Loading...
HomeMy WebLinkAbout1999-08-08 City Council (6)City of Palo Alto C ty Manager’s Report TO:HONORABLE CITY COUNCIL FROM:CIT,Y MANAGER DEPARTMENT: UTILITIES DATE:FEBRUARY 8, 1999 CMR:136:99 SUBJECT:PROPOSED ADDITIONS AND MODIFICATIONS TO ELECTRIC UTILITY PUBLIC BENEFIT PROGRAMS REPORT IN BRIEF This report requests that Council approve additions and modifications to the on-going Electric Fund public benefit programs approved by Council in May 1998. This is a referral item from the Utilities Advisory Commission (UAC). Staffhas revised its original proposal to the UAC to meet some concerns. Staff proposes to modify existing programs and introduce six new programs, with the following funding targets: (1)Residential Resource Efficiency Program-S125,000 (2)Residential Online Energy Audits-S30,000 (3)Commercial Online Energy.Audits-S30,000 (4)Business Retrofit Program-S421,000 (5)Photovoltaics ’for Palo Alto Incentive Program-$100,000 (6)Investment in Remote Renewable Generation Facilities-S250,000 CMR:136:99 Page 1 of 5 RECOMMENDATION Staff recommends that Council approve the following multi-year public benefit package: 1.Public benefit programs with proposed modifications as described in Attachment A; 2.New public benefit programs as described in Attachment B and; 3.The attached resolution revising Rate Schedule C-4 to increase the Residential Rate Assistance Program discount from 15 percent to 20 percent. BACKGROUND In 1997, California State AB1890 was passed requiring municipal utilities to collect an electric charge to fund public benefit programs. The funding level established for Palo Alto is approximately $1.77 million annually. AB1890 established that funds be expended in any one or more of four program categories: [] [] [] Demand-side management programs New investment in renewable energy resources Research, development, and demonstration programs Low income services To comply with AB1890, the City Council approved an initial public benefit package with funding allocations as part of the budget process for 1998-99 (CMR:237:98). The program allocations serve as guidelines and were expressed by a range, which in sum cannot exceed a budget of $1.77 million. However, within the constraints of the $1.77 million cap, the allocation for a given program may be exceeded (with a corresponding reduction in another program) if, for example, customer demand is high for a particular program.. The selection of an appropriate mixture of public benefit programs is an ongoing process which requires monitoring, evaluation and modification from time to time. Staff anticipates that the components and details of public benefit programs will continuously evolve through an iterative process involving the residents and businesses of Palo Alto, staff, Council, and the UAC. Of the $1.77 million budget approved for public benefit programs by the Council, staff has identified programs representing a total target allocation of approximately $1,476,000. Hence, additional programs need to be added to reach the $1.77 million target CMR: 136:99 Page 2 of 5 (Attachment B). Accordingly, at the November 1998 UAC meeting, staffproposed six new programs for inclusion in the overall public benefit plan. The UAC recommended that Council approve four of the six proposed programs. The UAC voted 3-1 against the Appliance Incentive Program and tied 2-2 on a program to provide investment grants for remote generation facilities. However, staff has reviewed the UAC’s comments (minutes attached) and revised its original proposal to address some UAC’s comments. In particular, the staff recommends modifying program levels to reduce the amount targeted for investing in remote renewable energy projects and a shift of public benefit dollars into energy efficiency programs which directly benefit Palo Alto residents. This report presents all six programs as revised as well as modifications to existing programs, for Council approval. Staff proposes to begin development and implementation of these environmentally sound programs upon Council approval. DISCUSSION The proposed modifications to existing public benefit programs are shown on Attachment A and descriptions of the six new programs are provided on Attachment B. The six new programs include: (1) Residential Resource Efficiency Program (2) Residential Online Energy Audits (3) Commercial Online Energy Audits (4) Business Retrofit Program (5) Photovoltaics for Palo Alto Incentive Program (6) Investment in Remote Renewable Generation Facilities The Residential Resource Efficiency Program was recently presented to the UAC as an Appliance Rebate Program limited to promoting refrigerators and washing machines which exceeded existing Federal efficiency standards by at least 20 percent. Of the six programs, this was the only program the UAC voted against (3-1). However, staff believes it is a valuable component of this expanded program because it can more directly benefit Palo Alto residents than other public benefit programs, and is already offered in the Bay Area by PG&E, Silicon Valley Power, and the City of Alameda, to residents served by those utilities. This results in frequent inquiries from Palo Alto residents as to why Palo Alto does not have an appliance incentive program. In addition, it represents one of the few public benefit programs which can be implemented with a minimum of delay. This is desirable because it will take well beyond one year to reach the overall spending level budgeted on public benefit programs. CMR:136:99 Page 3 of 5 In comparison to the programs targeted for businesses, the current public benefit plan offers little, in terms of direct benefits to residents. The Residential Resource Efficiency Program _has been designed to fill this void by expanding the appliance incentive program to cover all energy efficient appliances as well as building envelope, efficient lighting and heating systems. The Residential Resource Efficiency Program is modeled after its business counterpart, the Business Retrofit Program, which received unanimous UAC support. Although staff did not present this expanded residential program to the UAC for consideration, the benefits of the program are consistent with a comment made at the UAC meeting. Before voting on a proposed program to invest in remote generation facilities (which became a split vote), the UAC indicated a preference to spend more public benefit dollars within Palo Alto. Staff concurs and proposes to raise target levels for local programs, existing and new. At the same time, staff proposes to keep the program for investment in remote renewable generation facilities as an option, but reduce the target level from $500,000 -to $250,000. With regard to existing programs previously approved by the UAC and Council (Attachment A), the proposed changes include an increase in incentives for commercial and industrial new construction and a transfer of incentives from the Industrial Comprehensive Audit Program to the newly proposed Business Retrofit Program. Staff also proposes to increase funding of electric vehicles for the City’s fleet and installation of City and public charging stations, which is consistent with suggestions made at the UAC. Staff further proposes that the Residential Rate Assistance Program (RAP) discount be increased from 15 percent to 20 percent to help raise participation levels while increasing rate relief to residents who need financial assistance. Presently, approximately 330 residents receive RAP discounts totaling approximately $35,000 annually. Finally, the largest existing public benefit program, Enhancements to Existing Northern California Power Agency (NCPA) Generation Facilities, is being terminated due to lack of interest by NCPA. RESOURCE IMPACT Funds are available in the Electric Fund operating budget and capital improvement project. Since the public benefit programs were not all in place and at full customer participation levels as of July 1, 1998, staff anticipates that a significant amount of the public benefit program funds budgeted for FY 98-99 will be unexpended at year-end. Such funds will be transferred to the Public Benefit Reserve for future withdrawal. The financial impact resulting from the increased subsidy proposed for the Residential Rate Assistance Program is expected to be insignificant. POLICY IMPLICATIONS Approval of the proposed public benefit programs will implement existing policies. This CMR: 136:99 Page 4 of 5 includes thepolicy adopted in 1996 to justify demand side management programs based on the community’s support for environmental policies and the Utilities goal of retaining and enhancing the satisfaction of customers (CMR:209:96). ENVIRONMENTAL REVIEW Modifications to the on-going Electric Fund public benefit programs and the six added programs are either not a project under Section 15061 (b) (3) (Energy Audits) or are categorically exempt under Section 15301 (b) (Resource Efficiency Programs and Retrofit Programs) and Section 15302 (c) (Photovoltaics Program and Remote Generation Facilities Investment) of the California Environmental Quality Act (CEQA) in that they involve minor changes or no physical changes, to existing utility facilities that are intended to improve delivery and conservation practices. The Investment in Remote Renewable Generation Facilities may, in the future, require further environmental analysis by the beneficiary of the investment based on specifically proposed improvements that can not be determined at this time. ATTACHMENTS Attachment A:’ Description of Modifications to Existing Programs Attachment B: New Programs Resolution Rate Schedule C-4 UAC Minutes of November 4, 1998 meeting PREPARED BY:Lindsay Joye, Marketing Engineer Linda Clerkson, Public Relations Manager Randy Baldschun, Assistant Director of Utilities, Administrative Services DEPARTMENT HEAD APPROVAL: EDWAI~ J. MRI~EK Director of Utilities CITY MANAGER APPROVAL: EMIE’g H~SON Assistant City Manager CMR:136:99 Page 5 of 5 ATTACHMENT A:DESCRIPTION OF MODIFICATIONS TO EXISTING PROGRAMS 1.Industrial Comprehensive Audit Program 2.New Construction Design review 3.Enhancements to Existing NCPA Generation Facilities 4.Photovoltaic Demonstration project 5.Electric Vehicle Infrastructure Plan 6.Electric Vehicle Leasing for City fleet 7.Electric Vehicle Demonstration Grants 8.Membership in EPRI and Esource 9.Residential Rate Assistance Program (P~P) Offer comprehensive energy audits to Key commercial customers. Offer design review services for large commercial construction projects. Replace McKay’s micro turbine and upgrade new Spicer transmission in conjunction with other NCPA members. Provide grants to residential and commercial customers for photovoltaic demonstration facilities. Hired a consultant to develop an infrastructure plan which is near completion. Select vehicles to lease and evaluate appropriate users. Install charging outlets. Promote vehicles in community. Provide grants to local organizations to promote electric vehicles. ’ Research in efficient equipment, electric vehicles and renewable generation Offer 15% electric rate discount for qualifying low income residents. Transfer the incentive component to the proposed Business Retrofit Program. Add incentives for efficient equipment exceeding state standards applicable to all commercial and industrial customers, regardless of size: Due to a lack of interest by Northern California Power Agency, staff proposes to drop these NCPA projects. No change No change Expand budget to include building one public charging station. Delay until public infrastructure is available, however, target allocation for EV programs may be increased pending results of consultant study recommendations. No change Increase level of discount to 20%. Fixed Expenses (salaries, facilities, and indirect charges) Total for approved programs $440,500 $10,000 $500,000 $75,000 $25,000 $25,000 $35,000 $16,000 $24,000 $326,000 $1,476,500 $100,000 $100,000 $0 $75,000 $25,000 $100,000 $35,000 $40,000 $326,000 $817,000 $16,000 ATTACHMENT B:DESCRIPTION OF NEW PROGRAMS 1.Residential Resource Efficiency Program 2. Residential Online Energy Audits 3. Commercial Online Energy Audits 4. Business Retrofit Program 5. Photovoltaics for Palo Alto Incentive Program 6. Investment in Remote Renewable Generation Facilities Comprehensive approach to program addresses residential end uses (heating, lighting, and appliances) which present efficiency opportunities in new construction and retrofits. Incentives, subsidized f’mancing, bulk buy, and other mechanisms will be considered to enhance energy efficiency efforts in the residential community. Offer residential energy analysis to residents using online survey. Offer commercial energy analysis to businesses using online survey. Offer incentives for energy efficient retrofits to all commercial and industrial customers. Offer customers an incentive to subsidize new photovoltaic systems. Apply for grant to reduce program costs. Subsidize the construction of new remote renewable generators. Replaces program to enhance NCPA generation facilities. Total for New Programs $125,000 $30,000 $30,000 $421,000 $100,000 $250,000 $956,000 Total for Approved programs (with proposed modifications)$817,000 Target amount for all Public Benefit expenses $1,773,000 2 ATTACHMENT B:DESCRIPTION OF NEW PROGRAMS Residential Resource Efficiency Program Description This comprehensive program combines educational outreach with specific efficient equipment options, technical assistance, vendor selection and financial incentives directed at the residential community. This program will encourage residents to properly select, maintain and/or replace older inefficient equipment before it fails. The Residential Resource Efficiency program will help consumers reduce their home energy use and lower annual energy costs. A variety of mechanisms may be used to motivate customers to action such as technical assistance, energy efficient equipment rebates, vendor alliances, bulk purchases, and financing options. Originally planned as an appliance rebate program, this program concept has been expanded to be a more comprehensive and customer responsive efficiency program based upon the best components of many customer-driven programs currently being offered by other utilities. Program Operation Staffplans to out source the majority of program design and implementation to outside consultants such as Conservation and Renewable Energy System (CARES), one of three alliance partners under contract with the City of Palo Alto Utilities (CPAU). CARES is known for its successful design and administration of many energy efficiency programs for public power utilities in the Pacific Northwest, development of local vendor networks, identification of customer savings opportunities, and promotion of financial incentives (i.e., rebates, shared savings, vendor performance contracts). Staff intends to offer a comprehensive technical assistance/incentive program which may include a combination of bulk purchases, rebates, loans, energy efficient mortgages, technical assistance, and strategic vendor alliances to better address each customer’s specific needs. Participants must be a residential customer and have a City of Palo Alto Utilities electric, gas or water utility account. All single and multi-family residents will be notified about the Residential Resource Efficiency Program via the online energy audit program, bill inserts, direct mail, a description and link on the Utilities Web page, workshops and/or targeted advertising. Program Objectives The objective is to motivate Palo Alto residents to update the resource efficiency of their home or specify efficiency improvements above Title 24 in new construction. These changes will result in improved resource efficiency and contribute to a healthy environment, lower annual utility costs, and a better understanding of how energy efficient technologies can save money and contribute to home comfort. Annual Budget The estimated annual program budget is $125,000, depending on customer response. ATTACHMENT B:DESCRIPTION OF NEW PROGRAMS o Online Home Energy Analysis Program Description This Internet-based home energy analysis program is intended to educate consumers about their energy use habits. This program will provide a simple, interactive and inexpensive way for consumers to learn about how they use energy at home, how much their appliances, lighting and heating equipment cost to operate, and how to use energy wisely. Additionally, depending upon the consumer activity of this program, an additional water use and water conservation element may be added at a later date. Program Operation Staff is evaluating the costs and features of a variety of existing energy analysis software programs. When an appropriate software program is identified, a contract to purchase the software, customize it to Palo Alto data, and activate the online access will be established. All residential utility customers will be notified about the program in a variety of ways such as utility bill inserts, a line item on the bill statement, a description and link on the Utilities Web page, and local advertising. In the past, the City of Palo Alto Utilities (CPAU) had a full time employee ’assigned to complete up to 200 onsite analyses each year. That personalized process proved to be a very labor and time intensive way to educate consumers, frequently taking up to two hours onsite with the customer followed by lengthy follow-up reports mailed out weeks later. The online approach provides much of the same kind of customized information to a much larger number of consumers-- all at significant cost savings to the Utility. Once the online program is operational, all Palo Alto residents, who have Intemet access and a City of Palo Alto Utilities electric or gas account, will be eligible to use the home energy analysis product. Participants will input their specific home energy use data online and can print out their customized energy use results immediately. Program Objectives The goal of the program is to educate Palo Alto consumers about their home energy use and promote energy efficient technologies and practices. Additionally, the online energy analysis can be used to design and market current CPAU efficiency programs and services to consumers. Annual Budget The estimated start up program budget is $30,000 to purchase the software, with lower operating costs annually for upgrades and customization. 4 ATTACHMENT B:DESCRIPTION OF NEW PROGRAMS Online Business Energy Analysis Program Description The objective of the Internet-based business energy analysis program is to provide a simple, interactive and cost-effective way for businesses to learn about how they use energy. This program will educate business operators about their energy use habits and encourage them to implement many of the no-cost and low cost ways to easily reduce their energy costs. Addition- ally, depending upon the customer participation in this program, an additional water use and water conservation element may be added at a later date. Program Operation Staff is evaluating existing energy analysis software programs. Once an appropriate product is identified, a contract to purchase and customize the program will be established. All City of Palo Alto Utility commercial customers with Intemet access are eligible for the program. Commercial customers will input energy use data online and print out customized energy use results. All commercial customers will be notified about the program via a targeted direct mail piece, informational brochure, a description and link on the Utilities Web page, etc. In the past, CPAU had full time employees assigned to complete up to 200 onsite analyses each year. That personalized process proved to be a very labor and time intensive way to educate business operators. Many analyses required days allocated onsite with the customer followed by lengthy follow up reports mailed out months later. The online approach provides customized energy analysis information to a much larger number of businesses-- all at significant cost savings to CPAU. Business operators will complete an energy survey via the Intemet which will include questions about operating hours, lighting, heating and cooling equipment, and other business energy users. Once their energy use data is compiled and analyzed by an online software, a customized business energy management plan will be produced. For the customer, this program will provide specific recommendations to implement in order to better manage their business energy costs. Additionally, they will be informed about current efficiency programs available through CPAU. Program Objectives The goal of the program is to educate Palo Alto businesses about their energy use, promote energy efficient technologies and practices, and motivate the consumer to implement savings recommendations. Additionally, the online energy analysis can be used to market current CPAU efficiency programs and services to businesses. Finally, the information gathered can provide valuable information about customers which can be utilized in future program design and targeted marketing activities. Annual Budget The estimated start up program budget is $30,000 to purchase the software, with lower operating costs annually for upgrades and customization. 5 ATTACHMENT B: DESCRIPTION OF NEW PROGRAMS 4.Business Retrofit Program Description The business retrofit program will help business customers reduce energy use and lower annual energy costs in their business through a variety of tools such as energy efficient equipment retrofits, vendor alliances, financial incentives and financing options. Investments in a cost-effective and potentially self-supporting retrofit program qualify for Public Benefit program funding. Through moderate financial incentives, technical assistance and vendor links, businesses will be motivated to make investments in energy efficient equipment. Incentives can also encourage business owners to replace their older, less efficient equipment before it fails in order to take advantage of improved technology, increased energy efficiency, and reduced operating expenses. Program Operation, This program will be developed by staff with assistance from a consultant. Discussions are currently underway with an outside consultant partnership that includes the energy efficiency organization, CARES (Conservation and Renewable Energy System), a public power business group, to develop a comprehensive energy retrofit and self-sustaining program similar to ones currently offered by Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric. This program will target up to 200 business customers in the first year of operation and encourage them to properly maintain and/or replace older equipment before it fails. Additionally, depending upon the success of this program, it could become self-funding through vendor alliances, certification and training, low interest financing options and shared savings plans. All City of Palo Alto Utilities commercial and industrial customers are eligible to participate. The funds will be available on a first-come-first-served basis. Customers will be notified of the program through direct mail, newsletters, online energy audit, the Utilities Web page, and/or workshops. Program Objectives The objective of this comprehensive program is to combine educational outreach with specific efficient equipment options, technical assistance, vendor selection and financial incentives in order to motivate Palo Alto businesses to update the resource efficiency of their business operations. Annual Budget The estimated annual program budget is $421,000 depending on customer response. 6 ATTACHMENT B:DESCRIPTION OF NEW PROGRAMS PVs for Palo Alto Incentive Program Description The PVs for Palo Alto program will offer residential and commercial customers incentives to install grid-connected Photovoltaic (PV) systems. This program is similar to the State of California’s "PV Buydown Program" which offers incentives to all customers in the investor owned utilities territory. The program will leverage Federal dollars to maximize the economic incentive. To access Federal funds, CPAU must have a long term, sustainable commitment to this program. CPAU plans~to run the PV incentive program for a minimum of four years, subject to annual budget approval by the City Council. Program Operation The program will be operated with existing staff and with assistance from consultants. The incentives are available to all City of Palo Alto Utilities customers on a first-come-first-served basis. Customers will be notified about the program via bill inserts, direct mail, a description and link on the Utilities Web page, workshops and/or targeted advertising. Program Objective The objective of this program is to promote Photovoltaic technology by partnering with customers in investing in local Photovoltaic systems. The promotion of Photovo!taic technology at this time is geared towards future market commercialization. By promoting Photovoltaics in visible places now, customers in the future will be more comfortable with the technologies and thus more willing to invest in Photovoltaic systems. With increased demand for Photovoltaics, prices are expected to decrease as the technology improves and mass production systems are implemented. Annual Budget The estimated annual budget is approximately $100,000 depending on the customer demand for incentives and the_ availability of funds from the Western Area Power Administration (WAPA). The expected WAPA contribution is $20,000 to $50,000 (while funds are available). 7 ATTACHMENT B:DESCRIPTION OF NEW PROGRAMS o Investment in Remote New Renewable Generation Description In order to encourage new renewable resource development while leveraging staff efforts, this program would subsidize the high capital cost of new development of renewable generation facilities such as electric generators powered by wind turbines, landfill gas and geothermal sources outside of Palo Alto. However, it would not exclude cost effective generators within Palo Alto if siting, environmental and all regulatory approvals are in place. Program Operation The program would operate by announcing opportunities for proposers to compete for a portion ofPalo Alto’s Public Benefit monies in the form of a grant. Proposals would be evaluated by Palo Alto staff based on proposed lifetime energy output per dollar of capital subsidy required. Proposals would be accepted on a technology diversified basis (some wind, some geothermal and some landfill gas). Upon completion of construction and start-up, a grant would be paid to successful applicants. The output of the generators would be sold into the grid by the project operator near the generator sites to cover operating costs and profit. Palo Alto would neither own the generators nor the output. This avoids the electrical losses, transmission charges and the staff effort of scheduling small and fluctuating quantities of renewable power to Palo Alto. Program Objectives The program is designed to efficiently and competitively deliver needed capital subsidies for developing otherwise uneconomically viable renewable projects within the United States. The program is intended to minimize Palo Alto staffrequirements and associated overhead. The benefits of the program are intended to be global rather than local. The net effect of the program is intended to contribute to sustaining the continuing development of these renewable resources while giving technology advances and market forces more time to make the renewable generation industry self-sustaining. ~ Annual Budget The estimated annual program budget is a maximum of $250,000 depending on responses to proposals. RESOLUTION NO. RESOLUTION OF THE COUNCIL OF THE CITY OF PALO ALTO A!)OPTING MODIFIFCATION TO UTILITY KATE SCHEDULE C-4 OF THE CITY OF PALO ALTO UTILITIES KATES AND CHARGES PERTAINING TO THE RESIDENTIAL RATE ASSISTANCE PROGRAM WHEREAS, the Council has considered the need to issue discounts to electric, gas, and water utility customers who may qualify for such discounts under prescribed terms and conditions; NOW, THEREFORE, the council of the City of Palo Alto does hereby RESOLVE as follows: SECTION I. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule C-4 (.Residential Rate Assistance Program) of the City of Palo Alto Utilities Rates and Charges is hereby adopted to read in accordance with the sheet captioned: "Utility Rate Schedule C-4-I," attached hereto and incorporated herein by this reference. The foregoing Utility Rate Schedule shall become effective on March i, 1999. SECTIQN 2. The Council finds that the discounts to be provided to electric, gas, and water utility customers who qualify for such discounts Under prescribed terms and conditions estab- lished by the City Manager shall be used only for the purposes set forth in Article VII, Section 2, of the Charter of the City of Palo Alto. SECTION 3. The Council finds that the adoption of this resolution is exempted under the CEQA Guidelines under Section 15273 of Title 14 of the California Code of Regulations. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST:APPROVED: City Clerk Mayor APPROVED AS TO FORM:City Manager Senior Asst. City Attorney Director of Administrative Services Director of Utilities 990112 ayn 0071578 RESIDENTIAL RATE ASSISTANCE PROGRAM UTILITY RATE SCHEDULE C-4 APPLICABILITY: This schedule applies to residential premises (single-family dwelling, separately metered fiat or apartment) within the City of Palo Alto limits which are served by the City and occupied by a full-time resident who qualifies for participation in the Utilities Residential Rate Assistance Program. RATES: A discount of twenty (20) Schedule. SPECIAL coNDITIONS: percent on any applicable City of Palo Alto Utilities Rate Residents may qualify for participation in the Residential Rate Assistance Program (RAP) for either medical or economic reasons. To qualify for medical reasons, a resident must provide a physician’s letter certifying to the medical condition of the resident and the necessity for special mediral equipment. To qualify for economic reasons, a resident must provide proof of financial need as required by the City or its authorized certification agency. Residents participating in RAP based on economic reasons will be eligible to receive a 20 percent discount on water, gas, and electric Charges. Residents participating in RAP based on medical reasons will be eligible to receive a 20 percent discount on the applicable water, gas, and/or electric charges. The 20 percent discount does not relieve the resident of the obligation to pay the Utility Users Tax. Such tax will be computed on the gross utility charges before applying the discount. It is unlawful for a resident to knowingly provide incorrect or false information in connection with an application for participation in RAP. Such violation could result in a $1,000 fine or six months in jail, or both. The issuance of the discount shall be subject to further reasonable rules and regulations as may be prescribed by the City Manager. The procedure for qualification and all interpretations as to the applicability of the provisions of this schedule or such rules and regulations shall be made by the City Manager or her/his designee whose determination shall be final. CITY OF PALO ALTO UTILITIES Issued by the City Council Cancels Sheet No. C-4-1 dated 7-1-93 CITY OF PALO ALTO UTILITIES Effective 3-1-99 Sheet No. - 1 6odo Electric Public Benefit Programs for Fiscal Year 1998-9~ Mr. Mrizek: We have a brief presentation for you. Lindsay Joye: I do not have a formal presentation, but I want to clarify that the memo was i-n response to your request last month to review the public benefit programs. The memo provides an update of the public benefit programs that were already approved by the City Council as part of this fiscal year’s budget. We also bring proposed public benefit programs for the commission to review, and then recommend for council approval. .. Vice Chair Johnston: ~ understand that staff will be looking for us to make recommendations specifically related to Attachments B and D. Therefore, I would like to focus on those particular progra~ns. I suggest that weallow commissioners to ask questions on the various programs, and then decide whether we should have one overall vote of approval, or~vote on the individual items. "’" ’" Commissioner Gruen: I have a general question. In looking at some of these programs, it appeared that there were some relatively small programs, where we are going to spend $25,000 on something. Out of the million of dollars, that seems small. To what extent are these programs in concert with other organizations? That is, we are funding some larger research project or funding some larger development project, rather than doing a little thing all on our own. Ms_~: Are you referring to the demand side management programs or all of the public benefit programs? ~ _Co/nmissioner Gruen: Mot really the demand side management programs. That is kind of an individual program, but when we say we are going to do something in photovoltaic, are we doing that or are we doing it through some organization like EPRI? What did you have in mind? Spending a small chunk of dollars to achieve good results? Ms_~J_~ye: The photovoltaic program specifically would be run by our staff. The incentive program, which is one of the proposed programs, is similar to the state’s buy-down program that is available. So it is modeled after that program, but we would be emulatin~ and running it ourselves. Cmmmissloner Grlten: Are there any programs where you would be doing it with some larger organization? Ms. Clerks~l~: Are you now referring to the DSM progra/ns, because a number of the DSM programs are working with outside consultants who have implemented these programs in the Pacific Northwest, in Ce~ifornia, etc. So that would be the DSM programs that are being proposed, the new MINUTES UAC:981104:MIN Final Page 27 proposed ones. to that. If you are not talking about DSM, Lindsaywould respond M~: They are all run by our staff with the assistance of consultants, but not in conjunction with any other utility, per se. M/~: For the majority of the small programs, we have elected to apply them to our customers in Palo Alto, the public benefits of the funds we have collected from our customers in Palo Alto. We did have that ability via A.B.1890 to utilize those funds within our community rather than putting~it into a state fund. So we are trying to bring~a lot of these benefits to our customers within our service territory, so you see some small dollars here and some small programs. We want to benefit our existing customers. You will also see some very large dollars where we are probably going outside the community-. Mostly you will see the participation with NCPA on the energy supplies, looking at our existing resources and upgrading some of those. That iS where a lot of dollars will be spent in bigger programs outside of the community. Commissioner Sahagian: I have some general questions. These are public benefit programs that are all geared toward energy efficiency and demonstration of technology, etc. Do we have any lifeline programs? Public benefit programs in the IOUs often include some lifeline rates and other things for people who do not have adequate income. I do not see anything like that here. I recall discussing this awhile back. Can you refresh my memory on that? Ms~: Yes, we do have one category ~for low income. It is the Rate Assistance Program. We have had that for many years, and we are now including that as part of our public benefit. It is" on Page 3, Attachment A, Table of Council-Approved Public Benefit Programs. It is running at about $12,000 to $15,000 per year, and it covers all of the utilities. The electric portion comes from our electric public benefit charges. Commissioner Sahagian: Obviously, we are not living in a poor neighborhood in Palo Alto, but is that an adequate amount for that program? How do we determine it? M~: That particular program was implemented by Randy Baldschun who took the lead on that. It was approved by the council a few years back, and we have been evaluating it. Randy reports on the status of that on an annual basis. The dollars you see here are adequate to cover that progra~n. Commissioner Sahagian: The second question I have is in regard to what other utilities’ public benefit programs look like. Was that something that you took into consideration when you. modeled this program? Are MINUTES UAC:981104:MIN Final Page 28 these similar in magnitude? ~s. Joye: Definitely. We did a number of different activities to assess what path to take last year in the development of these plans. We looked at other municipal utilities, but most of them, except for Sacramento, were not spending very much On public benefits, but because of A.B.1890, they have had to follow our same path and increase the level of spending in this area. We also looked at what the rest of the state is doing, because that would be for all of the IOU customers. We looked at the percent of funds going into the different categories, such as Demand Side Management, renewable energy, RD&D, and we also surveyed all of our customers and received 1,200 responses from a bill survey about their level of~interest in the different types of programs. Vice Chair Johnston: I would like to run through Attachment~B and offer some comments and questions on each of the programs. The first one, Page 4, is the appliance rebate program. When we talked about that in the past, this probably went down as the one DSM program’that in the past was rejected by the UAC. I know that the situations here may be different, so part of what I would like to do is to get an understanding as to what is different about this program from the program that we rejected previously, bearing in mind that my recollection is that there were a number~ of reasons for rejecting it. One of them was the conclusion that as you look at appliances today,~ therereally is not a correlation between cost and energy efficiency. What is stated in the report is that one of the reasons for giving a rebate is because it costs more to buy a more efficient appliance. In the report that we had the last time, that was true at one time before some federal regulations came out that made manufacturers become more energy-efficient in building their appliances. Once they did, the whole, marketplace shifted, and therefore, the cost of building energy-efficient appliances -- the economies of scale caught up, and all of the appliances fell into those categories. So the whole idea that you have to pay more to get an energy-efficient appliance basically disappeared. So then the question really becomes, why would one opt to give a rebate? Is there an update on the answer to that issue? Ms. Clerkson: The quick update is competition, in that the local municipal utilities -- Alameda, Santa Clara -- are offering a similar program. PG&E has continued to offer programs, so one thought is that we want to be on a level~ playing field in what we are offering our residents. Secondly, particularly in relation to the front-load clothes washers, there is a significant price premium on the super efficient, front-load washing machines that most people are not motivated to buy unless they have some sort of incentive to say, we are behind this technology, and we are going to try to get the market to accept this more readily. MINLrrEs UAC:981104:MIN Final Page 29 With the refrigerators, the shift to CFC-free is still not mandated at this point. It is moving in that direction, and our thought is that we do want to motivate our citizens to remove older appliances that have CFCs, are inefficient, and are probably 15 or 20 years old. So the thought is to again motivate folks to replace existing refrigerators that are inefficient and have CFCs, motivating them to do it sooner rather than later, and be significantly above the existing federal standards. Vice Chair Johnston: The second issue which I recall rejecting was because the survey data that were available the last time as to whether people will really change their refrigerators because there was a rebate, as opposed to the fact that they were remodeling their kitchen, or their old refrigerator broke, etc. The conclusion that came back before was that overwhelmingly, these rebates were going to people who were going to replace their appliance anyway, as opposed to people who would simply decide that their refrigerator worked fine, bu’tthey would get a more efficient one. That was what the research said, so again, I don’t know if there is an update on that.~ I know that a part of your answer is the competition factor, but I am trying to see whether it is competition, even if it does not make sense, we might still do something because everyone else is doing it, even though it doesn’t make sense. Ms. Clerkson: I think you are correct in the sense that when people are planning on remodeling or that their refrigerators fail, that they do go out and replace them. Whether they replace them with a more efficient model or not, I think they are motivated to doing that by an incentive. Yes, they will go and buy one that meets the standards or fulfills all of the features that they want, but if they realize that there is a little carrot out there for them to push to the next step, I think they are motivated to do that. I think that actually in our past program, there was some demonstration of that. I do not have those data in front of me right now, but there was some demonstration that we were able to motivate people to get more efficient appliances. Maybe it was not i00%, but there was a high percentage of people that were motivated by that carrot approach. Vice Chair Johnston: For the next two items here, the On-Line Energy Audits, is this basically an Internet-based service that we are going to provide? I am not quite clear who developed this. Ms. Clerkson: There is a variety of products on the market that is available, and we have been researching a number of them. Predominantly, all of the IOUs in California offer this. Currently,~ the municipals do not. Our thought was that (I) it is a very inexpensive way ~o collect a lot of data about.our customers and what kinds of technologies they have in their homes, what some of their motivations are, and (2) we do not currently have the luxury of staff to go out and MINUTES UAC:981104:MIN Final Page 30 provide two- and three-hour on-site energy audits which we did do in the past. So the thought was, how can we Cost-effectively provide that information to customers while also laying a foundation for future programs or collecting the data, understanding what their needs are, motivating them to take energy-efficient or water-efficient actions, and again, ~develop programs that fit more directly to what is currently out there in the homes. Vice Chair Johnston: The fourth item is a Commercial Business Retrofit Program. I ~think that is ~similar to programs that were generally considered to be successful before in terms of changing out lighting and other various things. Is that basically what that is? Ms. Clerkson: Yes, but the distinction is that it is a more comprehensive approach. It is not going in and saying, we have a lighting program to participate in. It is asking, what makes sense for you, and having it much more customer-driven. vice Chair Johnston: Good. As we get into the renewable energy, I think I understand the basis of the program, but are we going to give $4 per watt of capacity, and then are we going to go out and recapture from WAPA the $1.90, or are we going togive out $2.10 and ask them to go and get the other $1.907 ~_~i~: We would have to apply to WAPA for the funds, probably semi- annually, depending upon the fund’s availability. The funds that has through a one- or two-year grant would be available to all of the WAPA members, so we may be competing w~th some of the other utilities for these funds. Vice Chair Johnston: So you may or may not get a full allocation. ~s. Joye: That is correct. Vice Chair Johnston: The final program you have is one that you have referred to as primarily sort of a green credit, it is primarily the investments outside. There are no particular projects here that are identified, so I am not quite clear on that. Are we essentially saying that it does not really matter whether these are geothermal or windmill or whatever? ~: It is green green, and that is it. In the program description, we mention trying to divide up the money and use some to subsidize windmills, some land fill gas generation, and some geothermal, not having set the particular criteria for how much goes to each of the technologies. The idea was to spread it around a bit among the three. MINUTES UAC:981104:MINFinalPage 31 Vice Chair Johnston: If we are going to do this, and this is going to affect projects that are outside of Palo Alto, is there a reason why we want to administer this at all? For example, would we have the option -- let’s say that PG&E or SMUD had a similar program they were administering. Might we not just give them a half million dollars and say, give us the credits? Is there an advantage to that, because this does not seem to have any local play. That is what I am trying to understand. ~i~/~b~t: I imagine that if we like the way they are administering them, that might be a way to further leverage our efforts and reduce our effort on this program. It would be to contribute to someone else’s existing program. I don’t know of one outside at this time. Vice Chair Johnston: What would there be to like or dislike? Is it a matter of how many credits you get for the amount of dollars you spend? I am not quite sure what the criterion would be. ’ ~i~i~at: Yes, you would try to evaluate projects, get people to propose projects and have them compete, and you would try to cause the most change for your given dollar of subsidy that you are handingout. If you were to evaluate someone else’s program, you would see if they are doing the same thing, competitively assessing various proposals and selecting by those criteria. Vice Chair Johnston:~ Basically, we are talking about spending a lot of money in this program, in comparison to the other programs, yet it seems to me as though it has less payoff for our customers. So I am wondering whether there are some programs that our customers would prefer to see us have. I have no difficulty at all with people who want to pay a surcharge for green power. That is what they are paying, and that is what they ought to get, absolutely. But what I see here is that in addition to people who might want to pay for green power, we are suggesting that we.might spend another half million dollars on it when potentially, we could be doing other things for a whole variety of customers. I am just asking what is the thought process behind that.. ~r. Hab~Li: Generally, that is why we have a range from zero to $500,000, because we felt that it is quite possible that we would spend a lot more money on the other programs if they indeed proved to be what the customers wanted and spend less on this one. So it really depends. We are trying to make sure that by the end of the year, we have managed to do programs that will cost us somewhere around $1.7 million. That is why we wanted to include as many of these as possible, giving a wide range. It is not guaranteed, by any means, that we are going to end up spending that kind of money, but just in case. Vice Chair Johnston1: Then we finally get to a project that is not here MINUTES UAC:981104:MIN Final Page 32 but is my pet project for public benefit dollars. My understanding is that we determined that electric vehicles qualify under this program. Since demand side management also qualifies, it seems to me that saving vehicle trips should also qualify. Therefore, I would again ask the question, is there a basis for concluding that providing better communications to the residents, which would reduce travel trips, why does that not qualify? Have we, in fact, a formal ruling that that does not qualify? ~LT~~shi: We have gotten a verbal ruling from ourcity attorney that it does not apply. In so many words, it would be a stretch. We have talked with Grant quite Often to see if we can qualify that under the public benefit. He has thought about it and thought about it, and finally ruled that it would not work. Vice Chair Johnston: Who in the state decides whether something does or does not qualify? ~u~Habs~hi: To be honest, i don’t think Grant has researched any legal document to get to that. He just ruled on it independently. That is my guess. Vice Chair Johnston: I would agree with you that the city should not take risks and be exposed by doing something that might get overturned, and therefore, have to pay for it. But what I am asking is, is it not possible for one to write a letter to the state, to the appropriate agency, and say, we want to know wh~ther this qualifies or not. Mr. Habashi: You are making a very good point. I will~talk to the staff to see which agency to start with. I assume it is the CUC, and we will go from there. Vice Chair Johnston: If the answer is it does not, I am not suggesting we should push the envelope here at all. But if the answer is that it does qualify, then I would far prefer to see us spend a half million ~dollars of city money on improving communications to residents of the City of Palo Alto than spend a half million dollars on someone else’s pet energy project in some other city or state. Mr. Habashi: I think your point is quite Valid. be proactive, and I think we will do that. You are asking us to ~ic~_C!1~ir Johns_to~: Is there a sense that we want to vote in favor of everything here, or go one by one? Commissioner Gruen: I would rather do the One by one. Before doing anything about the appliance rebate, I would want to hear how it is going to make someone replace something rather than.just adding another MINUTES UAC:981104:MIN Final Page 33 refrigerator and put the old one out in the garage and use it for parties. What kind of program is there that actually has some payoff on this? Ms. Clerkson: In terms of-removing refrigerators? Commissioner Gruen: Removing’rather than adding another one. ~: Again on that one, we would do the educational approach. We would not want to increase the incentive. When we were looking into a buy-back program for second refrigerators a few years ago, the cost was prohibitive. Most people, if they are going to keep their second refrigerator, you would have to pay them a lot of money for them to give it up. When we did the research on that a few years back, it was incredibly prohibitive. So in answer to your question, I would say that there will probably be some refrigerators that would move into the garage. But I would not say that is whole scale. ~ Commissioner Gruen: I am mindful of the similar issue of ultra-low- flush toilets. When the toilet breaks, you replace it with something, and you cannot now buy anything other than an ultra-low-flush toilet. So the idea of having some sort of incentive program does not seem interesting. I have the same kind of feeling about refrigerators. A 1998 refrigerator is a lot better than a 1978 refrigerator, but there is nothing in the program as I remember it that would make you do it. In fact, it is a negative incentive that the city offers on not replacing your refrigerator in that there is a charge for saying you don’t want it and taking it to the dump. So there are some little things we could do which might help, like removing that charge or subsidizing that charge for this program, that sort of thing. Is there anything in here which encourages people to get rid of the other refrigerator?~ Ms. Clerkso~: No, not through an incentive. Through education, yes. Commissioner Eyerly: I would like to ask you to give me a little overview of the whole public benefit program. We get a certain amount of money that comes down to us, and we supervise it. Do we charge for our staff time? How do we market it? When do we cut it off? Do we have to supervise it? Please give me a general overview of the whole program. I am not up to date on it. ~/~: The public benefit program is a function that we charge our customers for. A part of our rates is dedicated to doing public benefit programs. That portion is approximately 2.75% of the total revenue. The public benefit program, as you probably know, is a part of A.B.1890 that decided on deregulation. The program is made up of four different components. One is demand side management programs, one is renewable resources, a third is research and development, and the fourth MINUTES UAC:981104:MINFinalPage 34 is low-income progr~uns. So as we collect the money, it is up to us to decide how to allocate it among these four different areas. It is up to us to come up with the programs and market them. accordingly. I hope that answers your question. C~mmissioner Eyerly: The point I would like to make is that we, as a commission, can sit up here and critique each one of these programs, and we might not get away from here tonight if we do that. I have a feeling that staff has looked this over, are aware of how they are going to have to market it, ~how they are going to have to supervise it, how much money is available, etc. If certain programs do not work, they are not going to push them. They are going to use it someplace else. Is that the way the program works? ~L~li: That is it precisely. That is why we have a range of expenditures for each of those programs, because we know we have to have the fixed ability to move in and out of programs, because it all~ depends upon market penetration, customer acceptance, and a few other factors that we cannot really control, and neither can you. Commissioner Eyerly: With those responses, to my question, I would be willing to vote approval of the entire package and send it on to the council. Vice Chair Johnston: I think we will go through them one by one, and Fred, you can vote yes on them. I think this program is an important issue. It. is about public benefit, and I see that members of the UAC are, in some ways, supposed to represent the public in this process. Part of our charge is to give our input on what we think the public best benefits from. Granted there are only four of here tonight, but I think that is part of what we want to do. Certainly there is nothing wrong with voting in favor of everything, and obviously, it will be up to staff to take forward what they think. In the past, sometimes they have accepted the UAC recommendation and dropped something before taking it to the council. They can also decide not to do that and just go forward with the recommendation. My fee~ing is that I would like to take a vote on each of these and then ask staff to simply decide how they would best like to go forward to the City Council. So let’s take them in the order that they appear .in Attachment B. We are only talking about six progr~ns. I don’t feel it is really overwhelming, Fred. Let’s take the Appliance Rebates first. Those in favor?. (Fails 3-1 with Commissioner Eyerly voting in favor) ~ice Chair Johnston: Next is Residential On-Line Energy Audits. (Approved 4- 0) MINUTES UAC:981104:MINFinalPage 35 Vice Chair Johnston: Next is Commercial On-Line Energy Audits. (Approved 4-0) Vice Chair Johnston: Next-is Business Retrofit Progr~ns. (Approved 4-0) Vice Chair Johnston: Program. Next is Photovoltaics for Palo Alto Incentive (Approved 3-0 with Chairman Sahagian abstaining due to a conflict) Vice Chair Johnston: generation facilities. Lastly is investment in remote renewable (Two approved, two opposed) Vice Chair Johnston: So you have the flavor of. the commission. I voted in favor of the last one, giving you a sensitivity to the idea that it is zero to $500,000, and I would strongly encourage you to find some programs that are what I would call a more direct benefit to the customers in Palo Alto. This money should be spent on these general kinds of programs, and to the ~extent that that you want to spend some money here, I do not personally object to that. Thank you for this report which I had asked for. I appreciate the work you have done. MINUTES UAC:981104:MINFinalPage 36