HomeMy WebLinkAbout1997-11-17 City Council (22)City of Palo Alto
City Manager’s Report
TO:HONORABLE CITY COUNCIL
FROM:
AGENDA DATE:
SUBJECT:
CITY MANAGER DEPARTMENT:UTILITIES
NOVEMBER 17, 1997 CMR:453:~I~
STATUS REPORT ON THE IMPLEMENTATION OF THE
RECOMMENDATIONS FOR THE UTILITIES
ORGANIZATIONAL REVIEW
This is an informational report and no Council action is requested.
BACKGROUND
In December 1994, when the City Council approved the City Manager’s recommendation
to perform an organizational review of the Utilities Department, the goal was to ensure that
the Utilities were prepared organizationally for future competition in the industry and had
the ability to meet the customers’ service expectations efficiently while remaining
competitive. The consulting firm of Theodore Barry and Associates (TB&A) conducted the
study from April through November 1996. The final report was presented to Council in
December of that year.
In January 1997, staff outlined the strategy for responding to the 39 recommendations from
TB&A. Staffaddressed the organizational recommendations pertaining to positions with the
FY 1997-98 budget and returned to Council with greater detail on these during the budget
issues discussions. Staff continued to work over the next several months to address the
operational recommendations.
DISCUSSION
TB&A listed 39 recommendations in the report. Listed below are the recommendations and
the status of each as of October 1997:
Establish a business planning process for each commodity provided by the
utility.
CMR:453:97 Page 1 of 13
In-progress. The estimated completion date is Deeember1997.
A team has been formed composed of members of the Utilities and Administrative Services
Departments (ASD). This team is working with a consultant to produce an electric and gas
business plan, with completion estimated by November 1997. Funding for the water and
wastewater plans has been included in the FY 1997-98 budget. Once the electric and gas
plans are complete work will start on the business plans for water and wastewater utilities.
Determine ~reliability needs of each customer class; rank projects by
contribution to reliability; link with business plan.
In progress. Due to its link to the business plan, the estimated completion date is
November 1997.
Staff has completed initial analysis of the reliability needs and the monitoring of outages.
The business plan will establish the priorities for the projects.
t Conduct detailed study of substation maintenance intervals (including bench
marking "best of class" utilities); devdop a reliability-centered maintenance plan
(reliability needs, contracting policies, and need for substation improvement
projects,) and set staffing levels to accomplish the plan.
Complete.
The benchmarking study is complete as well as the maintenance study. Staffing reductions
(one FTE) were included in the adopted FY 1997-98 budget.
o Join with Public Works Department to conduct a detailed study of tree trimming
policies, methods and intervals (including a benchmarking study of "best of
class" utilities); determine reliability needs; improve reporting and analysis of
data by cause; and set goals to reduce total costs of tree trimming program
In progress. Estimated completion date is December 1997.
Electric Operations and Public Works Departments are completing the study, reviewing
¯ existing practices, investigatingexpenditures, budget practices, and manpower.
Continue efforts with the Northern California Power Agency (NCPA) and
Western Area Power Administration (WAPA) to jointly secure future sources
of electric supply and actively explore alliances with other entities.
CMR:453:97 Page 2 of 13
This recommendation is an ongoing activity,
Staff continues to work proactively with NCPA and WAPA to secure future competitive
resources. The Director of Utilities is working with the utility directors of NCPA members-
to chart a new course for NCPA including the refinancing of the Calaveras bonds to reduce
the project’s overall debt. Resource Management staff is working proactively with WAPA
staff to help that agency become more competitive in the deregulated market.
t
Develop a job costing system to better manage costs; revise accounting system
to separate operations from maintenance expenses and transmission from
distribution. Upgrade the Interactive Financial Accounting System (IFAS) to
-allow job costing capabilities; work with the Administrative Services
Department (ASD) to conduct a search for "best practices" at other utilities.
Investigate available job costing vendor packages.
In progress. Staff plans to complete an implementation plan for a new job costing
system by the end offiscal year 1997-98.
Job Costing System: Staff from the Utilities, Administrative Services and Public Works
Departments (primary users of the current costing system) have been meeting regularly for
the past few months to identify the City’s job costing needs. The City Auditor’s Office has
taken the lead in organizing and facilitating these meetings. Staff plans to complete a needs
assessment, which will identify the features and functions needed in a new job costing
system, in early 1998. After the needs assessment is complete, staff will work with the
Information Technology Services Division to evaluate the feasibility and costs of upgrading
the job costing module of the City’s existing fmancial system. Staff will also assess the job
costing capabilities that exist in the new utilities Customer Information System (CIS). At the
same time, staff will investigate vendor software package and job costing systems utilized
at other utilities.
Separate Accounting for Maintenance and Transmission: Administrative Services and
Utilities Department staff will evaluate the benefits of budgeting and tracking maintenance
and transmission costs separately and will revise the City’s general ledger account structure
to accommodate this need in 1998-99 budget process, if appropriate.
o Use the next few years as a transition period to move toward a separate energy
utility; take advantage ofsynergies between utilities, but move toward separating
the electric and gas utility from wastewater and eventually water.
CMR:453:97 Page 3 of 13
Staff recommends that this consultant proposal be rejected with no further action.
After evaluation, staff concluded that the synergies achieved from the current matrix
structure are greater than any benefits derived from the separation of the gas and electric
utilities from the water and wastewater utilities. Significant efforts over the last few years
to cross train staff in the water-gas-wastewater utilities have resulted in a more efficient use
of staff.
e Establish a Utility Information Systems Manager position to provide a focal
point for all services provided by the utility.
Complete.
The adopted FY 1997-98 budget included the position of Manager, Information Systems.
o Appoint a full time utility project manager within the utility for the Customer
Information System (CIS). Commit to implementation of new CIS system with
the highest priority. Implement business process additional recommendations
from Solutions for Government (SFG) reports.
Complete.
The Adopted FY 1997-98 budget included the position of Business Analyst-CIS. The
position is filled. Implementation of the recommendations from the SFG reports for
business process improvements is on-going.
10.Assign a full time project manager within the Utilities AM/FM/GIS. Dedicate
City resources to complete phase 1 (base maps). For phase 2, consider new
project organization.
Complete.
The FY 1997-98 budget included the position of Business Analyst-GIS. The position is
filled.
11.Work with purchasing to rethink the utility purchasing/inventory process
including: standardized material; partnership with commodity suppliers;
cooperative buying with other utilities; outsourcing of key supply functions; and
reexamination of utility stores service needs.
r
CMR:453:97 Page 4 of 13 I
In progress. Most changes are ongoing improvements.
The Purchasing Division (Purchasing) established and has recently filled a new Contract
Manager position dedicated to serving the needs of the Utilities Department. In September
1997, in order to speed the processing of contracts, Purchasing recommended that Council
approve a change to the Palo Alto Municipal Code that will reduce the number of contracts
that need City Council approval, and a change to City Policies and Procedures which will
waive the requirement for Council standing committee participation in the consultant
selection process for the Utilities Department. The development of a list of other
governmental contracts that can be used by the City to further reduce contracting time and
effort is underway. By the end of 1997, inventory replenishment responsibilities will be
transferred to Stores Division staff in order-to reduce cycle times and to minimize the
potential for stock outs. In addition, a plan has been developed to reduce the number of
slow-moving inventory items to make room for high demand items. Supplier alliances are
being cultivated through long-term contracts for City inventory. In the coming year, the new
Contract Manager will focus on additional improvements to the purchasing and inventory
process for the Utilities Department.
12.Set a long-term goal for the customer service group to become the primary call
and dispatch center, supported after hours by Utility Dispatch Center (new CIS
technology is critical). In the short-term, study the feasibility of utility handling
calls.
This evaluation is planned for FY 1998-99.
Due to the heavy workload of current deregulation activities and the implementation of the
CIS, the evaluation of this recommendation has been postponed until FY 1998-99. The
City’s dispatch center, operated by the Police Department, will continue to support the after
hours utility calls.
13.Continue shift of Demand-Side-Management (DSM) programs to focus on
industrial and commercial users. Eliminate four low-value marketing positions
(each with some residential components) and add three new industrial and
commercial positions.
Complete. First half of recommendation has been implemented Staff recommends
no reduction in staff due to requirements of AB 1890.
Staff has established the key account program to focus the efforts of the marketing staff on
the needs and desires of the large commercial users. Cross training has been provided among
CMR:453:97 Page 5 of 13 [
other marketing staff members for better coverage of the remaining customer classes
(medium and small commercial and residential customers). The passage of AB 1890
emphasized the need to establish a public benefit program, and therefore negated the TB&A
recommendation to eliminate marketing and efficiency programs for small commercial and
residential customers. Staff disagrees with the second half of recommendation to eliminate
staff and does not intend to proceed, absent specific Council direction.
14.Review gas meter testing approach; visit "best practice" firms.
In progress," survey completed August 1997. A complete analysis and
recommendation will be done by the end of February 1998.
A survey was conducted and staffis in the process Of evaluating the responses and feasibility
of changes. No clear, constant practice emerged form the survey. Palo Alto has changed the
process to test 10 percent of some smaller gas meters rather than all of them when they are
new. Staff is examining the possibility of extending the period between residential gas meter
replacement.
15.Develop a new product development process.
Complete.
In June 1997, staff developed a process by which new products and services would be
evaluated and submitted for Council approval.
16.
Delay
17.
Develop and document the process for responding to customer requests for new
rates (e.g. unbundling). Process must include Rates, Customer Service, and
Resource Management.
In progress. Estimated completion date is January 1998.
due to the vacancy of the Customer Service Supervisor. This position is now filled.
Consider appointment of Automated Meter Reading (AMR) project manager to
conduct pilot. Target need for real time two-way communication with electric
meters.
Complete.
CMR:453:97 Page 6 of 13 ~
The Supervisor, Meter Reading and Field Services has been assigned as AMR Project
Manager to cc~aduct pilot. Estimated time for real time, two-way communication with
electric meters is February 1998.
18.Develop and document a process for responding to customer inquiries/needs that
includes the mutually agreed upon delineation of responsibilities between
Customer Services and Marketing. Inform customers whom they should call
under various circumstances.
In progress. Estimated completion date is January 1998.
Due to the vacancy of the Customer Service Supervisor, this was delayed. The position is
now filled.
19.Although write offs are low, review lenient credit and collection policies,
particularly credit screening for new businesses, time to cut off, and late
payment policies. Implement process improvements recommended in SFG
analysis from February 1995.
Complete. Implementation of improvements from the SFG study is ongoing.
A review of credit and collection policies has been completed. The policies are considered
consistent with industry standards. Some changes are planned for Council approval as part
of its review of the Utilities Rules and Regulations in the upcoming months. The business
process improvements recommended in the SFG analysis in February 1995 are ongoing.
10.Update charges based on the results of the electric cost- of- service study.
Complete.
A study was completed in FY 1996-97.
98 budget.
These rates were included in the adopted FY 1997-
[
21.Key account representatives should develop team approach to managing key
accounts~ taking role of facilitator. Key account teams, which should meet
periodically and should include representatives from Engineering, Operations,
Customer Service and Rates.
Complete.
CMR:453:97 Page 7 of 13
Key account representatives are already meeting on an ad hoc basis with key individuals
from Engineering, Operations, Customer Services and Rates. Routine meetings began in
September 1997 with other City and utility stakeholders.
22.Strengthen productivity tracking capabilities. Current workload does not justify
large scale work management effort. Instead concentrate on improving cost
management.
In progress. Estimated completion date is June 1998:
Staff is expanding the statistical record keeping to be consistent with the impact measures.
Currently, staff tracks a number of jobs on a monthly basis. Utility staff is working with a
team from other departments as part of the needs assessment for improving the tracking
costs. The team is reviewing project criteria for productivity improvements, using new
techniques and processes, and trying new products to improve productivity and reduce costs
in the main replacement programs.
23.Work with the Human Resources Department (HR) to review training needs of
each employee and to investigate ways to increase employee input into decision-
making processes.
Complete.
Staff is evaluating existing processes and considering some changes. At this time,
supervisors review training needs yearly with employees and the Human Resources
Department supplies mandatory requirements. Staff recommends no change in current
system.
24.Consolidate DSM programs into Utility Marketing Services (UMS) group
(including evaluation, development and implementation). Remove maintenance
of data collection systems from the Competitive Assessment Group. Rename
"Market Research and Competitive Analysis".
Complete.
CMR:453:97 Page 8 of 13 ~
The recommendation to reassign work tasks in Utility Marketing Services and Competitive
Assessment sections was implemented. The recommendation to rename Competitive
Assessment was deemed unnecessary.
25.Consider account initiation fee.
Complete.
The recommendation was rejected since it is not consistent with good customer service nor
keeping and attracting new customers.
26.Reconsider City requirements imposed on contractors that tend to increase costs.
In progress and partially complete. Final completion is estimated for FY 1997-98.
Staff surveyed contractors and received a 67 percent response. The number one cost items
were material st6rage restrictions, temporary use permits limited to 45 days and denial of
permit renewals if a complaint is filed by a resident. The Utilities and Public Works
Departments are in the process of developing a storage site at the east end of San Antonio
Road. The second highest cost was for replacement of asphalt pavement "in kind". Working
with Public Works, staffhas negotiated an acceptable alternative to this practice. The third
highest cost item was the City truck routes, considered by contractors to be restrictive.
Contractors are required to move material extra distances in and out of the City. Staffwill
discuss alternatives with the Transportation Division for possible Council approval in FY
1997-98.
27.Review procedures for h~ndling gas emergency calls.
Complete.
Current procedures were reviewed by Water-Gas-Wastewater Operations and Customer
Service. Responses to gas-related calls during the week between 7:00 a.m. and 9:00 p.m. are
dispatched within 36 minutes. After hours calls are responded to within one hour. The
Federally-required Gas Emergency Plan is updated on an annual basis and staff receives
emergency response training on an ongoing basis.
28.Review allocation of gas transmission and distribution (T&D) costs; be prepared
to lower T&D rates for non-core natural gas customers (G-3 rate schedule) to
meet competitive pressures.
CMR:453:97 Page 9 of 13
In progress. Completion is estimated for January 1998,
Presently, staff is working with a consultant.
29.Update Water Master Plan; provide written response to master plan
recommendations and establish procedures to track implementation of
recommendations (see recommendations in wastewater).
In progress. A written report on the status of the recommendations made in a 1983
water study will be presented to Council in April 1998.
Currently, a consultant is conducting a water study and storage needs study and will be
making recommendations for future planning of projects upon completion in March 1999.
30.Update Urban Water Management Plan; establish procedures to track
implementation of recommendations.
Complete.
The Urban Water Management Plan was updated. Staff is in the process of establishing a
tracking system for-implementation of recommendations.
31.Preventative maintenance for water system needs to be scheduled and
procedures written; intervals/practices need to be compared against industry
best practices.
In progress. Funds will be budgeted during the FY 1998-99 budget process to
purchase the selected software program.
Staff has reviewed and evaluated several different maintenance management systems.
32.Review allocation procedures and method of allocating Administration &
General expense among Utility funds and to the Water Fund.
In Progress. The expected completion date of the evaluation is January 1998.
Staffis working with ASD staffto review the methodology for calculating cost plan charges.
CMR:453:97 Page 10 of 13 [~
33;Evaluate method of assessing rate of return and General Fund transfers for
water.
Planned for 1998-99.
Consultant study scheduled for FY 1998-99. Funds will be included during the FY 1998-99
budget process.
34.Evaluate infrastructure financing approach for major water capital projects.
Complete.
The study is completed. A report was sent to the Utility Advisory Commission (UAC) .in
February 1997. Financing of major capital projects raised rates in the long-term and this was
rejected.
35.Prepare written schedules and procedures for preventative maintenance on the
wastewater lift station and manhole inspections.
ln progress. The expected completion date is estimated for December 1997.
Preventative maintenance procedures and schedules have been developed and are currently
.being implemented. Written procedures have been drafted and will be final by December
1997 for the one utilities lift station.
36.Evaluate the need for a dedicated wastewater clean-out waste crew for mains to
avoid pulling off the job.
Cor~plete.
Staff conducted a cost analysis based on vehicles, manpower, and maintenance. It is staffs
opinion that the most efficient method is to use existing staff on an as-needed overtime basis
to keep on schedule with the preventative maintenance cleaning of the wastewater collection
system. No further action is required.
37 Develop a business plan that defines the strategic goals for the Water utility and
allocates resources according to their relative importance.
Estimated completion date is June 1998.
CMR:453:97 Page 11 of 13
See recommendation number one. Funds are included in the FY 1997-98 budget. Plans will
be developed with consultant assistance following completion of the Electric and Gas
Business Plans.
38.Provide written responses to Wastewater Master Plan recommendations and
establish procedures to track implementation of recommendations.
In progress. A report to Council is planned for February 1998.
A written response to the Wastewater Master Plan recommendations is being prepared by the
engineering staff. A status report to Council is scheduled for February 1998.
39.Evaluate infrastructure financing approach for major wastewater capital
projects.
Complete.
In June 1997, Council adopted a debt policy which states that it is appropriate to consider
debt financing: "for Enterprise Fund projects, if a significant backlog of capital
improvements has been developed, and if that backlog cannot be addressed through the
ongoing capital budget without having a significant impact on utility rates. In this case, debt
financing can be used to.smooth out the wide rate variations in a otherwise stable capital plan
... (Debt would also be considered) ... if funding a large project.., would have a significant
impact on the availability of funding for other ongoing capital needs."
The Wastewater Utility has a relatively stable, consistent amount of capital improvement
projects planned. Moreover, since the Wastewater Utility is financially healthy, it is able to
plan for, and fund this planned level of capi.tal projects annually through rates. Accordingly,
staff intendsto adhere to the debt policy guidelines, where pay-as-you-go financing will be
used as long as no significant capital backlog exists. It is important to note that it is less
costly to finance capital improvements on a pay-as-you-go-basis, because ratepayers will not
have to fund the financing costs associated with debt.
ENVIRONMENTAL ,ASSESSMENT
This report does not constitiute a project for California Environmental Quality Act (CEQA)
purposes, therefore, no environmental assessment is required.
CMR:453:97 Page 12 of 13 I
PREPARED BY: Rosemary Ralston, Utilities Administrator
DEPARTMENT HEAD APPROVAL:
CITY MANAGER APPROVAL:
Manager
CMR:453:97 Page 13 of 13 l