-local power and a
diesel generator. The amount of generation from a solar + storage microgrid is limited by the
amount of roof space, the season, and weather. Because the Utility does not have to buy as
much power when people install solar + battery microgrids, the City’s current policy is to pass
on that value to the customer installing the microgrid via Net Energy Metering and the Palo Alto
CLEAN feed-in-tariff program but it is not enough to cover the customer’s cost of the microgrid.
The City does backup power planning for its facilities. The Office of Emergency Services (OES)
identifies gaps for critical City services. Sometimes grants are available for putting microgrids in
prisons, fire stations, and community centers, for example, but those grants are often targeted
toward remote or low-income communities or are funded by Utilities in areas subject to
frequent shutoffs to reduce wildfire risk.
The UAC needs to inform staff if there is a desire to include evaluation of potential policy
alternatives to provide technical assistance, subsidize, and/or facilitate local solar + batteries.
Mr. Abendschein presented the following options of who may participate. Option 1, everybody
can participate but this will raise electric rates. Option 2, critical community facilities (e.g.
grocery stores) can participate in order to have power in an emergency. Option 3, limited
funding for first come first served but this creates an equity issue. Option 4, have a policy for
Utilities Advisory Commission Minutes Approved on: Page 23 of 30
income-qualified participants. Option 5, customers willing to pay for their solar + battery
(reflects current practice). In the past, the Palo Alto CLEAN program paid a higher rate for local
generation, which was justified by the savings from lower power and was subsidized by the rest
of the community.
Mr. Abendschein stated the consultant performed a high-level analysis on whether an airport
microgrid had a positive cost benefit. The preliminary results of the study found very high costs
for a power purchase agreement (PPA). The water quality control plant and the airport would
need to value resiliency at about $2.5 million per year with the ITC or $5 million per year
without the ITC. There were cheaper options for long-term resiliency at the treatment plant.
The Utility would not need to do a lot more work on this project. It was up to Public Works to
determine their resiliency planning and alternatives but it was very unlikely this project would
pencil out.
With the Utility buying power from the airport’s microgrid, Commissioner Tucher wondered if
the water treatment plant would buy power from the Utility or the airport’s microgrid.
Mr. Abendschein explained that when the microgrid is up, the Utility buys the power at an
agreed-upon price. The people receiving resiliency services use power from the microgrid when
the grid goes down but have to pay an ongoing amount to fund the microgrid. Therefore, the
treatment plant would have to pay regardless if the grid is on or off.
Vice Chair Mauter queried if the Regional Water Quality Control Plant had biogas.
Mr. Abendschein answered the Regional Water Quality Control Plant does not have biogas from
their treatment processes because they do not have a digester but he thought they were
looking at pulling biogas from the landfill.
Vice Chair Mauter noted these analyses were sensitive to the size of the battery but maxing out
the size of the battery drove the value down to zero because of the expense of the battery. Vice
Chair Mauter did not want to spend a lot of money on consultants to study something that was
not likely to pencil out. In Vice Chair Mauter’s professional experience, small batteries at
wastewater plants can make a lot of financial sense.
Mr. Abendschein mentioned that a secondary consultant was looking at smaller, targeted
projects that could make sense for energy arbitrage.
Commissioner Croft went to see the electric planes at the airport. Commissioner Croft asked
what was the airport’s financial situation, was the airport its own entity or what the airport’s
relationship was with the City, and did the staff report say the airport might put in a microgrid
regardless of whether the Utility participates.
Mr. Abendschein answered the City owns the airport. Kiely Nose, Assistant City Manager,
remarked the airport was run through an enterprise fund, similar to a utility. For significant
Utilities Advisory Commission Minutes Approved on: Page 24 of 30
capital improvement such as the investment in apron repairs, the airport enterprise fund
obtained a loan from the General Fund that the airport enterprise fund pays back on a
repayment schedule. Chair Scharff stated the airport enterprise fund was run by the City
Manager’s Office. Ms. Nose said the airport was a City entity, the City was responsible for the
airport, and the City managed the airport and its operations. The revenues associated with
activities at the airport (rental fees, tie-down fees, hangar fees, etc.) help support the
operations at the airport but there was not a large margin. Mr. Abendschein clarified that if the
large airport microgrid does not go forward, the airport was doing a separate analysis (not a
Utility-driven analysis) to determine whether a small microgrid made financial sense, and then
the airport would have to go through the City approval process.
Commissioner Croft asked if the commercial batteries in the cost benefit chart were assumed to
be hooked up with an existing commercial solar array. Commissioner Croft noted big solar
arrays were visible around town at schools and she saw other solar arrays when she looked
aerially but did not know who the companies were. Commissioner Croft wondered if there was
an opportunity for the City to put a battery on somebody’s existing solar array to achieve the
City’s reliability and resiliency goal.
Mr. Abendschein pointed out that Slide 6 differentiated commercial standalone battery
(without solar) and solar + battery. Rather than have a systematic program, Mr. Abendschein
said there may be targeted opportunities to take advantage of existing solar to create resiliency
but if the City was making an investment it had to meet the criteria of providing a
communitywide benefit. There may be opportunities to put in solar and storage when
rebuilding the Cubberley Community Center.
Mr. Kurotori mentioned that staff has had internal discussions about the potential to add
storage on parking garages with solar and have resiliency charging.
Public Comment:
1. Bob Lenox, President of the Airport Association, spoke in support of a microgrid at the
airport. Mr. Lenox flew the electric airplane a couple weeks ago and noted it flies like a
regular airplane. Mr. Lenox thought the community will benefit from a larger microgrid.
Under the previous federal administration, the airport was looking at a grant for a
microgrid but now it was unknown. Infrastructure work had been done at the airport for
a grid. Conduit was laid underneath the ramp. There was a lot of space for solar panels
on top of hangars and solar panels could provide shade for aircraft in open hangars.
Chair Scharff asked Mr. Lenox why he wanted a microgrid and what the advantage was
to the airport. Mr. Lenox replied that having a microgrid and available storage would
provide resiliency and reliability by having power available during power outages. The
most recent outage 2 weeks ago affected everything east of the Bayshore and lasted
about 4 hours. In response to Commissioner Phillips asking if the airport had backup
power with a diesel generator, Mr. Lenox answered no. It was Mr. Lenox’s
understanding that the tower had backup power but not the rest of the airport. Chair
Scharff inquired if Mr. Lenox was willing to pay more in electricity costs. Mr. Lenox
Utilities Advisory Commission Minutes Approved on: Page 25 of 30
cannot speak for airport management but as a renter at the airport, he paid a monthly fee that
goes up every July 1 and he believed everyone would be paying more for everything.
2. Esme Lopez-Landeck is a representative of the Clean Coalition, a technical nonprofit
with the mission to accelerate the transition to renewable energy and a modern grid.
The Clean Coalition strongly supported efforts to promote reliability and resilience.
Clean, local energy was viewed as a critical component of a sustainable future,
especially as the community electrifies. The environmental benefits of deploying blocks
of community-scale solar and storage included optimized grid citizenship by reducing
peak usage of the grid at the most stressed times and eliminating energy loss associated
with traversing transmissions and distribution grids. Typically, 15 percent of remotely
generated energy was lost due to resistance and congestion, which was exacerbated by
distance. The environmental impact of central generation was the open space
consumed for generation and transmission areas. The economic impacts of deploying
blocks of community-scale solar and storage included electric cost savings compared to
buying electricity from a utility, the value of resilience compared to implementing and
operating a fossil fuel generator, providing a fixed cost of electricity compared to rising
utility costs, and reduced the total amount of Palo Alto’s transmission spending. The
Clean Coalition found that deploying blocks of 10 MW solar and 20 MWh storage would
net $17.3 million of economic stimulation. The amount of savings obtainable by
deploying community-scale solar and storage was an example from 2020 in the Santa
Barbara region. The Clean Coalition urged moving forward with Strategies 3 and 5,
which would provide long-lasting economic, environmental, and resilience benefits.
3. Johnny, Program Engineer for the Clean Coalition, stated that properly identifying
essential community facilities and valuing the resilience they gain from retaining power
during grid outages was a critical step toward planning for community resilience and
benefitted the entire community. The Clean Coalition developed a methodology called
the Value of Resilience 1, 2, 3. The Clean Coalition’s Resilient Energy Subscription
allowed a community to fairly determine which facilities and loads will be prioritized
during an outage and use the subscription to fund scalable community microgrids.
Community resilience would be drastically improved by installing solar microgrids onsite
at critical facilities and resilience would be further elevated with a community microgrid,
with the added benefit of reducing or eliminating the City’s reliance on the delivery of
fossil fuels during an emergency. Clean Coalition strongly supported developing a solar
microgrid to provide resilience at the airport and the Regional Water Quality Control
Plant. Johnny encouraged exploring the total solar generation potential at the airport
because once the critical loads for those facilities were covered, the additional solar
energy could be used to charge the City’s electric vehicle fleet and provide the City the
ability to manage energy supply and demand with vehicle-to-grid technology.
4. Sam Andre is an Associate Program Engineer for the Clean Coalition. The Clean Coalition
had over a dozen community microgrid projects moving forward across the country,
including 2 in California under the microgrid incentive program in Marin County with
PG&E and in East Los Angeles with Southern California Edison. In Buro Happold’s cost-
benefit analysis results in Attachment A of the agenda packet, commercial solar and
Utilities Advisory Commission Minutes Approved on: Page 26 of 30
BESS projects had a benefit-to-cost ratio of 1.07 without factoring in long-term resilience
benefits. A pilot-scale community microgrid of 2 MW of solar and 4 MW hours of storage
offered in a single Tesla Megapack had a total cost of about $7 million based on Clean
Coalition’s experience with the Tomales West community grid and other community microgrid
projects. A pilot-scale Palo Alto Airport community microgrid would give CPAU an opportunity
to evaluate the economic and resilience benefits and then decide to extend it and have
additional community microgrids in Palo Alto. The Clean Coalition urged the UAC to move
forward with a solar and storage buildout at the Palo Alto Airport and Regional Water Quality
Control Plant.
5. Caleb, Palo Alto resident and former Clean Coalition employee, had professional
expertise in economic analysis. Caleb highlighted the benefits of community microgrids
including avoided transmission cost, avoided congestion cost of 10 to 15 percent, and
resiliency benefits during long-term grid outages. The airport microgrid feasibility study
noted an airport microgrid can provide long-term power to the Regional Water Quality
Control Plant up to 45 days in September. The Clean Coalition’s Resilient Energy
Subscription was a mechanism to finance community microgrids by allowing any facility
within the footprint of a community microgrid to pay a monthly kWh fee (in addition to
its normal electricity tariff) for guaranteed daily delivery of locally generated renewable
energy during grid outages. Each facility can decide what percentage of its total electric
load to include in its Resilient Energy Subscription and perform behind-the-meter load
management to stay within its daily load budget during grid outages. The Clean
Coalition’s Value of Resilience 1, 2, 3 can estimate an average value of resilience of 25
percent of a subscriber’s typical energy costs. PG&E’s transmission access charge
averaged 3 cents/kWh in January of 2023 and had risen sharply since then but could be
avoided via community microgrids. A Resilient Energy Subscription could alleviate some
PPA costs. Community microgrid owners could potentially reap significant value through
energy pricing arbitrage and/or reducing daytime rates. Based on the locational
marginal pricing analysis conducted last year for Clean Coalition’s West Marin
Community Microgrid, the average value of solar alone averaged 4⅕ cents/kWh over
the course of a year and the value of time shifting averaged 6½ cents/kWh with the
standard solar-driven community microgrid ratio of 2 kWh of BESS to 1 kW of solar
power capacity.
Staff’s straw proposal for UAC feedback:
1. Promote ways community members can save money by reducing peak period load
(helping the electric grid) under TOU rates once those rates are launched.
2. Monitor demand response technologies for positive benefit-cost opportunities but
continue existing City practice of not pursuing demand response (unless benefit-to-cost
ratios change in the future).
3. Promote residential solar and battery adoption, standalone batteries, and thermal
storage but continue the City’s current policies of not providing technical assistance
programs or incentives due to costs exceeding benefits.
Utilities Advisory Commission Minutes Approved on: Page 27 of 30
4. Promote electric vehicle to home/grid as it becomes more available but continue the
City’s current policies of not providing technical assistance or incentives (unless benefit-
to-cost ratios change in the future).
5. Further explore the cost effectiveness of local larger-scale commercial solar + battery
programs and bring to the UAC and City Council for consideration as part of the report
on Strategies 4 and 5 if cost-effective options can be identified, while continuing to
pursue utility-scale solar and storage and other renewables in parallel.
6. Monitor opportunities for distribution investment deferral using flexible technologies
and efficient electrification but do not pursue additional analysis or new policies or
programs at this time.
7. Maintain City’s current policies on microgrids and backup power (long-term resiliency).
8. Explore electric utility-treatment plant partnership on airport microgrid.
Commissioner Metz needed to see a more detailed analysis to provide feedback on specific
projects. Commissioner Metz wanted to know what costs were included, whose costs were
they, and how the costs were calculated and integrated. Commissioner Metz would like to
understand what was included in reliability and resiliency. Rather than start with a discrete
project, Commissioner Metz thought it was valuable to start with CPAU’s objectives for
reliability and resilience when the grid was working and when it was not. An example of a
specific goal was to reduce outage duration and frequency 50 percent in 5 years; then ask what
technology or programs achieve that goal and what it would cost. Commissioner Metz viewed it
as an important core competency and thus recommended that CPAU build the internal
capability to conduct this analysis.
Commissioner Tucher agreed this was a core competency that one would want to have
internally. Commissioner Tucher thought CPAU needed to promote and expand microgrids,
virtual power plants, solar and storage, batteries in the garage and at the grid, and batteries
connected to shopping mall and parking lot solar systems; come up with ways to show they will
work and pick one to start first. Vehicle to grid would not be the first. Commissioner Tucher
liked the way staff showed the methodology for finding the 360 transformers and it would be
great to defer the upgrades, so he would tie in some of this work with grid modernization.
Commissioner Tucher wanted to know where the transformers were failing in order to identify
the substations or transformer areas of most concern, and ideally where we could best prove
the benefits of storage and solar. Commissioner Tucher did not see how the cost-benefit ratios
were determined for projects.
Commissioner Croft generally supported staff’s straw proposal 1-8. Commissioner Croft thought
there should be a plan for a longer-term emergency. Commissioner Croft wondered if the
airport microgrid could be a shared investment with a shared benefit. It would be valuable to
the City to have a renewable resource for the City’s emergency electric vehicles when
greenhouse gas resources are hard to find.
Utilities Advisory Commission Minutes Approved on: Page 28 of 30
Chair Scharff supported staff’s straw proposal 1-8. Chair Scharff encouraged staff to look for a
targeted project to move forward with. Chair Scharff reminded staff to mention that the second
interconnect will make a big difference in long-term resilience issues.
Vice Chair Mauter echoed Chair Scharff’s comments. Vice Chair Mauter believed there should
be a discussion with community input on raising rates to more fully weight resiliency or local
generation. Vice Chair Mauter felt it would be helpful if the presentation highlighted the
individual, household, or business investments with the highest payback. Vice Chair Mauter
thought that good resilience and carbon benefits would accelerate voluntary investments. In
general, Vice Chair Mauter strongly supported the set of staff’s recommendations. Even if the
cost-benefit ratio was not quite there, Vice Chair Mauter recommended looking for an
opportunity for a program with a single, large commercial entity because she assumed it was
much easier to roll out and required less staff effort, and staff could learn from it. Because this
is a period of tremendous volatility in policy and rates, Vice Chair Mauter wanted to see
tornado plots in the final set of analyses to better understand the sensitivity analysis and some
of the risks to the financial assumptions. Emergency long-term planning was in the UAC’s
strategic plan this year, which will provide an opportunity for the Commission to talk more
about how we want to value long-term electric power resiliency or longer-duration storage, so
Vice Chair Mauter encouraged staff to schedule that discussion soon for the UAC to provide
timely feedback.
Commissioner Gupta will email his comments after the meeting as a public comment. At a high
level, Commissioner Gupta supported the principles in staff’s recommendation. Commissioner
Gupta wondered if it was beneficial to have a formal collaboration with OES to have a lens
toward disaster and emergency preparedness when designing resiliency programs.
Commissioner Gupta did not agree with staff’s Straw Proposal 3 because he thought the City
should at least provide technical assistance to residents who were interested in solar and
battery adoption, particularly if they were concerned about disaster preparedness, maybe a
vulnerable person who relied on medical devices. Commissioner Gupta suggested adding
“unless benefit-to-cost ratios change in the future” to Straw Proposal 3. Regarding Straw
Proposal 6, Commissioner Gupta thought we should look for opportunities to reduce the $300
million cost of the grid modernization project. In addition to staff’s 8 straw proposals,
Commissioner Gupta wanted to consider equity principles. Commissioner Gupta was interested
in studying the success of voluntary tariffs mentioned in public comment to buy battery storage
for a certain percentage of load, which would enhance resiliency.
Commissioner Phillips did not want to raise everybody’s rates to help somebody buy solar.
When this is done and rolled out, Commissioner Phillips encouraged staff to provide careful
communication to the community on why the City will not do certain things. Anything we say
we will look more into meant it will take more of staff’s time away from other more important
things and the additional cost to hire consultants to perform studies. Commissioner Phillips
loved this exercise and recommended repeating and updating it at an appropriate cadence such
as annually or every other year because the economics and overall situation will change, which
could lead to different decisions. Staff’s Straw Proposal 1, tell people now how to reduce peak
Utilities Advisory Commission Minutes Approved on: Page 29 of 30
period loads to help the grid as good citizens instead of waiting until TOU rates are launched.
Regarding staff’s Straw Proposal 5, Commissioner Phillips thought a commercial entity would
not consider it at 1.07, so maybe a public-private partnership. For staff’s Straw Proposal 8,
Commissioner Phillips asked if the Utility was planning to do more work on the airport
microgrid.
Mr. Abendschein replied it was up to Public Works to consider their options for long-term
resiliency, one of them being a solar microgrid, what those options cost, and how much
resiliency they provide in a major emergency. Work had been done on valuing the PPA. If there
was an opportunity for an airport microgrid, it will be brought back but Mr. Abendschein did
not think it was likely.
Vice Chair Mauter pointed out that the Regional Water Quality Control Plant’s value of a
microgrid was highly dependent on the tariff structure we set. The City or Utility could value the
grid peak load reduction significantly and apply a TOU tariff structure that makes a microgrid
pencil out whereas flat rates would provide no benefit. For Staff’s Straw Proposal 8, instead of
passing it to Public Works, Vice Chair Mauter believed there should be collaboration between
the Utility and Public Works.
Mr. Abendschein explained that you need a partnership when you think about the airport
microgrid as a behind-the-meter project where the rates matter, which is why it was analyzed
as a PPA because you can value the resiliency and value the PPA price against our existing PPA
price, and you do not have to worry about rates and tariffs. With that approach, Mr.
Abendschein thought it can be given entirely to Public Works with some support and Utilities
would stay involved.
Mr. Kurotori mentioned the work that Public Works did for Utilities. Mr. Abendschein was in
Public Works. Public Works was leading on exploring an airport microgrid and Utilities was a
supportive department.
FUTURE TOPICS FOR UPCOMING MEETINGS
Utilities Director Alan Kurotori referred commissioners to the 12-month calendar. The next UAC
meeting will be held on September 3, 2025.
COMMISSIONER COMMENTS and REPORTS from MEETINGS/EVENTS
Regarding the public commenter who spoke of having trouble with the UAC’s public comments
email address, Commissioner Gupta’s theory was it had something to do with the domain name
shift. Commissioner Gupta wondered if staff could follow up, maybe reach out to IT to resolve
the apparent issue with the City’s software identifying certain messages as spam and not
coming from safe senders. Utilities Director Alan Kurotori said that multiple staff made a note
about this and will see how to ensure the public comments get through.
Commissioner Croft shared an interesting fact she heard at the Climate Working Group meeting
on June 11. Two-thirds of new construction was all electric. A question was raised on why one-
Utilities Advisory Commission Minutes Approved on: Page 30 of 30
third of new construction had a gas hookup and the reason was for stoves, so there was a need
to convince people they do not need gas stoves.
ADJOURNMENT
Chair Scharff adjourned the meeting and reminded commissioners that the UAC will not have a
meeting in August.
Meeting adjourned at 10:04 p.m.
Phil Metz Feedback for Item 5. Status Update on Studies Related to the Electric
Utility’s Reliability and Resiliency Strategic Plan (RRSP) Strategies 4 and 5 and
Request for Feedback on Draft Proposals for Implementation. July 9,2025 UAC.
#1. Feedback on project next steps: To provide feedback on the projects presented, I
would need to see a much more detailed analysis. The information presented is very
high level; even the appendices are just high-level summaries. (So is the 2/5/25
“Reliability & Resiliency Strategic Plan: Update on Studies”) To provide feedback on
these projects, I would need to see:
What costs are included? And whose costs are they?
How are these calculated?
How are they integrated (e.g., interest rates, discount rates, durations)?
Benefits: Same questions.
If CPAU can provide that information I would be willing to review it and provide detailed
feedback on next steps, as requested.
#2. Feedback on inputs vs. outputs: The analysis conflates exogenous forces with
CPAU (and community) outcomes. VTG will happen. Solar + batteries will happen.
New data centers will happen. Etc. These and other exogenous forces should be
treated as inputs to CPAU’s strategy – not as outputs. The CPAU questions should be:
Given those forces, what are CPAU’s objectives? What should CPAU’s strategy and
actions be for addressing them?
#3 Feedback on the analytical approach: I think this analysis has “started at wrong
end of the elephant”. Instead of starting with possible technology “solutions”, I
recommend:
1) Start with “aspirational goals”: "What does CPAU want to achieve?” Examples:
Lower peak electricity demand, less CO2, grid cost reduction, higher reliability &
resilience (when things are operating "normally" and during emergencies), better
emergency preparedness & response. These should be quantitative, for example,
“Over the next 5 years reduce short term outage average duration and frequency 50%.”,
“During a 1-2 week emergency (as called out in the CPA EOP) provide adequate
electricity and water to enable residents to stay in their homes.” It would be valuable to
obtain inputs from City Council and residents in setting these goals.
Phil Metz Feedback for Item 5. Status Update on Studies Related to the Electric
Utility’s Reliability and Resiliency Strategic Plan (RRSP) Strategies 4 and 5 and
Request for Feedback on Draft Proposals for Implementation. July 9,2025 UAC.
2) Then identify potential initiatives for achieving those goals. (e.g., microgrids, or solar
+ storage, etc.)
3) Quantify the performance of each option against the goals in a transparent way that
non-experts can follow. CPAU has unique capabilities to do this.
4) Get the results in front of decision-makers – City Council and residents – so that they
can conduct an informed discussion and decide what to do. This might involve CPAU
technical programs, or rates or subsidies, or education.
#4. Feedback on consulting studies: Reliability and resilience, and Grid Mod more
broadly, are strategic, large, and long-term challenges for CPAU. Multiple City Council
members have expressed concern about how CPAU navigates these. For deciding
whether to outsource or insource a given business problem, core competency business
thinking says, “Insource if the problem is strategic, big, and long term. Outsource if it’s
less strategic, or a small one-off. So, based on that logic, I think CPAU should be
building and maintaining competencies in reliability and resilience, and in Grid Mod
strategy more broadly – not outsourcing its strategic planning to consultants.