HomeMy WebLinkAboutStaff Report 444-06City ef Alto
City Manager’s
TO:HONORABLE CITY COUNCIL
FROM:
DATE:
SUBJECT:
CITY MANAGER DEPARTMENT: UTILITIES
DECEMBER 18, 2006 ~CMR:444:06
APPROVAL OF A BUDGET AMENDMENT ORDINANCE IN
THE AMOUNT OF $750,000 FROM UTILITIES ELECTRIC
SUPPLY RATE STABILIZATION RESERVE, TO PROVIDE
INCENTIVES TO CITY OF PALO ALTO UTILITIES’
CUSTOMERS TO CONTINUE INSTALLING PHOTOVOLTAIC
SYSTEMS
RECOMMENDATION
Staff recommends that Council approve the attached Budget Amendment Ordinance in
the amount of $750,000 to provide additional funding for the existing City of Palo Alto
Utilities’(CPAU) "PV Partners" (photovoltaic) program for FY 2006-07 to provide
incentives to CPAU customers who install a solar electric or photovoltaic (PV) system.
BACKGROUND
CPAU is required to collect and spend at least 2.85% of electric utility revenues in four
categories which qualify for Public Benefit funds: a) cost-effective energy efficiency, b)
renewable energy, c) research, development and demonstration (RD&D), and d) low-
income assistance programs. For the past seven years, CPAU has offered incentives to
customers who install PV systems, as part of the state-mandated Electric Public Benefits
Program (renewable energy). The Electric Public Benefit Reserve was established for
unspent funds arising from unanticipated changes in market demand for these programs.
California’s Senate Bill 1 (signed August 24, 2006) affects PV program funding. The bill
requires all publicly-owned utilities to offer specified minimum incentives for PV
systems, on or before January 1, 2008, for a ten year period. This mandate also prevents
public utilities from taking funds previously used for energy efficiency and low income
programs to meet the customer demand for solar incentives. The budget to meet CPAU’s
CMR:444:06 Page 1 of 3
share of the total California PV installation goal is projected to be $13 million, averaging
$1.3 million per year for ten years. Staff will return to Council in 2007 with the revised
new PV program design, and funding levels to meet the requirements of Senate Bill 1. By
continuing the City’s existing PV Partners program, the existing demand for PV rebates
can be satisfied without interruption, and all installations that are completed after January
1, 2007 will count towards the City’s SB1 goals.
DISCUSSION
The award-winning PV Partners program has experienced significant demand for
incentives in the past few years with more homeowners installing systems on existing
housing stock, and greater numbers of developers using solar for their new construction
projects. The increase in annual PV installations has averaged 114% since the program’s
inception.
CPAU has previously met increased demand for solar incentives by redirecting unspent
funds within the overall annual Electric Public Benefits program budget, but is unable to
meet the higher-than-projected demand with this year’s Renewable Energy category
budget of $225,000, nor are sufficient budget dollars available from other programs or
Public Benefit categories. For FY 2006-07, CPAU has already paid out $190,000 in
customer incentives, resulting in a budget balance of $35,000.
Staff projects that $750,000 is needed to satisfy the current program demand. Presently,
$300,000 in incentives is pending from received customer applications. Other projected
incentive expenses include: a) a new housing project with 25 condos applying for an
additional $150,000 in PV incentives; b) a potential large-scale commercial application
requiring from $ 200,000 in incentives; and c) a FY 2006-07 additional market potential
for single-family applications of up to $135,000.
RESOURCE IMPACT
These additional funding requirements require a Budget Amendment Ordinance to
transfer $750,000 from the Electric Supply Rate Stabilization Reserve to the PV Partners
program within the Electric Fund operating budget. This transaction will decrease the
Electric Supply Rate Stabilization Reserve to a balance of $63.8 million. This transaction
will not draw upon the Electric Public Benefit Program Reserve, which will be needed
for potential non-solar Public Benefits.
POLICY IMPLICATIONS
This request does not represent a change in policy.
ENVIRONMENTAL REVIEW
This is not a project under the California Environmental Quality Act.
ATTACHMENTS
Attachment A: Budget Amendment Ordinance
Attachment B: PV Program Participation
CMR:444:06 Page 2 of 3
PREPARED BY:
JOYE
Marketing Engineer
DEPARTMENT HEAD:
CITY MANAGER APPROVAL:
VALEI~ O.I~3NG
Director of Utilities
Assistant City Manager
CMR:444:06 Page 3 of 3
Attachment A
ORDINANCE NO.
ORDINANCE OF THE COUNCIL OF THE CITY OF PALO ALTO
AMENDING THE BUDGET FOR FISCALYEAR 2006-07 TO CONTINUE
TO PROVIDE INCENTIVES TO CITY OF PALO ALTO UTILITIES’
CUSTOMERS TO INSTALL PHOTOVOLTAIC SYSTEMS AND TO PROVIDE
AN APPROPRIATION OF $750,000 FROM THE ELECTRIC SUPPLY
RATE STABILIZATION RESERVE
The Council of the City of Palo Alto does ORDAIN as
follows:
SECTION i. The City Council of the City of Palo Alto
finds and determines as foilows:
A. Pursuant to the provisions of Section 12 of Article III of
the Charter of the City of Palo Alto, the Council on June 12, 2006
did adopt a budget for fiscal year 2006-07; and
B. The City of Palo Alto Utilities’ (CPAU) ~PV Partners"
(photovoltaic) program provides incentives to CPAU customers who
install a solar electric or photovoltaic (PV) system; and
C. The ~PV Partners" program has experienced significant demand
for incentives in the past few years with more homeowners installing
systems on existing housing stock and greater numbers of developers
using solar for their new construction projects; and
D. CPAU is unable to meet the higher-than-projected demand with
this year’s Renewable Energy category budget of $225,000, and
sufficient budget dollars are not available from other programs or
Public Benefit categories; and
E. For fiscal year 2006-07, CPAU has already paid out $190,000
in customer incentives, resulting in a remaining available balance
of $35,000; and
F. Additional projected incentive expenditures include $300,000
for approved customer applications in process; $150,000 for a new
25-condominium housing project; $200,000 for a large commercial
application; and $135,000 for additional market potential for
single-family applications; and
G. A transfer of funds in the amount of $750,000 from the
Electric Supply Rate Stabilization Reserve is needed to continue the
¯ ~PV Partners" program for fiscal year 2006-07; and
H. City Council authorization is needed to amend the 2006107
budget as hereinafter set forth.
SECTION 2. The sum of Seven Hundred Fifty Thousand Dollars
$750,000) is hereby appropriated from the Electric Supply Rate
Stabilization Reserve to continue to provide incentives to CPAU
customers to install photovoltaic systems.
SECTION 3. The Electric Supply Rate Stabilization Reserve is
hereby decreased by Seven Hundred Fifty Thousand Dollars ($750,000)
with a remaining balance of Sixty-Three Million Seven Hundred
Ninety-Two Thousand Two Hundred Fifty Dollars ($63,792,250).
SECTION 4. As specified in Section 2.28.080(a) of the Palo Alto
Municipal Code, a two-thirds vote of the City Council is required to
adopt this ordinance.
SECTION 5. The Council of the City of Palo Alto hereby finds
that this is not a project under the California Environmental
Quality Act and, therefore, no environmental impact assessment is
necessary.
SECTION 6. As provided in Section 2.04.330 of the Palo Alto
Municipal Code, this ordinance shall become effective upon adoption.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSTENTIONS:
ABSENT:
ATTEST:APPROVED:
City Clerk Mayor
APPROVED AS TO FORM:City Manager
City Attorney Director of
Services
Administrative
Director of Utilities
CMR BAO for PV Program Attachment B
PV Partners Program Installations
Calendar
Year
1999
2000
2001
2002
2003
2004
2005
2006*
TOTAL
System
Count
4
6
28
22
16
17
20
40
System
Size
(kWAc)
t6
16
101
73
4O
45
74
158
145 510
Rebates Paid
$93,008
$83,383
$395,731
$168,506
$113,377
$173,982
$223,356
$427,069
$ 1,643,033
Starting FY 2006-07 PV Budget
Paid to date*
Current balance*
Pending applications (already approved)*
Projected potential new incentive payments
$225,000
($190,000)
$35,000
($300,000)
($485,000)
Amount Needed for BAO:($750,000)
*as of 10/31/06