HomeMy WebLinkAboutStaff Report 218-10TO: HONORABLE CITY COUNCIL
FROM: CITY MANAGER DEPARTMENT: UTILITIES
DATE: MAY 3,2010 CMR: 218:10
REPORT TYPE: ACTION
SUBJECT: Finance Committee Recommendation to Approve the 2010 Ten-Year
Electric Energy Efficiency Plan
RECOMMENDATION
Staff, the Utilities Advisory Commission, and the Finanee Committee recommend that the Council
approve the 2010 Ten-Year Electric Energy Efficiency Plan for the pcriod 2011 to 2020.
BACKGROUND
State law requires the preparation of a ten-year electric energy efficiency (EE) plan evcry three
years. The first EE plan was adopted by Council in 2007. The proposed 2010 Ten-Year Electric
EE Plan has a goal to save 7.2% of the electric needs of the City by 2020. This is a doubling of
the goal in the 2007 EE Plan. At its March 9, 2010 meeting, the Utilities Advisory Commission,
(UAC) unanimously recommended approval of the proposed 2010 IO-Year Electric EE Plan. The
draft notes from the UAC's meeting are provided as Attachment C.
The Finance Committee considered the 2010 EE Plan at its April 6 meeting. The staff report
(CMR 188: 1 0) for that meeting, provided as Attachment A, contains a description of the 2010 EE
Plan and the discussion by the UAC. The Finance Committee unanimously recommended
approval of the proposed 2010 Ten-Year Electric EE Plan.
COMMITTEE REVIEW AND RECOMMENDATIONS
At the April 6, 20 I 0 meeting of the Finance Committee, staff provided a presentation on the
Proposed 2010 Ten-Year Electric EE Plan. Finance Committee questioned whether residential
energy efficiency savings could be enhanced by greatly expanding rebates for refrigerator
replacements and requested more information on the City'S Light Emitting Diode (LED) streetlight
replacement project. Committee members also suggested that Utilities continue to integrate cost
effective energy efficiency implementation when reviewing renewable energy purchase proposals
and updating resource procurement plans. Staff was encouraged to think through the energy
efficiency potential and alternative resource requirements in an integrated manner. After
discussion, the Finance Committee voted unanimously to support the recommendation that City
Council approve the 2010 Ten-Year Electric Energy Efficiency Plan.
The notes from the April 6, 20 I 0 Finance Committee meeting are provided as Attachment D.
CMR: 218:10 Page I of2
RESOURCE IMPACT
If approved, electricity supply funds will be utilized for up to $1.2 million per year to implement
programs for three years starting in FY 2011. Part of the total enhanced budget for EE programs
will need to be used to increase UMS staffing by one to two full-time program managers in order
to expand current and develop new programs to meet the goal of doubling electric energy savings.
The supply funding requests will be determined annually into the budget process. For FY 20 II,
temporary staff will be hired to assist in this expanded EE program effort. Permanent staffing
increases may be requested in the FY 2012 budget.
POLICY IMPLICATIONS
Approval of this recommendation conforms to the Council approved Long-Term Electric
Acquisition Plan (LEAP) Guideline which recognizes cost-effective energy efficiency measures as
the principal supply resource and requires that they take priority over the purchase of renewable
and conventional supply sources. Energy efficiency also enables the community to reduec its
carbon footprint and will help achieve the Council approved greenhouse gas reduction targets by
2020.
ENVIRONMENTAL REVIEW
Approval of this recommendation does not meet the definition of a project, pursuant to section
21065 of the California Environmeptal Quality Act (CEQA), thus no environmental review is
required.
ATTACHMENTS
A. CMR 188: 10: Utilities Advisory Commission Recommendation that the City Council Approve
the 20 I 0 Ten-Year Electric Energy Efficiency Plan (without attachments)
B. City of Palo Alto Utilities 2010 Ten-Year Electric Energy Efficiency Plan
C. Excerpted Final Minutes of the Special March 9, 20 J 0 Utilities Advisory Commission Meeting
D. Excerpted Draft Minutes of the April 6, 20 I 0 Finance Committee Meeting
REPAREDBY:
REVIEWED BY:
APPROVED BY:
;
. CHRISTINE TAM, Resource Planner ~YCE KINNEAR, Manager, Utility Marketing Svs
smv A SW AMINA UlAN, Senior Resource Planner
JANE RATCIIYE
Assistant Director, Resource Management
OM AUZENNE
Assistant Director, Customer Support Services
NG
CITY MANAGER APPROVAL:~~~~~
CMR: 218:10 Page20f2
ATTACHMENT A
TO: HONORABLE CITY COUNCIL
ATTN: FINANCE COMMITTEE
FROM: CITY MANAGER DEPARTMENT: UTILITIES
DATE: APRIL 6, 2010 CMR: 188:10
SUBJECT: Utilities Advisory Commission Recommendation that the City Council
Approve the 2010 Ten-Year Electric Energy Efficiency Plan
RECOMMENDATION
Staff recommends that the Finance Committee recommend that the City Council Approve the
2010 T en-Year Electric Energy Efficiency (EE) Plan for the period 2011 to 2020.
EXECUTIVE SUMMARY
This report presents the updated energy efficiency goals for the next ten years and the plan to
achieve those goals. Energy efficiency is the most cost-effective way to provide electric services
to customers as a kilowatt-hour not used is a kilowatt-hour that didn't need to be generated,
transmitted and delivered. Energy efficiency reduces greenhouse gas emissions, a key goal in
the City's Climate Protection Plan. Energy efficiency is also an important way for citizens and
businesses in Palo Alto to control their utility costs.
The proposed 2010 10-year Energy Efficiency (EE) Plan has a goal to save 7.2% of the electric
needs of the City by 2020. This is a doubling of the goal in the lO-year EE plan approved by
Council three years ago, in 2007. To achieve these more aggressive targets, additional funding
will be required. However, even with increased funding, these efficiency resources are less
costly than purchasing electric supplies, especially renewable supplies. Some of the additional
funding is planned to increase staff resources by one or two program managers to implement the
expanded programs that will be required to mect the goals. The new programs will include
programs administered and implemented in-house as well as those administered by third party
contractors.
The Utilities Advisory Commission (UAC) reviewed the proposed 2010 Ten-Year EE Plan at its
meetings on February 9 and March 9, 2010 and voted unanimously to rccommend that the City
Council approve the Plan.
BACKGROUND
City Policies and Applicable Legislation
Council approved the Long Term Energy Acquisition Plan (LEAP) objectives and guidelines
(CMR: 158:07), which contain direction to treat energy efficiency as the first resource to be
procured before renewable energy or traditional "brown" energy. The City's 2007 Climate
CMR: 188:10 Page 1 of 10
Protection Plan (CPP) also relies on electric efficiency and load reduction goals to meet
greenhouse gas (GHG) reduction targets by 2020.
The City is also subject to state legislative and regulatory mandates. State law AB 1890 (1996)
requires that all electric utilities collect funds for "Public Benefit" purposes. These purposes are
defined as cost-effective efficiency, new renewable energy, research and development of energy
teehnologies, and/or low income rate discounts and efficiency programs. SB 1037 (2005)
requires public utilities to first acquire all cost-effective, reliable and feasible energy efficiency
resources before investing in commodity supply. AB 2021 (2006) requires municipal electric
utilities to develop ten-year electric EE plans and submit them to the California Energy
Commission (CEC) every three years. This updated 2010 Plan meets the AB 2021 regulatory
requirement and must be filed by June 1,2010 with the CEC.
Loading Order for Efficiency and Renewable Energy
State law requires that utilities follow a "loading order" for energy resources (SB 1037). The
loading order means that utilities first procure cost-effective energy-efficiency, then renewable
energy, and finally fossil-fueled electricity.
If the LEAP goals are achieved, by 2015 the City of Palo Alto Utilities' (CPAU's) long-term
electric supply portfolio is expected to be composed of hydro supplies (50%) and renewable
energy supplies (33%), with the balance (17%) purchased from fossil-fuel based generation. The
EE achievements will help in reducing the need to rely on this fossil-fuel based electric supply.
The efficiency savings also reduce the need to purchase the higher cost renewable energy supply
needed to meet the City's 33% renewable portfolio standard (RPS).
While CPAU expects renewable supplies to be 20% of its electric portfolio in 2010, achieving
the Council-set RPS goal of 33% renewable energy supplies by 2015 is expensive. Long-term
fossil fuel-based electricity supplies cost approximately 7 to 8 cents per kilowatt-hour (¢IkWh);
however, long-term renewable energy supplies cost 10 to II ¢/kWh, a premium of 3 to 4¢/kWh.
This premium is mainly driven by the demand for renewable resources to meet California's state-
. mandated RPS goals-currently 20% by 2020 and likely to be 33% by 2020.
This high cost premium for renewable energy is another reason to ensure tbat EE receives higher
priority, as every 100 kWh of energy saved reduces the need to purcbase 67 kWh or fossil-fuel
energy and 33 kWh of high cost renewable energy. In addition to lowering energy purchase cost,
every unit of electricity not consumed reduces costs related to transmission delivery,
transmission congestion, and losses in the delivery system. EE is the most cost efficient way for
a utility to reduce greenhouse gas emissions while simultaneously reducing the energy bill for
customers who implement efficiency measures.
The 2007 Ten-Year Electric Encrgy Efficiency Plan
Consistont with state law, the City Council approved the 2007 Ten-Year Electric EE Plan on
April 2007 (CMR:216:07). This plan developed a number of goals to meet the City's Climate
Proteetion Plan, as well as support the Long Term Energy Acquisition Plan (LEAP) objectives
and guidelines (CMR: 158:07). The 2007 Plan's goal was to meet 3.5% of the electric energy
needs of the City by energy efficiency by the end of the lO-year pi arming period. In addition to
the lO-year goal to achieve a cumulative 3.5% energy use reduction by 2016, there are
incremental goals for each year of the plan.
The Table below (Table 1 in the 2010 EE Plan) provides the summary EE goals, achievements,
and expenditures over the past two years. In FY 2008, an annual net savings of 4,399 megawatt
hours (MWh) (or 0.44% of annual load) was achieved at a cost of $1.48 million. On a life cycle
basis, the average cost of the saved energy was 3.1 cents per kilowatt-hour (¢/kWh). The annual
savings increased to 0.47% of load in FY 2009, which was achieved at a cost of $1.79 million.
The City anticipates it will achieve incremental EE savings of 0.5% of annual load for FY 2010.
Table 1: Electricity Efficiency Achievements for FY 2008-09
FY2008 FY 2009 FY2010
(Actuals) (Actuals) (Projections)
Efficiency -Goals
Annual energy savinQs (MWh) 2,500 2800 3500
: Percent of Annual Load 0.25% 0.28% 0.35%
Energy -Achievements
Lifecycle enerQY savings (MWh) 48,220 51,426 TBO
Annual enerQY savinQs (MWh) 4399 4668 TBO
Percent of Annual Load 0.44% 0.47% 0.5%
Budgets & Expenditures ($M)
Customer Rebate 0.48 0.6 TBO
Program Administration/Contractor 1.00 1.17 TBO
Total Cost 1.48 1.79 TBO
Average life-cycle savings cost (¢/kWh) 3.1¢ I 3.5¢ I TBD
The table shows that the actual achievements were significantly higher than the goals set in the
.2007 EE Plan.
Current Programs
:
Since the approval of the 2007 Ten-Year EE Plan, considerable progress has been made in
expanding programs, retaining contractors to implement third party programs, and enhancing
educational outreach. Numerous new programs were developed andlor expanded to increase
efficiency savings from hard-to-reach customers. Some of these programs are managed by in
house staff, such as the low-income weatherization, lighting and appliance direct install program
(Residential Energy Assistance Program or REAP). Others are administered by third party
companies under a contract, managed by Utility Marketing Services staff. For example, the
Ecology Action-administered program to install measures at traditionally hard-to-reach small
commereial sites (Right Lights+) was increased from a contract of $200,000 to $500,000 per
year. The expanded contract increased both the types of measures that could be rebated and the
authorized budget for energy savings to be reimbursed to the vendor. The expansion in both in
house and third party administered programs enabled the City to exeeed targets established in the
2007 EE Plan.
The technologies that provided EE savings in the past three years were primarily from lighting
non-residential (Right Lights+) retrofits of fluorescent tube and other fixtures, as well as from
residential compact fluorescent bulbs in the "five for $1.00" promotions, low-income
installations and holiday light exchanges. Non-residential Heating, Ventilating, and Air
CMR: 188:10 Page 3 of 10
Conditioning (HV AC) systems and residential refrigerator recycling also provided significant
energy reductions. Staff continuously monitors teclmologies and other utility programs to
understand the suitability of various measures for promotion within the City. Efficiency
programs are also evaluated annually by an outside contractor (as required by state law) and are
updated whenever deemed necessary.
Finance Committee Review of Renewable Energy Contract
When the Finance Committee considered a proposed contract for renewable power in July 2009
(CMR: 305:09), it asked whether staff was appropriately valuing energy efficiency given the
high prices of renewable power. The Finance Committee recommended that Council direct staff
to work with the UAC and report back to the Finance Committee with a re-examination of the
policies and goals that are being used in the alternate energy program, including the energy
efficiency plans and the electric acquisition policies and plans. In August 2009, Council
approved the Finance Committee's recommendation (CMR: 342:09).
To implement this Council direction, at the November 2009 UAC meeting, staff discussed how it
planned to conduct the study to determine the potential for energy efficiency in the City. Staff
presented different ways to value the avoided energy supply cost when developing the analysis
tool to develop EE potential. Based on that discussion, staff utilized the Market Price Referent
(MPR) as the avoided energy component of the cost when reviewing the EE measure cost
effectiveness. The California Public Utilities Commission (CPUC) annually establishes the
MPR, which is the pre-authorized price for renewable energy for investor-owned utilities (IOUs),
and becomes the lowest price that CPAU can expect to pay for long-term renewable energy
supplies. The levelized MPR for a 20-year renewable resource is currently about 10.5¢/kWh,
and ranges from 7 to IS¢/kWh for per year (in nominal terms) over the 20 year period.
DISCUSSION
Analysis Model
In order to efficiently assess and meet AB 2021 requirements in establishing the potential for
energy efficiency, CPAU, in collaboration with other Northern California Power Agency
. (NCPA) members, engaged a consultant to develop an analytical model for all California
publicly owned utilities (POUs) to use. The California POU Energy Efficiency Resource
Assessment Model (CaIEERAM) is based on the integration of energy efficiency measure
impacts and costs, utility customer characteristics, utility load forecasts, and utility avoided costs
and rate schedules. The model estimates teclmical, economic and market potential for EE
measures for residential and commercial customers.
• Technical energy efficiency potential represents the amount of energy efficiency
savings that could be achieved if econornic and market barriers are not considered. It is
the product of the energy efficiency measures' savings per unit, the quantity of applicable
equipment in each facility, the number of facilities in a utility's service area, and the
measure's current market saturation. Technical potential estimates include measures that
may noi be cost- effective. These estimates, while not realistically obtainable, are used to
establish the outer boundary of what might be achieved.
• Economic energy efficiency potential represents the portion of the teclmical energy
efficiency potential that is "cost-effective," from a societal perspective, as defined by the
Total Resource Cost (TRC) test. Economic potential does not consider market barriers
CMR: 188:10 Page 40f1O
that limit a voluntary utility efficiency program's success in encouraging customers to
install energy efficiency measures.
• Achievable energy efficiency (market) potential is an estimate of the part of economic
EE potential that could be attributed to utility energy efficiency programs, recognizing
the effect of a few market barriers. It is modeled to vary with parameters, such as the
magnitude of incentives and customer awareness and willingness to adopt measures.
The model calculates the technical potential including both economic and uneconomic EE
measures. The economic potential includes only EE measures that are cost-effective when
compared to avoided cost of energy. Technologies which are not yet commercially viable, such
as Light Emitting Diode (LED) products, are not considered to be economic. Other measures
(such as windows) are costly to implement and result in such low electricity savings that they are
not cost-effective. Finally, the market potential in FY 20 II is calibrated based on the two full
years of actual program results and projected achievements in FY 20 I O.
The assumptions used in the analysis include:
• Palo Alto's avoided cost over the lO-year period ranges from 8 to l2¢IkWh. This
includes the cost of energy, capacity, transmission, the City's carbon adder! of I to
2¢IkWh, and system losses. This calculation (avoided cost plus the carbon adder) is
approximately the same as the current MPR plus avoided transmission and loss charges.
• Utility rebates will be set at 50% of the incremental cost above new standard equipment.
• Penetration of energy efficient technologies is assUl)1ed to be similar to that of PG&E
customers in the same climate zone. This benchmarking data is based on statewide
surveys completed for both residential and commercial customers.
It should be noted here that the EE savings counted toward the goal can only include the
incremental EE savings above state or local standards for new equipment. The efficiency goal is
based on 'net savings,' excluding any naturally occurring savings that would have resulted from
appliance replacements over time in the absence of utility EE programs. The savings are
calculated in this way so that utilities encourage installation of the most efficient equipment and
in recognition of that fact that eventually older appliances will need to be replaced with new
models that wili, due to updated standards, save energy "naturally."
Analysis Results
The proposed 2010 EE Plan contains an aunual electric EE goal of 0.6% of forecast electric load
in FY 2011, with incremental achievements increasing by 0.05% each year until the annual
incremental goal reaches 0.8% in 2015 through 2020.
By 2020, the proposed 2010 EE Plan will cumulatively achieve a 7.2% load rednction. This goal
is more than twice the goal of 3.5% that was set in 2007 and 25% more than what has been
achieved even with significantly higher levels of in-house and third party administered efficiency
I The City's Climate Protection Plan established a "carbon adder" of$20 per ton of carbon dioxide (C02) in 2008,
increasing at a rate of 5% per year to use when making investment decisions. When translated to the COst of electric
energy, this carbon adder is about I ¢/kWh, increasing by 5% per year.
CMR: 188:10 Page 5 of 10
programs. The recommended EE goal in FY 2011 is about a 25% increase from actual EE
savings achieved in FY 2009.
Staff also conducted a number of sensitivity analyses with the following results:
• Increasing efficiency goals by an additional 0.1 % per year increases implementation costs
by an additional $0.5 million per year.
• Increasing the avoided cost by I to 3¢IkWh did not increase the EE economic potential
by much. Lighting, the bulk of residential and commercial economic EE potential, costs
around $0.06 to $0.08IkWh. Very few measures created significant cost-effective savings
in comparison with a higher avoided cost.
• Elimination of the rebates for compact fluorescent lamps (CFL's) reduced residential
market potential by 25%. Since residential savings are about 20% of the entire potential
as an average over the entire period, the net impact to the goals when eliminating CFL
rebates was about 5%.
• Increasing customer incentive level from 50% of incremental costs to 75% resulted in the
model predicting a market potential projection of almost 14,000 MWh, which is triple the
EE savings achieved in 2009; however, these estimates are highly uncertain, as there is
little empirical research on the impact to customer adoption levels when utility programs
offer aggressive incentives.
CMR: 188:10 Page.6 of 10
The projected annual and incremental EE savings are shown in Figures 1 and 2 below.
Figure 1: Annual Ineremental Efficieney Savings -Actual and 2010 EE Plan Goals ;--M__ -------.. --------...... ~---------.. ------------... -------~~ .. --i
9.000
8,000
7,000
6,000
5,000 Actual
4,000
3,000
2,000
1,000
r--00 0'> 0 ...-N ('I') "'I" III co r--00 0'> 0 0 0 0 ...-...-...-...-...-...-...... ...-...-...... N
0 ~ ~ 0 0 0 ~ 0 0 0 0 0 0 0
N N N N N N N N N N N
--....... _-_. --....... _-_. --....... -~ ....
80,000 ,-----------~-----~----_,_,,.,,...,
70,000
00,000
50,000
.c
3: 40,000
:IE
30,000
20,000
10,000
CMR: 188:10
Percentages represent cumulative
EE salAngs relative to load ---------~~-~---~ ........ ------.-~
4.9%
2011 2012 2013 2014 2015 2016 2017 2018
Page 7 of 10
The estimated potential comes primarily from lighting technologies. These technologies,
including office lighting upgrades to T8 lamps, residential hard-wire and compact fluorescent
lamps, and other measures, are by far the most cost-effective to implement. The model predicts
that the EE market potential will increase over time due to the increased willingness and
awareness about efficiency measures among customers.
The implementation cost to CPAU will increase with this expanded EE goal. Currently, the $1.8
million electric efficiency budget comes from the state mandated Electric Public Benefit 2.85%
surcharge collected through customer retail rates. Additional funding above this level will be
cost-effective compared to purchasing renewable power and will result in long-term reductions
in the amount of energy that must be purchased on the market. Figure 3 below contains the
actual budget for EE and the projected EE budgets in the future to achieve the higher EE savings
goals in the proposed 2010 EE Plan.
,---_____ ~F=l=· =u=r=e=3~: =Act!lllllllld~P,"ro=-jLOecccto:ec=dc:E=ffi=lc=ie=n=cc.oL ~== _____ ----,
$6 Millions
$5 4.5 4.7
Projected
4.2
$4 3.5
$3
2.1 2.2
$2
1.1
$1
$-,.... co CD 0 ...... N M v It) co ,.... co CD 0
0 0 0 ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... N
0 0 0 0 0 0 0 0 0 0 0 0 0 0
N N N N N N N N N N N N N N
To achieve the higher level ofEE savings, the budget is projected to increase by over 50% above
current levels to $3 million by FY 2013. This additional EE program expenditure will have a
retail rate impact of around 1% by 2013. Energy efficiency is an investment that returns savings
over a 10-to IS-year period, as most equipment installed lasts that long and provides energy
savings over the equipment's useful life. The energy savings will result in lower electricity bills
for customers, as they consume fewer kilowatt-hours. Over the lifetime of the equipment, the
cost savings from reduced energy usage exceed the initial investment. Towards the end of the
proposed 2010 EE plan, retail rates will be 5 to 7% higher compared to a scenario without any
EE programs at all, including those funded from Public Benefits funds. The retail rate impact
from the incremental increases in EE programs that are funded from additional supply funds will
CMR: 188:10 Page 8 of 10
result in a retail rate impact of between 3% and 4% by 2020. The average bill will drop by about
I % as a result of the 2010 EE Plan.
Summary of Proposed 10-year EE Plan Recommendations
The proposed 2010 10-year EE Plan contains the following recommendations:
• Establish an incremental electric EE savings goal for 2011 of 0.6% of projected annual
energy use and increase this goal by 0.05% per year to reach a 0.8% annual EE savings
by 2015. Maintain this annual incremental savings goal of 0.8% of annual energy use
until 2020.
• Establish a 10-year cumulative electric EE goal of 7.2% of projected annual energy use to
be achieved by 2020. This effect is shown in Figure 3 below.
• In addition to the $1.8 million Public Benefits funds used for EE measures and programs,
utilize up to $1.2 million per year of additional funding to implement electric EE
programs for three years starting in FY 20 II. Part of the enhanced budget could fund the
increased UMS program manager staffing. The supply funding requests will be
determined annually in the budget process. .
If these goals can be achieved, the City will exceed the 4.3% cumulative electricity consumption
reduction (2020 target) set under the 2007 Climate Protection Plan (CPP). With an estimated
cumulative savings of 1.4% from programs implemented between 2008 and 2010, plus the
projected 7.2% savings over the next ten years, the cumulative energy savings through 2020
would be 8.6%, or double the 4.3% EE reduction goal in the CPP. The corresponding C02
emissions reduction is estimated to be 32,000 tons, or approximately 20% of the 145,000 tons of
C02 emissions associated with the electric portfolio in the base year of 2005.
COMMISSION REVIEW AND RECOMMENDATION
Staff provided a discussion of the proposed methodology to evaluate EE potential at the
November 2009 meeting of the UAC. The UAC supported staff's plan to evaluate the cost
effectiveness of EE using the cost of renewables as the marginal cost. During its February 3,
2010 meeting, a draft of the 2010 Ten-Year Electric Energy Efficiency Plan was provided to the
UAC for discussion. At that meeting, the UAC reviewed the preliminary results of the potential
study and supported the proposed Plan.
At its March 9, 2010 meeting, the UAC discussed the types of efficiency programs for which the
greatest potential exists (lighting) and requested greater detail on the work performed by staff in
developing, administering, and contract management of programs to support the justification for
increased staffing to complete these activities. After discussion, the UAC voted unanimously to
support the recommendation that City Council approve the 2010 Ten-Year Electric Energy
Efficiency Plan. Draft minutes from that meeting are provided as Attachment B.
RESOURCE IMPACT
If approved, electricity supply funds will be utilized for up to $1.2 million per year to implement
programs for three years starting in FY 2011. Part of the total enhanced budget for EE programs
will need to be used to increase UMS staffing by one to two full-time program managers in order
to expand current and develop new programs to meet the goal of doubling electric energy
CMR: 188:10 Page 9 of 10
savings. The supply funding requests will be detennined rumually into the budget process. For
FY 2011, temporary staff will be hired to assist in this expanded EE program effort. Pennanent
staffing increases may be requested in the FY 2012 budget.
POLICY IMPLICATIONS
Approval of this recommendation confonns to the Council approved Long-Tenn Electric
Acquisition Plan (LEAP) Gnideline which recognizes cost-effective energy efficiency measures
as the principal supply resource and requires that they take priority over the purchase of
renewable and conventional supply sources. Energy efficiency also enables the community to
reduce its carbon footprint,and will help achieve the Council approved greenhouse gas reduction
targets by 2020.
ENVIRONMENTAL REVIEW
Approval of this recommendation does not meet the definition of a project, pursuant to section
21065 of the California Environmental Quality Act (CEQA), thus no environmental review is
required.
ATTACHMENTS
A. City of Palo Alto Utilities 2010 Ten-Year Electric Energy Efficiency Plan
B. Excerpted Draft Minutes of the March 9, 2010 Utilities Advisory Commission Meeting
REPAREDBY:
REVIEWED BY:
APPROVED BY:
CITY MANAGER APPROVAL:
CMR: 188:10
CHRISTINE TAM, Resource Plw.mer
JOYCE KINNEAR, Manager, Utility Marketing Services
SHIV A SWAMINATHAN, Senior Resource Plw.mer
JANE RATCHYE
Assistant Director, Resource Management
TOM AUZENNE
Assistant Director, Customer Support Services
VALERIE O. FONG
Director, Utilities Department
JAMES KEENE
City Manager
Page 10 of10
ATTACHMENT B
CITY OF PALO ALTO UTILITIES
TEN-YEAR ELECTRIC EFFICIENCY PLAN 2010
TABLE OF CONTENTS
1. EXECUTIVE SUMMARY ................................................................................................... 2
2. INTRODUCTION AND POLICY OBJECTIVES ............................................................... 2
3. 2007 ELECTRIC EE PLAN GOALS AND ACHIEVEMENTS SINCE 2007 ................... .4
4. EXISTING PROGRAMS AND IMPLEMENTATION STRATEGIES .............................. 7
5. LONG TERM EFFICIENCY PROGRAM GOAL SETTING ........................................... 10
6. EFFICIENCY PROGRAM PLANS FOR FY 2011 TO FY 2013 ...................................... 16
7. STAFFING IMPACT .......................................................................................................... 18
8. PROGRAM IMPACTS: RETAIL RATES, BILLS AND CARBON FOOTPRINT.. ........ 19
9. CONCLUSIONS AND NEXT STEPS ............................................................................... 20
APPENDIX A: SUMMIT BLUE ANALYTICAL FRAMEWORK, ASSUMPTIONS, AND
SCENARIO RESULTS ................................................................................................................. 22
APPENDIX B: SUMMARY OF MODEL OUTPUT OF CPAU ENERGY POTENTIALS .... 27
APPENDIX C: PROGRAM SCREENING TESTS & DESIGN CONSIDERATIONS ........... 29
APPENDIX D: HISTORICAL PERSPECTIVE OF CITY AND STATE DRIVERS OF
ENERGY EFFICIENCY ............................................................................................................... 32
APPENDIX E: GLOSSARY OF ABBREVIATIONS AND TERMS ...................................... 35
City of Palo Alto Utilities Ten Year Electric Efficiency Plan -2010
CITY OF PALO ALTO UTILITIES
TEN YEAR ELECTRIC EFFICIENCY PLAN 2010
1. EXECUTIVE SUMMARY
This report outlines the City of Palo Alto Utilities (CPAU) Department's 2010 Ten-Year Electric
Energy Efficiency (EE) Plan (2010 Plan or Plan). The 2010 Plan updates the 2007 EE Plan
approved by the City Council in April 2007. The Plan updates technology and market
parameters, and incorporates lessons learned in implementing programs in the past three years.
During Fiscal Years (FYs) 2008 and 2009, the actual electric efficiency savings achieved
exceeded goals set in the 2007 Plan, with FY 2010 achievements also expected to exceed goals.
Based on this experience and the updated modeling results, the 2010 Plan recommends a 10-year
cumulative EE saving goal of 7.2%, which is double the 3.5% cumulative savings goal set in the
2007 Plan. The main elements ofthe updated 20 I 0 Plan are as follows:
1. Establishes an annual incremental electric EE savings goal for FY 2011 equal to 0.6% of
projected annual energy use and increases this goal by 0.05% per year to reach a 0.8%
annual incremental EE savings goal by FY 2015. Maintain the 0.8% annual incremental
savings target until FY 2020.
2. Establishes a 10-year cumulative electric EE goal of 7.2% of projected annual energy use
to be achieved by FY 2020. This is a doubling of the 2007 Plan's 10-year cumulative
goal of 3 .5%.
3. In addition to the $1.8 million per year Public Benefits funds used for EE measures and
programs, utilize up to $1.2 million per year from supply funds to implement electric EE
programs for three years starting in FY 2011. Part of the additional supply funds could
be used to increase staffing for program delivery. The supply funding requests will be
determined annually in the budget process.
Upon approval of this 2010 Plan by Council, it will be submitted to the California Energy
Commission (CEq to meet AB 2021 regulatory reporting requirements.
2. INTRODUCTION AND POLICY OBJECTIVES
The Palo Alto City Council adopted a "resource loading order" for electric resources in March
2007 when it approved the Long-term Electric Acquisition Plan (LEAP) Objectives and
Gnidelines. The loading order identifies energy efficiency as the top priority and the most
preferable electric resource in the portfolio. The other resources in order of preference are
renewable supply, local ultra-clean distributed generation, and, fmally, conventional supply. The
loading order is consistent with SB 1037 (2005) which specified a hierarchy of resources:
efficiency first, then renewable supply, then conventional supply.
20f36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan -2010
The City has a very long history of implementing energy efficiency programs, starting in the
1970's. Renewable supplies have also long been a cornerstone of the City'S electric resource
portfolio in the form of contracts for hydroelectric power. Starting in 2004, new renewable
supplies began to be delivered to the City in an attempt to meet a Renewable Portfolio Standard
(RPS) goal. By 2015, the City's long-term electric supply portfolio is expected to be composed
of hydroelectric supplies (50%) and renewable energy supplies (33%), with the balance (17%)
purchased principally from fossil fuel based generation in the short-term electricity markets. The
EE achievements are a key part of the electric resource portfolio and have helped lower costs,
reduce reliance on fossil-fuel based generation, and reduce greenhouse gas emissions. The 2010
Plan further increases EE goals so that these benefits will continue long into the future.
The cost to achieve the Council-adopted RPS goal of 33% renewable energy supplies by 2015 is
expected to come at a steep cost premium. Long-term fossil fuel based electricity supplies
currently costs approximately 7 to 8 cents per kilowatt.-hour (¢/kWh); however, long-term
renewable energy supplies cost 10 to II ¢IkWh.
Ibis high cost premium of renewable energy is another motivation to ensure that EE is
considered higher priority, since each unit of long-term electricity saved obviates the need to
purchase 0.33 units of high-cost renewable supply. In addition to lowering energy purchase cost,
every unit of electricity not consumed reduces costs related to transmission delivery,
transmission congestion, and losses in the delivery system. Efficiency and targeted peak-demand
reduction programs also help to improve transmission grid reliability on hot summer days -
periods when the grid is under stress and the delivery system is least reliable.
In November 2009, staff, with input from the Utilities Advisory Commission (UAC), discussed
alternative ways to value the avoided energy supply cost when evaluating EE potential. Based
on those discussions, this analysis used the current costs of renewable power as the value of the
avoided energy cost for EE potential. The California Public Utilities Commission (CPUC)
annually establishes the Market Price Referent (MPR), which is a proxy for cost of renewable
energy supplies. The MPR is the pre-authorized price for renewable energy for Investor-Owned
Utilities (lOUs), and becomes the de-facto floor price CPAU pays for long-term renewable
energy supplies. The levelized MPR for a 20-year renewable resource is currently about
10.5¢IkWh, and ranges from 7 to 15 ¢IkWh for each year (nominal) over the 20 year period.
Use of the MPR as the avoided cost for evaluating EE conforms to CPA U' s loading order which
recognizes cost-effective efficiency measures as the principle electric resource and requires their
priority over renewable and conventional supply sources. The City's 2007 Climate Protection
Plan (CPP) also relies on electric efficiency and associated load reduction goals to meet
greenhouse gas (GHG) emissions reduction targets by 2020. In addition, the CPP established a
"carbun adder" of $20 per ton of Carbon Dioxide equivalent (C(he), increasing at a rate of 5%
per year beginning in 2008, to use when making resource decisions. When translated to the cost
of electric energy, this carbon adder is about I ¢/kWh, increasing by 5% per year.
Although Palo Alto has long had aggressive EE programs in place, the emphasis of GHG
emission reductions has renewed the focus on energy efficiency since 2007. The City's 2007
Climate Protection Plan (CPP) found that electricity usage accounted for 145,000 tons of C~e
30f36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan -2010
emissions, equivalent to 20% of the community's GHG emissions in 2005. The CPP relied on
electric EE and established a cumulative load reduction goal of approximately 4.3% (43,000
MWh) to deliver 16,000 tons of C0 2e reduction by 2020. The updated 2020 electric EE goals
recommended in this plan exceeds the 2007 CPP GHG emissions reduction goals.
In addition to Council-set goals for GHG emissions reductions and efficiency programs, the City
is also subject to state legislative and regulatory mandates. AB 2021 (2006) requires municipal
electric utilities to develop Ten-Year Electric EE plans and submit them to the California Energy
Commission (CEC) every three years. l'he first such plan, the 2007 Ten-Year EE Plan, was
approved by Council in April 2007, and it was later submitted to the CEC as required by the law.
This updated 2010 Ten-Year Electric EE Plan also meets the AB 2021 regulatory requirement. A
more detailed history of City Council actions and state legislative actions is provided in
Appendix D.
3. 2007 ELECTRIC EE PLAN GOALS AND ACHIEVEMENTS SINCE 2007
The 2007 Plan's goals were to achieve 0.25% and 0.28% annual incremental efficiency savings
in FYs 2008 and 2009, respectively, and to achieve a 10-year cumulative EE saving of 3.5% by
2016. Since the approval of this 2007 Ten-Year EE Plan, considerable progress has been made
in terms of expanding program management, in retaining contractors to implement programs,
and in increasing educational outreach. The actual efficiency gains in the past two years (0.44%
in FY 2008 and 0.47% in FY 2009) were well above the targets and were close to double the
level of savings compared to the prior two years. The City has been successful in exceeding the
2007 Plan's goals primarily because aggressive new programs administered by third parties were
added. These new programs allowed greater marketing to customers without increasing City
staff. In addition, a wider variety of efficiency measures are now provided to customers in an
easy-to-access format.
The electric EE achievements in the past three years came mostly from lighting projects: from
both residential customers (the compact fluorescent lighting "five for $1.00" promotion and
holiday light exchanges) and non-residential (Right Lights+) upgrades to lighting. Also
important to achieving these totals were programs for non-residential Heating, Ventilating, and
Air Conditioning (HV AC) systems and residential refrigerator recycling programs.
Table! below provides the summary EE goals, achievements, and expenditures over the past two
years. In FY 2008, an annual net savings of 4,399 megawatt-hours (MWh) (or 0.44% of annual
load) was achieved at a cost of $1.48 million. On a life cycle basis, the average cost of the saved
energy was 3.1 cents per kilowatt-hour (¢/kWh). The annual savings increased to 0.47% ofload
in FY 2009, which was achieved at a cost of $1.79 million. The City anticipates it will achieve
incremental EE savings of 0.5% of annual load for FY 2010, which is significantly higher than
the goal established in the 2007 Plan of 0.35% of annual load.
40f36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan -2010
Table 1: Electricity Efficiency Achievements for FY 2008-09
FY 2008 FY 2009 FY2010
(Actuals) (Actuals) (Projections)
Efficiency -Goals
Annual energy savinQs (MWh) 2,500 ! 2,800 3,500
Percent of Annual Load 0.25% I 0.28% 0.35%
Energy -Achievements
Lifecycle energy savings (MWh) 48220 51,426 TBD
Annual enerQY savings (MWh) 4399 4668 TBD
Percent of Annual Load 0.44% 0.47% 0.5%
I
Budoets & Exoenditures ($M)
Customer Rebate 0.48 0.6 TBD
Program Administration/Contractor 1.00 1.17 TBD
Total Cost 1.48 1.79 TBD
Averaoe life-cycle savings cost (¢IkWh) I 3.1¢ I 3.5¢ ! TBD
Tables 2 and 3 below provide a more detailed report of the EE measures implemented,
corresponding savings, and cost during the past two years. The detailed programmatic results are
provided annually to the UAC, Council and the state to meet SB 1037's regulatory reporting
requirement.
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City of Palo Alto Utilities Ten Year Electric Efficiency Plan -2010
Table 2: CPAU EE Program Measures, Savings and Cost Summary for FY 2008
N&I Gross
Program Slilctor Demand Net Peak Annual Net Annua!
(Used Incec Units Savings kW kWh kWh
Cooling 36 " 15 20,691 16,553 297,950 182 I 9,700 $ 16,582
Dlsr,wasMrs 369 3 4 11,808 9,446 122,803 56 I 18,450 $ 20,516
Electro.,ics
Heating
L~hIlng 22,340 1,336 117 91l~4112 785,988 8,919,632 3.694 I 96,384 I 305,272
Pooi Pump 3 2 1 4,21l0 3,380 33,800 19 I 75() I 1,310
Refrigeration 801 74 74 596,2116 476,985 ~585,300 4,657 I 69,815 I 220,831
~I 78 4 4 4,008 3,270 65,407 37 $ 22,22S I 25,722
270 5 3 1,182,999 93(1,399 10,072,724 5,358 I 8O~41 I 153,890 $ 214,131
9,747 367 318 2.152,720 1,722,178 19,2B8,557 10,688 I 174,419 I 405,754 $ 580,173
11 17 13 111,679 89,502 1,342,538 714 I 2,680 I 20,850 $ 23,730
8 5 5 79,eaS 63,908 620,173 327 I 15,980 I 17,800 $ 33,766
3 110 11. 333 286 2,884 I 525 I 40 i $
I
565
lLiIO IT&D 156 156 7631575 36178750
IT""'I 34,598 2,10B 622 5,890,88S _____ .1?;-162.474 86,399 565 46,3431 $ 476.324 11,OO8,:lIJ41$ 1,464,628 !
lEE Program Portfolio TRC Test 2.43 ! ,
Table 3: CPAU EE Program Measures, Savings and Cost Summary for FY 2009
Progrem Sector
(U&ed InCEC
lEE Program PortfoBo TRC Test
22
343
6,953
7
656
81
1
2Q3
3,412
21
7
24
14032
2.4S !
"'I
Demand
2
3
427
5
71
5
7
354
"
8.,
1,825
Gros. Net
Net Ptak Annual Llfeeycls
'W kWh Net AnnuaJ kWh
1
3 15,09:2 12,074
56 1,623,298 818,837 9,222,682
3 9,600 7,840 76,400
71 559,874 447,699 8,062,186
5 19,180 15,344 306,681
2,262 1,810 21,715
7 1,157,899 928,319 9,869,412
321 2,199,922 1,759,936 19,379,044
" 787,197 629,756 3,770,540
6 .. 717 9,318 ." 2,664 2,131 21,312
1452 5634,63-9 4,eifi,711 51.425,595
Net 1II1111y
GHG Utility Direct
Reduetlons Incantives Install
7. I
'" $
4,927 I 195,903 I 35'1,887
43 I 1,75<J I 3,136
4,373 I 48,185 I 192.030
173 I 20,718 I 26,841
12 350 $ 362 I 732
5,265 $ 78,041 I 168,546 I 244,590
10,732 I 156,032 554,«8 I 710,478
1,98a I 70,192 I 121,342 , 191,534 :
5 I 140 , 152 $ 292 :
11 I I 341 I 4,541 :
27,908 ! $ 617,801 $ 1,166,1821 $ 1,785,783!
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City of Palo Alto Utilities Ten Year Electric Efficiency Plan -2010
4. EXISTING PROGRAMS AND IMPLEMENTATION STRATEGIES
A summary tabulation of existing utility funded electric efficiency programs is shown in Table 4
below.
Table 4: CPAU's Existing EE Programs
All Residential Smart Energy program UMS Staff
All Residential Refrigerator Recycling JACO
All Residential I UMS Staff
Low Income An energy
Low Income Residential Energy perfonns a free energy audit. Recommendations are
Residential Assistance Program Synergy given for energy saving measures. Replacements and
repairs are made to insulation, wealher stripping, (REAP) and furnaces
All Residential Aclara energy energy water
All Residential Green@Home ActeITa and electric
All Residential Training and Contractors and i Workshops on energy and water ccmservation issues for
workshops Staff the public.
, Contractor performs energy recommends
Small Business Right Lights+ Ecology Action ! changes, assists customer in making upgrades, and
• Commercial Rebates on energy efficient
equipment types: lighting, HV AC, chillers, boilers, food All Business . Advantage Program UMS Staff service, refrigeration, offIce equipment, appliance, & (CAP) custom
All Business UMS Staff state
Rebates
All Business Center EffIciency UMSStaff for server other data center
Large Business Industrial Energy Enovity , Commissioning and installation assistance for large
i businesses installing efficiency measures.
Programs Direct installation assistance for efficiency measures in Business Kitchens for Commercial Resource commercial kitchens. Kitchens
Various training and workshops for business customers,
All Business Training including Life Cycle Costing, Building Operator
Large Business Manager UMS Staff& Training on a variety of efficiency measures, from chillers
Others to LEED certification on buildings.
Large Business MeterLinks access to large
70f36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan -2010
Staff utilized the following guidelines in implementing EE programs:
• Programs shall be cost-effective on a CPAU combined utility basis. Some residential
items, such as washing machines, dishwashers, and insulation are not cost-effective
on electricity alone, but are when considering all utility commodities. Other items,
such as window replacements, remain not cost-effective even when all utility savings
are calculated and are not, therefore, rebated. Limited-time promotion may be offered
for emerging technologies such as LED spring light campaign.
• Programs shall be similar in nature to those available in surrounding communities, for
ease of customers and of contractors.
• Programs for hard-to-reach customers (low income or small commercial) are
designed to gain as much customer involvement as possible, including providing
direct install options at no cost to the customer. Other customer groups will need to
participate in the costs of efficiency implementation.
• Programs will not incent customers to install new high-electric using equipment-for
example; customers will not be rebated for the installation of new residential air
conditioners where none has existed previously.
• Funding for programs should be reasonably balanced across residential and non
residential customer classes, in similar proportion to their payments of utility Public
Benefit charges.
• Existing programs are screened every year and programs budgets adjusted annnally to
achieve goals optimally.
Staff continuously monitors EE technologies and other market parameters to understand the
suitability of promoting various efficiency measures within the City. Efficiency programs are
evaluated annually and updated whenever deemed necessary. In addition, the long term
efficiency potential is assessed every three years. An illustration of the program planning,
implementation, and reporting cycle is shown in Figure 1.
80f36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan -20 I 0
Figure 1: Illustration of Efficiency Program Assessment, Implementation, and Reporting
Process
NewtechnQlogles.
P1ClgNliMa', 'eonODpts
Over the past five or more years, efficiency programs have focused on the following program
areas:
• Getting businesses to upgrade to T8 fluorescent lighting with electronic ballasts as
replacements for older technology Tl2 lamps with magnetic ballasts. As technology
has developed, newer T8's have also continued to improve savings, allowing
customers to upgrade to the newer light~ and continue to improve efficiency.
• Supporting residents in the replacement of incandescent lighting with compact
fluorescent lights (CFL's).
• Incenting the replacement of older and inefficient HV AC equipment and appliances
vvith items achieving greater energy savings than the minimum efficiency standards at
the time of replacement. For example, residents are encouraged to replace
refrigerators with ENERGY STAR® certified models, while businesses are
encouraged to exceed the State of California's Title 24 energy budget requirements
when upgrading HV AC systems.
• Making it easier for hard-to-reach customers (low income and small commercial) to
make EE upgrades through direct install programs.
90f36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan -2010
• Reaching deeper into building perfonnance and into higher levels of savings through
the more extensive new construction rebates and the Commercial and Industrial
Energy Efficiency Program (CIEEP).
• Working with community groups, such as Acterra, the Community Environmental
Action Partnership (CEAP) and Wave One, to increase the community's knowledge
of and participation in programs.
• Expanding upon educational opportunities for all customers, from students to facility
managers at the largest customer sites in Palo Alto.
5. LONG TERM EFFICIENCY PROGRAM GOAL SETTING
In order to assess the market and technology landscape and bring analytical rigor in setting the
new Ten-Year Electric goals to meet AB 2021 requirements, CPAU, in collaboration with
other Northern California Power Agency (NCPA) members, engaged a consultant to develop a
new energy efficiency potential assessment model, The model estimates technical, economic
and market potential for residential and commercial customers.
Technical potential is the energy savings that would result from
installation of the most energy efficfent measures that are readily availablt
in the market.
Economic potential is the energy savings that would result from
installation of only the cost-effective measures. Energy savings from
non-cost effective measures such as ground source heat pumps for
residential homes are excluded in the economic potential.
Market potential is a subset of the economic potential that reflects the •
reality of customers' awareness and willingness to adopt certain measures i
customer's willingness is in turn influenced by messaging, incentive level
and retail rates.
One of the key criteria used in detennining the EE goals is the cost-effectiveness of EE
programs. AB 2021 requires that "each local publicly owned electric utility, in procuring energy
to serve the load of its retail end-use customers, shall first acquire all available energy efficiency
and demand reduction resources that are cost effective, reliable, and feasible.") For the purpose
of EE program planning and evaluation, staff uses both the Total Resource Cost (IRC) test and
the Utility Cost Test (UCT) to detennine the cost-effectiveness of the programs (see Appendix B
for the definition of the cost -effectiveness tests). The TRC accounts for the benefits and cost to
both the utility and its customers, while the UCT test provides a cost comparison of supply-side
resource and energy efficiency from a utility procurement standpoint. A IRC ratio that is greater
than one indicates that the EE program is beneficial to the community (i.e. it costs the
1 Public Utilities Code, Section 9615 (a)
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City of Palo Alto Utilities Ten Year Electric Efficiency Plan -20JO
community less than the cost of not doing it), while a GCT ratio greater than one indicates that
each kWh of avoided energy costs the utility less than each kWh of energy purchased.
The EE potential model is used to determine the available and feasible energy efficiency
potential over the 2011 to 2020 period. The following input assumptions are used in the analysis:
• Palo Alto's avoided supply cost over the 10-year assessment period ranges from 8 to
12¢/kWh. These costs include cost of energy, capacity, transmission, the ,City's carbon
adder of 1 to 2¢IkWh, and system losses. This calculation (avoided cost plus the carbon
adder) is approximately the same as the current MPR plus avoided transmission and loss
charges.
• Utility rebates are set at 50% of the incremental cost (above new standard equipment) for
the EE measures.
• Penetration of energy efficient technologies is assumed to be similar to that for PG&E
customers in the same climate zone.
The model calculates the full technical EE potential comprising ,both economic and uneconomic
EE measures. The economic potential includes only cost-effective EE measures. The market
potential in 2011 is calibrated based on the last two full years of actual program results and
projected efficiency achievements for FY 2010. Market potential generally increases over time
as customers' attitude toward EE measures change.
It should be noted here that the EE savings that are counted toward the goal can only include the
incremental savings beyond state or local standards for new equipment. For example, if an
old refrigerator is replaced, allowed EE savings are calculated by subtracting the energy used by
the new refrigerator less the energy used by a standard new refrigerator. If only a standard new
refrigerator replaces the old refrigerator, no EE savings are counted.
~-'''''-~~-~~-------~~'---....,
EXAMPLE: Using numbers to illustrate this example, assume:
• The old refrigerator uses 1,500 kilowatt-hours per year (kWhlyr),
• A new standard refrigerator uses 600 kWhlyr, and
• A new super efficient refrigerator uses 400 kWhlyr.
The energy savings that can be counted is the difference between the
energy used by the new super efficient refrigerator and the standard
model, or 200 kWhlyr (600 kWhlyr 400 kWhlyr) even though the
actual savings will be I,JOO kWhlyr (1,500 kWhlyr-400 kWhlyr).
The efficiency goal is based on 'net savings' that excludes any naturally occurring savings that
would have resulted from appliance replacements over time in the absence of utility EE
programs. The savings are calculated in this way so that utilities encourage installation of the
most efficient equipment and in recognition that eventually older appliances will need to be
replaced with new models that will, due to updated standards, save energy "naturally." This
method also ensures that the savings last as long as the appliance and not just until the old
appliance would have been replaced. \
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City of Palo Alto Utilities Ten Year Electric Efficiency Plan -2010
There are a number of market realities that needs to be considered when setting EE goals. There
are many barriers to achieving all of the economic potential. Long equipment turnover cycles is
one such barrier -many items will continue operating, albeit inefficiently, beyond the end of
their useful life. With limited fmandal resources, customers may choose to keep an older piece
of equipment instead of purchasing a new efficient model with lower energy costs as
replacement, especially if the payback period is more than 1 to 2 years. In other situations, the
customer may be resistant to adopting a new efficient technology due to perceived risk or
differences in operational characteristics. As an example, many residential customers continue
to dislike compact fluorescent light bulbs due their limited dimming ability and mercury content.
New EE goals should be set realistically from both the perspectives of program and budget
ramp-up. New programs take time to establish and expand. Recent program achievements and
expenditures should be taken into consideration in the goal-setting process. Staff also analyzed
the impact on customer rates, customer bills and staff resources. These results are presented in
section 8.
ProposegJen-Year Electric Energy Efficiency Goals (2011 -2020)
Based on the model assumptions stated earlier, staff recommends setting an incremental electric
EE savings goal for FY 2011 equal to 0.6% of projected annual energy use, and increasing by
0.05% per year to reach 0.8% annual incremental EE savings by FY 2015. This results in a 10-
year cumulative electric EE goal of 7.2% of the projected annual energy use to be achieved by
2020. These proposed goals are based on the market potential as projected by the EE potential
study during the 10-year period. Figure 2 shows the cumulative EE savings expressed in MWh
and as a percentage of the projected load between 2011 and 2020.
Figure 2: Proposed to-year cumulative EE savings
80,000 -------
70,000
60,000
50,000
~ 40,000
30,000
20.000
10,000
Percentages represent cumulatille
EE sailings relatille to load
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
120f36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan· 20 I 0
Proposed Electric Energy Efficiency Program Budget
To develop the goals, staff took into consideration past actual program achievements and
expenditures. The recommended EE goal for FY 2011 is over 25% higher than the actual EE
savings achieved in FY 2009. The projected EE budget is based on the proposed goals. Based
on the model results, the projected budget for 2011 is $2.2 million, which is also about 25%
higher than the actual EE expenditure in FY 2009. By 2014, the projected EE budget is
approximirtely double that in FY 2009 (see Figures 3 and 4 below).
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
Figure 3: Actual and Projected Annual EE savings
c;o o o
N
o T""
T"" T"" o 0 N N
N ... o
N
V
T"" o
N
1.0
T"" o
N
CD ... o
N
c;o ... o
N
0)
T"" o
N
130f36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan -2010
Figure 4: Actual and Projected Annual EE Budget
$6 Mil
$5 4.5 4.7
4.2
$4
3.0
$3 2.6
2.2
$2 1.8
1.5
1.1
$1
$-
"-~ 8 0 .... ·N C"') V 1.0 <D "-0 ...... .... .... .... .... ...... .... ....
0 0 0 0 0 0 0 0 0 0 0
N N N N N N N N N N N
Projected Electric Enenzy Savings by End Use
4.9 5.1
4.8
co (l) 0 ...... .... N
0 0 0
N N N
In terms of the expected distribution of EE savings, residential EE program savings represent
around 28% of the total EE savings in FY 2011; this ratio drops to 17% in 2012. By comparison,
residential load represents makes up around 16% of the City's total load. As shown in Figures 5
and 6, lighting measures represent the bulk of the residential and commercial potential EE
savings. However, federal legislation requires that all general-purpose light bulbs be 30% more
energy efficient than current incandescent bulbs beginning in January 2012. This reduces the
potential for residential EE savings, but has a lesser impact on commercial EE savings.
14 of 36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan -2010
Figure 5: Projected Residential EE saving!! by end use
Figure 6: Projected Commercial EE savings by end use
MWh
6,000 -,--------------------------,
5,000
4,000
3,000
2,000
1,000 EI Refrigeration .
!21
2011 2012 2013 2014
150f36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan -2010
6. EFFICIENCY PROGRAM PLANS FOR FY 2011 to FY 2013
Whlle CPAU has been successful in ramping up the efficiency gains from utility programs in the
past three years, the level of effort and cost for implementation continues to rise. The likelihood
of achieving the 0.6% to 0.8% goals set is highly dependent on customer response. The slow
economy and harder economic times have adversely impacted efficiency programs of sister
utilities and have been felt by CPAU, too. Hopefully the considerable amount of grants and tax
credits being provided fon:nergy efficiency in the coming years will continue to increase interest
in energy efficiency investments by residential and commercial customers.
In the next three years, Light Emitting Diode (LED) technology is projected to become more
available to customers. Several lighting styles are near to reaching commercialization, both in
cost and in capabilities. In the next two years, some are projected to achieve ENERGY STAR
quality rating. A few competitive and effective technologies are now available, such as LED
case lighting for commercial refrigeration units and holiday lights. These technologies are
expected to continue to come down in price and, thus, become more accessible to customers.
CPAU will continue to implement the recently developed new construction rebates for residents
and businesses. The commercial lighting (Right Lights) program is recently enhanced with new
efficiency measures for commercial kitchens and other businesses. A new Commercial and
Industrial Energy Efficiency Program (CIEEP) that offers technical assistance and cash
incentives to large businesses is being implemented. New programs will need to be continually
developed as existing programs reach maturity and market saturation. The Commercial
Advantage offerings will continue to be re-optimized to better reflect current technology,
customer nceds, and costs. All residential programs will be reviewed to ensure cost-effective
delivery and to integrate the rebate programs from electricity, natural gas, and water utilities.
Staff is implementing a Home Energy Report, Which will provide residents with a monthly
comparison of their electric and natural gas usage with those of similar homes in the area. Staff
plans to expand the program to include water comparisons in the next year. The program is
being partially funded by the Federal Government's stimulus funding through the Energy
Efficiency Community Block Grant Program (EECBG). Hopefully this comparative report
along with the ongoing emphasis on climate change will incrcase the focus of residential
customers on improved efficiency. On the other hand, continued tightening of both federal and
state (Title 24 and Title 20) efficiency requirements for equipment and appliances, as well a
poterttially stagnant econOlp.y, will make it more difficult for CPAU to achieve its efficiency
goals since only savings above standard requirements can be counted toward goal achievement.
A second efficiency measure being partially funded through the EECBG is the installation of
LED street lights, as a replaeement to the City's current High Pressure Sodium (HPS) lamps.
This is a continuation of CPAU's pilot study, conducted in 2009, on a few LED and induction
lamps. Community feedback showed that LEOs are generally preferred over BPS and induction
streetlights and achieved a 30 to 40% energy savings. The biggest drawback of the LED fixtures
is the color of the light output. Compared to the yellowish glow .ofthe BPS streetlights, the light
16 of 36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan -2010
output from LEDs appears starkly bluish white. It is anticipated that approximately 10% of
existing HPS fixtures could be replaced with LED fixtures within three years. Replacing all
6,400 HPS fixtures within the City has the potential to achieve up to 0.15% of energy savings
(eurrently streetlights aceount for 0.4% of the City's annual electricity consumption).
Also in development are two fmancing programs: the Electric Efficiency Financing Program
(EEFP) for businesses and the CalifomiaFIRST property tax based financing for residential
efficiency and renewable energy installations. The EEFP will provide ?,ero interest, non-secured
loans to businesses who install efficient equipment, and it is targeted at businesses that rent their
office space. The CaliforniaFIRST program is a joint action program with 14 counties and about
100 other cities. It will allow residents to finance efficient equipment installations and make
payments through their property tax assessments.
CPAU is also working on public-private partnerships with the local non-profit groups. Efforts
with Wave One, and a small business providing refrigeration efficiency measures, Humitech,
where both of these coalitions applied to the CEC for grants under the State Energy Program
unfortunately did not yield desired results. Neither project received grant monies. CPAU
continues to look for ways to coordinate efforts through thcse partnerships.
Staff is also reviewing several new programs that may require more time to evaluate and
implement. In order to maximize participation and optimize program savings, staff anticipates
sequencing new programs in targeted "blitzes" and may also need to roll out thematic programs
by customer type or business type, such as data centers, industrial motors, commercial
refrigeration or restaurants, for example.
Demand Reduction Programs
Demand reduction relieves stress on the electric grid during peak usage times. Peak load
reduction can be accomplished through more efficient equipment, which reduces peak loads by
lowering the power needed to perform a particular function, or through demand response, which
is the ability to reduce electricity use on short notice for a short period of time.
Demand reduction is not a high priority resource for Palo Alto due to both the temperate climate
and types ofloads within the City. The City has a relatively flat load shape (also called a high
load factor), which results in less need to purchase very expensive peak-time electricity. This
can be compared with utilities in California's Central Valley, such as the Sacramento Municipal
Utility District, Lodi Electrie, Redding Eleetric, and others, who have a sharp "Needle Peak."
This extremely high demand in Central Valley locations is caused primarily from residential air
conditioning loads and requires the utilities to purchase significant amounts of high-priced, and
generally less enviromnentally preferable, electricity. In these utilities, Demand Response
programs to lower needs during the needle peak are very cost-effective.
In Palo Alto, by contrast, Demand Response programs are relatively less cost-effective. The
2006 report prepared by the consultant RMI for the 2007 Plan came to this conclusion, and the
cost situation has not changed signifieantly in the past three years. There have been some
170f36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan -2010
regulatory and legislative actions at both the federal and state level that have resulted in CP AU
re-evaluating demand reduction programs. CPAU is in the process of exploring the
implementation of a volunteer pilot program for large customers. This opportunity may be
enhanced by installing advanced meters, and it is being investigated as part of the preparation of
the smart grid strategic plan.
Programs that Complement Energy Efficiency Programs
Some programs are complementary to efficiency and/or demand response, including advanced
metering at customer locations and deploying sensing and switching devices along the
distribution system. A smart grid road map for CP AU is being undertaken to map out options
and to determine the costs and benefits of different systems.
Other programs that offer promise include supply efficiency (improvements to generation,
transmission & distribution), demand reduction and demand response beyond the proposed
voluntary programs, energy storage, and additional joint programs with NCPA members.
Building-focused alternatives include building code enhancements (such as through the City's
. Grcen Building Program), building permit process, training for inspectors/plauners, and special
incentives for ENERGY STAR-rated buildings or similar building energy rating systems.
7. STAFFING IMPACT
CPAU's EE programs must either be implemented by internal staff or by third-party agents
under contract to the City. Whether or not intemal staff directly implements a program, any new
initiative requires significant staffing commitments by CPAU. For instance, when a new third
party program is desired, staff must develop a request for proposals (RFP) and related scope of .
work, work with internal City departments to issue the RFP and review responses to it, complete
final contracts and Council approval documents, work with the contractor on the development
and implementation of the program, market the program to customers, inspect work upon
completion of each job, administer contract payments and timing, and ensure the impact and
process of the program are appropriately evaluated by another third-party Measurement and,
Verification consultant (as required by state law). In addition to the process outlined above,
working in a public-partnership arrangement, as opposed to contracting with a more traditional
vendor, requires extensive education on the part of staff to ensure that the private agencies
understand the complex and specific state and federal reporting requirements for all programs.
Thus, regardless of the delivery mechanism selected, the addition of any new efficiency
initiatives requires considerable staffing resourees.
CPAU's Utility Marketing Services (VMS) group delivers programs to all customer types for
electric, gas and water utilities, in addition to key account management and fiber optic front-end
services. These nine full-time equivalent (FTE) positions with support from two to three interns
and temporary part-time clerical assistants currently spend one-third to one-half of their time
working in electric EE program management. The level of staffing allocated to program delivery
has not increased over the past several years, except for the approval of a part-time temporary
clerical assistant to input program achievements into the database and to answer residential
18 of 36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan -2010
customer requests for information. At the same time, electric EE results have doubled and
reporting requirements to the CEC and others have increased dramatically.
EE results can not continue to increase without providing additional resources to deliver the
programs. While funding is projected to increase through both supply resources and the transfer
of two million dollars from the Calaveras reserve to run the EEFP program for four years, this
funding is all allocated to increased incentives and contractor payments. In order to reaeh the
goals established in this plan, one to two new full-time program managers will need to be added
to the UMS staff Upon the approval of this Plan, staff will need to begin requesting additional
staffing through the mid-year process in FY 2011 and/or in the budgeting for FY 2012.
8. PROGRAM IMPACTS: RETAIL RATES, BILLS AND CARBON FOOTPRINT
Electric Energy Efficiency Program Expenditurcs
Funding for EE programs in the past has prihcipally come from the mandated 2.85% Electric
Public Benefit (PB) surcharge collected through eustomer retail rates. The total PB surcharge is
expected to remain flat at around $1.8 million between FY 2011 and FY 2020. Any incremental
EE program funding above this level will come from electric supply funds rather than increases
in the PB surcharge. To meet the recommended EE goals for FYs 2011, 2012 and 2013, the
corresponding EE program budgets are estimated at $2.2 million, $2.6 million, and $3.0 million,
respectively.
Figure 7: Projected EE Program Expenditures
----~ ...... ---;
$6
Millions
2.9 3.1
$5 2.7 2.8
EE program $ from 2.2 2:5
$4 supply funds
1.5
1.1
$3 0.8
$1.8M from public 0.4
$2 benefit surohaga
'-..,.
$1
$-
I'-(I) OJ 0 ..... N '" "¢ U'l (0 I'-(I) OJ 0
0 0 0 ..... ..... ..... ..... ..... ..... ..... ..... ..... ..... N
0 0 0 0 0 0 0 0 0 0 0 0 0 0
N N N N N N N N N N N N N N
190f36
City of Palo Alto Utilities Ten Year Electric Efficiel1cy Plan -2010
Supply Funding of Electric EE Programs and Retail Rate Impacts
Staff recommends that in addition to the PB funds used for EE programs, an amount of up to
$1.2 million per year of supply funds be utilized to implement eleetric EE programs for three
years starting in FY 2011. For the next three years, the total supply funds to be expended for EE
programs is around $2.4 million (see Figure 7 above). This additional EE program expenditure
will have a retail rate impact of about I % in FY 2013. Energy efficiency is an investment with
return over a 10-to 15-year period, as most equipment installed lasts longer than I year and
provides energy savings over the equipment's useful life. The energy savings will result in lower
eleetricity bills. Over the lifetime of the equipment, the cost savings from reduced energy usage
exceed the initial investment. Towards the end of the proposed 10-year EE plan, retail rates
could increase by 5% to 7% due both to the increased expenditure and reduced energy use.
However, the average bill is estimated to drop by 1 to 2%; the average bill for EE program
participants would drop even more.
The actual rate and cost impact is highly sensitive to the measures implemented and the lifetime
of the measures. Since customers implementing the measure will see bill reductions, while the
non-participant bills will increase, EEprograms are designed to reach all segments of the
customers to increase the percentage of customers who achieve savings.
Carbon Footprint Reductions
CPAU is on traek and projected to exceed the 4.3% cumulative electricity consumption reduction
(2020 target) set in the 2007 Climate Protection Plan. With an estimated savings of 1.4%
between 2008 and 2010, plus the projected 7.2% savings over the next ten years, the comparable
cumulative energy savings through 2020 could be 8.6%, which is double the 4.3% projeeted in
2007. If this reduction is achieved, the corresponding carbon dioxide (C02) emissions reduetion
is estimated to be 32,000 tons, whieh is double the reduetion estimated three ycars ago. The
32,000 tons of C02 emissions reduction represent approximately 20% of the 145,000 tons of CO2
emissions associated with the electric portfolio in the 2005, the base year.
9. CONCLUSIONS AND NEXT STEPS
Upon approval of the 20 I 0 Ten Year Electric Efficiency Plan by the Council, CPAU will submit
the plan to the CEC before June 2010, as required by state law. In summary, the 2010 EE Plan is
as follows:
I. Establishes an annual incremental electrie EE savings goal for FY 2011 equal to 0.6% of
projected annual energy use and inereases this goal by 0.05% per year to reach a 0.8%
annual incremental EE savings goal by FY 2015. Maintain the 0.8% annual incremental
savings target until FY 2020.
2. Establishes a lO-year cumulative eleetric EE goal of 7.2% of projected annual energy use
to be achieved by FY 2020. This is a doubling of the 2007 Plan's lO-year cumulative
goal of 3.5%.
200f36
City ofpalo Alto Utilities Ten Year Electric Efficiency Plan -2010
3. In addition to the $1.8 million per year Public Benefits funds used for EE measures and
programs, utilize up to $1.2 mUlion per year from supply funds to implement electric EE
programs for three years starting in FY 2011. Part of the additional supply funds could
be used to increase staffing for program delivery. The supply funding requests will be
determined in the budget process.
Staff will continue to review the existing programs based on customer feedback, market data and
technology information. Existing programs will be updated and new programs will be added in
accordance to the existing program implementation guidelines to ensure that CP AU will meet the
aggressive 2010 EE Plan goals in a cost-effective manner.
210f36
APPENDIX A: SUMMIT BLUE ANALYTICAL FRAMEWORK, ASSUMPTIONS,
AND SCENARIO RESULTS
Model Overview
The Energy Efficiency Potential model is developed by Navigant Consulting (formerly Summit
Blue) and contracted through the Northern California Power Agency. The Excel-based model
projects technical, economic and market potential over a lO-year period for electric efficiency
programs based on the integration of DSM measure impacts and costs, utility customer
characteristics, utility load forecasts, utility avoided costs and rate schedules.
Inputs to the model include:
• base year energy and demand usage as well as energy and demand forecast for the 10-
year planning period, beginning in FY 2011;
• utility avoided costs;
• utility rates by customer class (residential and commercial);
• estimated number of residential homes (by single family and multi-family) and
commercial floor space by building type;
• energy efficiency measure (technology) characteristics, measure impact and costs;
• initial penetration of base technology and efficient technology by building type;
• estimates of decision maker awareness and willingness by measure;
• customer incentive levels;
• administrative costs; and
• first year calibration estimates (i.e. 2010 residential and commercial EE program
savings as percentage of load).
Model outputs include:
• technical potential for the residential and commercial customer segments, based on
installation of the most energy efficient measures that are readily available;
• economic potential, based on installation of only cost-effective BE measures;
• market potential by year, based on installations of only cost-effective measures,
subjected to decision maker's awareness and willingness to implement the measure;
• naturally occurring efficiency by year, based on energy savings that would have
occurred in the absence of any utility programs;
• estimated administrative and incentive costs by year for utility;
• levelized cost and market potential in year 2020 for all energy efficiency measures;
City of Palo Alto Utilities Ten Year Electric Efficiency Plan -2010
• electric bill reduction by year; and
• cost-effectiveness ratios, based on Total Resource Cost test, Utility Cost Test,
Participant Cost test, and Ratepayer Impact test.
The model covers 28 residential measures and 38 commercial measures. Emerging technologies
that have not yet been widely commercialized, e.g. LED par lamps, are not included. The
measure-level energy savings and costs assumptions reflect the most recent deemed energy
savings and measure costs in the 2010 E3 model used for annual EE program reporting to the
CEC.
Base Scenario Assumptions and Results
As the base scenario, staff used the following assumptions:
• utility avoided' costs, which is approximately the same as the current MPR plus
avoided transmission and loss charges;
• penetration of energy efficient technologies similar to PG&E customers in the same
climate zone as Palo Alto; and
• customer rebates (incentives) set at 50"10 of the incremental cost.
The EE potential model projeets that the market potential in 2020 is around 7% of the load
forecast. Figure Al compares the technical, economic and market potential in 2020 for CPAU.
300,000
250,000
200,000
150,000
100,000
50,000
Figure AI: Energy Efficiency Potential Summary
27% 26%
Technical Economic
Percentages showEE
potential relative to load
forecast in 2020.
7%
Market in year 2020
230f36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan -2010
The incremental market potential generally increases over time, as customers become more
aware of and willing to adopt new EE measures. There is, however, a drop in the incremental EE
potential in the residential sector in 2012. This is due to the new federal regulation that requires
general-purpose light bulbs be 30% more energy efficient beginning in January 2012. This
regulation has a lesser impact on commercial buildings. Figure A2 illustrates the incremental
market potential for the residential and commercial sectors. The combined cumulative market
potentials add up to 7.2% of projected load in 2020.
Figure A2: Incremental Market Potential for the Residential and Commercial sectors
MWh 9,000 T----
8,000 -
7,000
6,000 -
5,000
4,000
3,000
2,000
Commercial
Residential
1,000 ~~----------------
o ...... _-------!---~ .... ,--------
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Tables A 1 and A2 list the top 15 residential and commercial efficiency measures with the highest
market potential in 2020 and their respective levelized costs.
240f36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan -2010
Table At: Top 15 Measures for Residential Customers
Measure
---~------=~~:"]F": Ex!St:CFt.L?Cre"~~"in (>=-7_~W):_di!:~.~ii6~ia(_==-:·_
f-.-I'i~~."'famny· CFL' Screw In {> 25W} dIrect Install
"SF
F ~ exi5~~L~Re~lng~' -eratofRe
, = , ~-....
...... SF -Exist: t;:6~.!iY .. 9tar Refr!geratqr _ ..... 771 .. , .. 134 , ~0,122
.i:J<lst: LED HolldMJdll~ts (100 bulb st1i1J9l.. 699 i 0
I ~0'125
cycling -removal of secondary refrigerator ~.Jmcondttloned spilCL 689 .... 145 0,054
Mult~:'.F.am!ly: Energy Sta~J~efrlgerator 514 I 89 $0,122
ItI-FamilY: .. bED Holiday Lights OJJO bulb string) i 437 . 0 ~0,125 --SF -Exist: Photocells -.0-3-----3·8 .. $0,107 ---Exlg: en: ~r~W~~rLt16-24W), dlr;ect In~tal1 32} .. __ 1
Table A2: Top 15 Measures for Commercial Customers
I
Measure
I
Office: : ,~ i ' I fixture
Office:" I" lQOW or~: 'oooe start, I retrofit 01 std MH fixture
Office: Metal Halide, 11 '200W, Dulse star I retrofit 01 std MH fIXture
i Mlsc: I I .• Ballasts
I Heath: Metal HaRde: .79J .. : 350W, (pulse sta or i 1 reirolit of std MH fixture
... M~c: ..
."'hong
pu so start or ceramic) retrofit of ....... , .....
talt or'
Energy ..
(MWhl
3,01'
53 , ,$0,08..L.,
Demand ~ : Levelized
(kW) Cost/kWh
1.06
7:
7;
~.
',025
,)65
, )23
The model calculates the cost-effectiveness ratios using different cost tests, Results are
summarized in Table A3, Note that residential EE measures are generally less cost effective than
commercial EE measures,
Table A3. Results ofEE Cost Effectiveness Test Ratios for the Base Seenario
Participant Cost LJtility Cost Test Total ResoUrft' Ratepa),,,. Impact
Test Cost Test Measure
Residential sector i 1,21 1.54 0,98 0,85
Commercial sector I 1,64 4,76 2,85 1,89
Total Portfolio I 1.52 3.80 2.31 1,64
The model projects the TRC ratio for the residential sector to be less than I due to the fact that
dishwashers and clothes washers are included in the residential programs, Residential
dishwashers and clothes washer are not cost-effective when only accounting for the electric
savings, However, wben the gas and water saviugs are taken into consideration, these measures
are cost-effective,
250f36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan -2010
Scenario Assumptions and Results
In addition to the base case, staff analyzed other scenarios with different input assumptions to
compare the projected market potential and EE program budget with the base case results. The
scenario defmitions and results are given below.
Scenario l:Increase EE goals
by an additional 0.1 % per year .
Scenario 2: Increase carbon
adder by an additional 1 to 3
centslkWh
Scenario 3: Eliminate rebates
forCFLs
. Scenario 4: Increase customer
incentive level from 50% of
incremental cost to 75% of
incremental cost.
Projected EE budget will increase an additional $0.5M per
year .
No noticeable change in the economic potential due to lack of
EE savings in the $0.11 to $0.13IkWh range. Lighting, which
represents the bulk of residential and commercial economic EE
potential, has levelized cost of around $0.06 to $0.08IkWh.
There are a few non-cost effective measures including
residential duct sealing and ground soUrce heat pumps -these
measures have significantly higher levelized CDsts, at $0.60
and $3lkWh (gas savings from these two measures are ignored
in the electric potential model).
Residential market potential drops by over 25%.
The model predicts that the increased rebate will increase
customer's willingness to adopt EE measures, with the
resulting market potential of almost 14,000 MWh, which is
tripled the EE savings achieved in 2009. The corresponding EE
program budget is projected to more than quadruple the EE
expenditure in 2009. Such a dramatic increase in EE savings
goals and budget IS not realistic from a goal-setting
perspective. Moreover, there is a high level of uncertainty
i assocIated WIth the projected market potentIal due to lack of
! empirical data to determine customer adoption level when
. utility programs offer aggressive incentives.
260f36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan -2010
APPENDIX B: SUMMARY OF MODEL OUTPUT OF CPAU ENERGY POTENTIALS
Shown below is the model output ofCPAU technical, economic and market potential for each of
the 10 year planning horizon for the residential and commercial sectors. The recommended EE
targets for CPAU are based on the market potential results for the first 5 years. The EE savings
target as percentage ofload is held constant at 0.8% after 2015 due to uncertainty in the model's
projection of consumer behavior (Le. willingness to adopt energy efficiency) in the outer years.
There could be increasing level of naturally occurring EE savings as efficiency standards
increase and as customer's willingness to adopt efficiency measures without rebate increase.
These savings are not counted towards the EE goals.
City of Palo Alto Electric Utilities
Energv Efficiency Program Targets
9,OOJ"Wh
StOOD 1
i 7,000 -:.,
6/000
4,000 -:------------."-.~------~~-------"-"--------" ~--
3,000 i
2,000 :-
1,000 .
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
MIDI 5,799 6,290 6,782 7,276 7,906 7,927 7,950 7,973 7,999 8,026
u/o()ofLoad Foreeast 0.600/0 (),65% 0,70<'10 0.75% 0.80% 0.800/0 0.80% 0.80% 0,80% 0.80%
Technical Potential
En.rgy Pot. udal (MWb)
:1 __ ••• '+ ,!!iII i ', ... '
Residentil:ll
NODNResidentinl
Total An Buildings
Pertent of Utility Foreeast
Demand Potential (k\\')
46,014
235,333
281,347
28.95%
38,229 38,210
233,297 233,317
271,526 271,526
28.09% 28.06%
38,[90 38,168 38,[45
233,337 233,696 233.746
271,527 271,864 271,890
28.02" .. 28.02% 27.51%
-iWiI __
38,122 38,100 38,078 38,055
233,957 234,742 235,580 236,477
272,080 272,842 273,658 274,532
27.46% 27.46% 27.46% 27.46%
t "II,,: m __ -''' .... -t.WiI."",.,_."".,,,, ••
Residenthtl
Non-Residential
Total AU Buildings
Percent of Utility Forecast
17,456
61,009
78,465
40.66%
[6,237
60,592
76,829
40,02%
16,228 16,219 16,2iJ9
60,594 60,597 60,638
76,822 76,816 76,846
39.80"10 39.80% 3982%
16.198 16,188 16,178 16,168 [6,158
60,643 60,692 60,896 61,l13 61,346
76,842 76,881 77,074 77,28[ 77,504
39.61% 37.87'% 37.78% 31.70% 37.81%
270f36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan -2010
Economic Potential
Energy Pore no" (MWh) WI 6.l1li&111II1II ______ ." __ 1111 __
Residendol 41,878 34,095 34,077 34,060 34,039 34,018 33,998 33,978 33,957 33,937
Non-Residential 226,473 224,437 224,457 224,477 224,837 224,886 225,091 225,846 226,653 227,516
Total All Building. 268,351 258,532 258,534 258,536 258,876 258,9lJ4 259,089 259,824 260,610 261,453
Percent oCUlility Foreeast 27.62% 26.75'% 26.72% 26.6&% 26.69'% 26.20"4 26.15% 26.15% 26.15% 26.15%
Demond Potential (kW)
MeA A_ ''1''''_ 'II_~_.CZ·'FH.'W_
Residential 10,152 8,937 8,931 8,924 8,918 8,911 8,935 8,898 8,892 8,885
Non-Residential 57.015 56,598 56,601 56,603 56,644 56,650 56,6% 56,886 57,08') 57~06
Total An Buildings 67,167 65,535 65 1531 65,527 65,562 65,561 65,601 65,784 65,981 66,192
Percent of Utility Forecast 34.W}~ 34.13% 33.95"10 33.95% 33.970;[. 33.79% 32.32% 32.25% 32.19'10 32.Y'1o
Market Potential
Energy Piltential (MWh)
•• l1li11100•711'1'1711171111111 .. _.11II1II-11'111 •• 111UI!lIl_!fl_.!illlll_liIi~_'I_
Residential 1,5% 1,07iJ 1,220 1,378 1,553 1,625 1,552 1,4& 1,368 1,269
Non~:a.e5idential
Total Aililulidings
Pereent of Utility Forecast
Demand Potential (kW)
4,Q79
5,675
5,105 5,655 6,542 7,286 7,654 7,586 7,445 7,282 7,098
6,175 6,875 7,920 8,839 9,279 9,138 8,908 8,650 8,368
0.58% 0.64% O.71'Vo 0.82% 0,91% 0.94% 0.92010 0.90% O.8~10 0.84%
:'liiM ;.~A;gi"". .:tn _WE e~lIfRJ_."
Residential 377 316 343 377 428 467 459 418 376 337
N()n~Resldentiai 1,000 1,261 1;398 1,611 1,778 1,863 1,858 1,839 1,812 I,m
Total All Dulldings 1,377 1,578 1,741 1,988 2,206 2,330 2,318 2,257 2,188 2,114
Pereent ofUtllity Foreeast 0.71% 0.82% 0.90% 1.03% 1.14% L2()01o 1.14% Ul% 1.07% 1.03%
280f36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan -2010
APPENDIX C: PROGRAM SCREENING TESTS & DESIGN CONSIDERATIONS
Cost-Effectiveness Testing and Perspectives
The primary aim of cost-effective energy effieiency programs is to reduce utility cost and hence
customer bills while improving the environment. It is worth noting, that though customer bills
for those who participate in programs will be reduced, the retail rate will tend to increase as
distribution system related fixed cost are spread over a smaller volume of energy sales. Thus,
non-participants ean expect to have higher utility bills.
'What is cost-effective depends on perspective. The five perspectives most commonly used in
efficiency program cost-effeetiveness testing are:
I. Participant: An energy efficiency measure that provides net savings to a custcmer is
cost-effective for them as a "participant".
2. Utility: A measure that lowers overall cost for the utility is cost-effective for the
utility (also referred to as "Program Administrator"). For CPAU, this
could also be considered the "all ratepayers test" or "average utility bill
test", as it reflects the change in the utilitY bill to the average customer.
Supply-funded ineentives should pass this test to be considered cost
effective.
3. Total Resource: If the combination of the utility and all customers together save money, it
is cost-effective from a "Total Resource Cost (IRC)" viewpoint. This is
the cost-effectiveness criteria that is required by the CEC and is used in
CPAU reporting.
4. Societal: If the commuuity as a whole is better off, including cost savings plus a
value assigned to environmental improvement or other public benefit, then
it is cost-effective from a societal vie"''Point. GHG adder was included in
the TRC in this assessment.
5. Non-Participant: Even if the bill for the average customer shrinks significantly, retail rates
could increase slightly, so that customers who do not reduce consumption
could see a slight increase in rates and therefore bills. This effuct is due to
the portion of retail rates that must be collected to pay for fixed costs. For
this reason it is important to design diverse programs to be widely
available in order tc facilitate efficiency implementation in as broad a
manner as possible.
The eash flows and relevant costs and benefits that go into calculating benefit-cost ratios from
these different perspectives are illustrated below:
290f36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan -2010
• Participant Cost Test (PCT)
I Does the participant save money?
i Utility Cost Test (VCT) -Average Bill
! Are utility revenue requirements lowered?
• Total Resource Cost Test (TRC)
, Sum of Participant + Non-participant
Are total' lowered?
Societal Cost Test (SCT)
Do total societal benefits exceed the costs?
Rate Impact Measure (RIM)
Also known as non-participant test
Are utility rates lowered?
Measure Cost
Incentive to Customer
Program Delivery Cost
Measure Cost
Program Delivery Cost
Measure Cost
Program Delivery Cost
Lost Revenues (=Bill
Savings)
Incentive to Customer
Bill Savings
, Tax
Avoided Supply Costs
A voided Supply Costs
Tax Savings
Supply Costs
Tax Savings
Avoided Supply Costs
Figure Cl: Ener~'VInvestmeDt Cost and Benefit Flows
~
Program vendors "':'.
and in-house ,. ;;~~~ II
Company
t t
l'rOQram Cost Measure Cost
Avoided
_ Cost !t'
Savings
Electric Grid
(/::::;''''''';; .
::' CPAU
: !
:: ! , .
" " " ~ " Other :: i
Cost : i i
-Savings -i1~j!+
."" ""'" """'" """ ''''';::;~~~~;::;'::;;:'f;;L;;;C;,:-;;:~;,,::. \,
, ! l' ~ \
d Tax
Ii Savings
Incentives, ! )
Bill Savings -+-t~ .... • Iii I
L0!11 Net Revenue = ~
Participant Bill savm~ -
i
Utility Net ......;..
Cost Savings .
\ Pal1:icipant j ~ '"" . "", Nori~participirits \ '
jl
:",\" Total Resource Cost "Rate Impact )1/ '
Environmental. .-... .................... -----............... ;'" ,.,""., ' .. "".' ,.,:::;:/ ,
Benefits -·":-,-.-._-_·~ ..... _ .... _.§~~J~!~LG.()~L ... _ ....... ___________ ." .. H ___ ' ./
Total Resource Cost reflects the financial perspective of the Palo Alto community as a whole,
The Utility Cost, Participant, and Rate Impact perspectives should be balanced to ensure lower
average bills and sufficient incentives to aehieve participation, but not set so high as to
encourage free riders, to prevent any undue burden on non-participating customers, and to
promote equity,
300f36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan -2010
Efficiency Ptogram Design and Screening Criteria
Staffwill continue to use the following standards when evaluating specific efficiency programs:
• The Total Resource Cost (TRC) perspective for ranking energy efficiency measures and
contrasting energy efficiency investments with supply alternatives from a community
standpoint. This is the required perspective to use when reporting to the CEC and
comparing with other utilities.
• On the supply side, avoided costs include energy, transmission and distribution costs, line
losses, reserve capacity, and externality cost.
• Program portfolio design and incentive levels that produce a group of programs under a
TRC limit and consider. customer equity.
• The Utility Cost, Participant, and Rate Impact perspectives are reviewed to maintain
lower average bills with sufficient incentives to achieve participation, but not so much as
to encourage free riders, to prevent any undue burden on customers, and to promote
eqnity.
• Since there .wiII be participants and non-participants for anyone program, CPAU will
develop a portfolio of programs to allow as many people as possible to participate in
some, but not all, programs.
• CP AU needs to explore the threshold for permissible rate impacts. Palo Alto City Council
has already established an acceptable rate impact that defmes how much may be spent for
renewable supplies; the same may be able to be done for efficiency, in which case, CPAU
could roll this issue into a LEAP update.
• CPAU's Rate Assistance Program (25% discount on electric and natural gas utility bills
for low-income participants) serves customers for whom efficiency could be most
profitable for CPAU, because the lost revenues and potential rate impact would be
diminished, while promoting equity. All recipients of this program are required to
participate in the efficiency direct install energy efficiency program for low-income
customers, the Residential Energy Assistance Program (REAP). These customers receive
free lighting upgrades, weatherization, and other energy saving measures. In addition,
refrigerators and furnaces can be repaired or replaced, if needed. This reduced the total
utility bill cost to these customers, as well as the cost to other ratepayers for subsidizing
this discount.
• Include a greenhouse gas adder when computing avoided cost.
• Staff will continue to educate and engage the public and City Council about these
impacts. Council guidance is nceded for cost-effective efficiency program design, based
on criteria that are simple, clear and measurable, based on total budget, rate impact, and
other factors.
310f36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan -2010
APPENDIX D: HISTORICAL PERSPECTIVE OF CITY AND STATE DRIVERS OF
ENERGY EFFICIENCY
CPAU's electric energy efficiency programs were first modified in 1996 with the passage of AB
1890, the electricity restructuring bill, which established a minimum percentage of electric
revenue (2.85%) to be collected and spent in four categories identified as Public Benefits:
1. Cost-effective energy efficiency;
2. Research, development and demonstration in efficiency technologies;
3. New investments in renewable energy; and
4. Low-income programs.
. .
The key California state legislation driving the CPAU's energy efficiency program design and
implementation are SB 1037 (2005) and AB 2021 (2006).
• SB 1037 established a "Loading Order" for electric power resources, specifying a
preference hierarchy of:
1. Energy Efficiency and Demand Reduction;
2. Renewable Energy Supply; and then
3. Conventional Power Supply.
This hierarchy is reflected in the Council-approved Long-term Electricity Acquisition
Plan (LEAP) Objectivcs and Guidelines, most recently updated in March 2007. The City
has been complying with this bill by annually reporting to the CEC and public on the
energy efficiency programs and achievements. The reports summarizing the actual
achievement in the past two years have been included in the body of the 20 I 0 plan.
• AB 2021 added new and very specific long-tenn planning, reporting, review
requirements with specific deadlines, and a requirement to "treat efficiency as
procurement investments ... without regard to previous minimum investments,"
highlighted in the graphic below.
32 of 36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan -2010
Figure D 1: California ener [V efficiency lelrlslation has continued to evolve over the past decade
l AB 1890 II SB 1037 AB 2021
· (1996) . i (2005) (2006)
I '
Public Benefits = 2,85% I First acquite all avail!tb!e --t+ Same
.. Cost-effective energy I energy efficiency and demand I d ' 1 O-year plan eve ry 3 ye a fa
efficiency re ucbon " I • First due to CEe September 1, 2007
• Renewable energy I : RC.QI~,.t·b·lf.feCtiVe ,I • Identlfy all energy efficiency potential
• Low-Income Assistance E t bl" hIt t • Research & Development i .. Feasible : • S. a IS ennue: arge,s .. . . • Without regard to preVliJUS mmH11um ~~-~.~,,---.. -..... """'-,."'"'------Report annually to custom;;;----r-investments .
and CEe ..... I ~ Treat as procurement Investments
• Programs I Report t~rget5 t,o CEe within 60 days of
• Expenditures 1 CounCil ado phon of plan
• Expected and actual energy Report annually to its customers and CEC
Invest in Pul)lic Good savings results 'I • Programs ~·I~~~~~n·d·~.p~~-··----' : ~.~J;t:::::::~~al.n.,gy savings
• Methodologies and anum ptions
• Independent M&V evaluation
eEC 10 include in IEPR and provide
recom m endations
Invest and Report in s Specific Way
California legislation is only one of many reasons to enhance CPAU's energy efficiency
programs with renewed vigor. Numerous policies and regulations, ranging from the Federal
Energy Policy to CPAU's electrie utility long-term resource implementation plans provide
additional impetus. The main motivating polices and regulations that are relevant to energy
efficieney are outlined below.
I. Long-term Electric Acquisition Plan (LEAP)
a. Guideline I: Resource Loading Order
Manage a supply portfolio comprising locally selected and joint action cooperative
purchases, with the following preference hierarchy for resource acquisition:
A. Efficiency
B. Renewable supply
C. Local ultra-clean distributed generation
D. Conventional supply
b. Guideline 7: Electric Energy Efficiency and Demand Reduction
A. Fund innovative programs that promote and facilitate deployment of all cost~
effective, reliable and feasible encrgy efficiency and demand reduction
opportunities as high priority resources.
B. Use a community-wide perspective in program evaluation criteria.
C. Use a bill reduction (utility cost) perspective in program funding criteria.
D. Promote equity by designing and making programs available to all customers
c. Guideline 8: Climate Action Plan .
As part of the City's commitment to develop and implement an action plan to reduce
greenhouse gas emissions, develop and implement a Climate Action Plan relating to
utility activities.
330f36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan -2010
A. Consider all of the Mayor's Green Ribbon Task Force utility-related
recommendations.
B. The plan shall be consistent with the California Municipal Utilities Association
Greenhouse Gas Reduction Principles.
C. Take actions to meet ICLEr Cities for Climate Protection Campaign milestones.
D. Coordinate with and support Climate Action Plan efforts of other departments.
2. City Policies
a. Comprehensive Plan
i. Policy N-44: Maintain Palo Alto's long-term supply of electricity and natural gas
while addressing enviromnental and economic concerns.
ii. Policy N-47: Optimize energy conservation and efficiency in new and existing
residences, businesses, and industries in Palo Alto.
b. Sustainability Policy and detennination that 'Environmental Protection' is one of Council's
top priorities.
c. Climate Protection Plan (December 2007) goals to reduce greenhouse gas emissions.
d. CMUA GHG Principles: Greenhouse Gas reduction principles for publicly-owned
electric utilities endorsed by Council in August 2006 (CMR:315:06).
e. NAPEE MOU: National Action Plan for Energy Efficiency Memorandmn of
Understanding endorsed by Council in August 2006 (CMR:316:06)
3. Legislative and Regulatory
a. SB 1037 (2005) Loading Order [efficiency first, then renewables, then conventional
supply]
b. AD 2021 (2006) -Energy Efficiency [specific planning, funding and reporting
requirements]
c. SB 1 (2006) Million Solar Roofs [includes energy audit requirements for solar rebates]
d. AB 32 (2006) Global Warming Solutions Act [sets State targets for GHG reduction to
1990 levels by 2020 and establishes mandatory reporting requirements for utilities]
e. SB 1368 (2006) Greenhouse Gas Limits On Long-Tenn Baseload Electricity Contracts
[baseload electric contracts 5 years or longer or baseload facilities to have greenhouse gas
emission no greater than a reference combined cycle natural gas generator]
f. SBl07 (2006) Accelerated Renewable Portfolio Standard [moves 20% target to 2010,
new reporting requirements for publicly-owned utilities, procurement plans to achieve
efficient use of fossil fuels]
4. Federal Energy Policy Act of 2005 (new requirements for energy efficiency, tax incentives
(Title 13) and time-differentiated retail rates.
340f36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan -2010
AB1890:
AB2021:
AB32:
APPA:
BIG:
CEC:
CFL:
CIEEP:
CMUA:
CPAU:
CPUC:
C02e :
CPP:
CW:
CY:
DEER:
DSM:
8:
EE:
EECBG:
EEFP:
EPAct:
FY:
GHG:
GRTF:
GULP:
GWh:
HPS:
HVAC:
IOU:
IRR:
kWh:
LEAP:
LEED:
APPENDIX E: GLOSSARY OF ABBREVIATIONS AND TERMS
California Electric Restmcturing Bil1/Deregujation (1996)
California Energy Efficiency Bill (2006)
California Global Warming Solutions Act (2006)
American Public Power Association
Build-It Green (green building rating system)
California Energy Commission
Compact Fluorescent Light
Commercial & Industrial Energy Efficiency Program
California Municipal Utilities Association
City of Palo Alto Utilities
California Public Utilities Commission
Carbon Dioxide Equivalent
Climate Protection Plan
. Clothes Washer
Calendar Year
California Database for Energy Efficient Resources
Demand Side Management
Energy & Environmental Economics Inc. (energy efficiency program
design software contractor)
Energy Efficiency
DOE-sponsored Energy Efficiency & Conservation Block Grant
Energy Efficiency Financing Program
U.S. Energy Policy Act
Fiscal year
Greenhouse Gas (main six are carbon dioxide, methane, nitrous oxide,
chlorinated fluorocarbons, and sulfur hexafluoride)
Palo Alto Mayor's Green Ribbon Task Force
Gas Utility Long-tenn Plan
Gigawatt-hour, equivalent to one million kWh
High Pressure Sodium streetlights
Heating, Ventilation and Air Conditioning
Investor-Owned Utility
Internal Rate of Return
Kilowatt-hour
Long-tenn Electric Acquisition Plan
Leadership in Energy & Environmental Design (green building rating system)
35 of 36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan -2010
LED:
MMBtu:
MPR
MWh:
NCPA:
NTGR:
PAC:
PCT:
PV:
PLUG-In:
POU:
RECO:
RIM:
REAP:
RMI:
SBl:
SB1037:
SBI07:
SB1368:
SCT:
Tonne:
TPY:
TRC:
UAC:
UCT:
UMS:
Light-Emitting Diode Light
One million BTUs, equivalent to 10 therms
Market Price Referent
Megawatt-hour, equivalent to one thousand kWh
Northem California Power Agency
Net-to-gross Ratio
Program Administrator Cost test
Participant Cost Test
Photovoltaics
. CPAU's local ultra-clean distributed generation incentive program
Publicly-owned Utility
Residential Energy Conservation Ordinance
Rate Impact Measure test
Residential Energy Assistance program
Roeky Mountain Institute
California Solar Roofs Bill (2006)
California Loading Order and Energy Efficiency Bill (2005)
California Ac~elerated Renewable Portfolio Standard Bill (2006)
Califomia Greenhouse Gas Limits on Baseload Electric Contracts and
Facilities Bill (2006)
Societal Cost Test
One metric tonne, equivalent to 1000 kilograms or 2,205 pounds
Tonnes per year
Total Resource Cost
Utilities Advisory Commission
Utility Cost Test
Utility Marketing Services within CPAU
360f36
ATTACHMENT C
EXCERPTED FINAL MINUTES OF UTILITIES ADVISORY COMMISSION
Special Meeting of March 9, 2010
NEW BUSINESS
ITEM 1: ACTION ITEM: Ten-Year Electric Energy Efficiency Plan
Assistant Director Jane Ratchye reminded the Commission that this Plan had been brought to the
UAC in February and that, based on comments from the UAC at that time, no changes have been
made to the goals or recommendations in the final report.
Commissioner Berry asked why additional UMS staffing was not being requested now during the
budget process. Utilities Director Valerie Fong said that staffing increases, probably through
temporary or hourly staff, could be requested in the mid-year budget process. Ratchye added that
there would be more funds in the budget for supply-funded Demand Side Management (DSM)
activities, and some of the funds could be used to implement programs or develop contracts with
third party vendors.
Commissioner Keller asked for a fuller explanation on how the increased funded for DSM projects
would impact rates. Ratchye responded that the amount for Energy Efficiency (EE) would be going
up over a 10-year period, which would be a greater cost than would have been expended
otherwise. This would increase retail rates by five to seven percent more than would have
otherwise been the case. On the other hand, participants in the program would reduce their usage,
resulting in a lower utility bill for these customers. The average effect between the Increasing retes
and the reduced usage would cause an average impact of an increase of one to two percent
overall. Commissioner Keller wondered if bills could go down for all customers. Ratchye
responded that nonpartiCipants would have increasing utility bills, as the rates would be going up.
She added that the programs are evaluated for cost effectiveness from a system wide (or Total
Resource Cost perspective), not from an individual utility customer perspective. Fong added that if
rates are higher and a customer's consumption does not decrease, that customers utility bill will go
up.
Chair Melton wondered at the graphs showing that the potential for electric efficiency is primarily in
lighting. Utility Marketing Services Manager Joyce Kinnear responded that lighting is by far the
most cost effective EE opportunity for most customers.
Commissioner Waldfogel expressed a concem in taking allocated supply resource dollars to pay
for more staffing. Kinnear pointed out that in the current budget, supply resources have been
paying for rebates in the solar photovoltaic (PV Partners) program, while Public Benefit Funds have
paid for staffing and the increased contracting requirements necessary for increasing reporting and
verification requirements imposed by the state. Fong noted that the way these programs can ramp
up is with more staffing to execute the programs and manage contracts. She added that these
programs are labor-intensive to run.
Commissioner Keller expressed a concem that the report did not mention water rebates, She
further asked how rebates for such appliances as hot water heaters are dealt with in the programs.
Kinnear responded that this report is on energy efficiency programs, so water rebates are not
included. She added that water heaters are considered to be natural gas efficiency measures,
since natural gas heats the water, Therefore, these rebates are paid through the natural gas
program.
Commissioner Waldfogel again expressed his concemed that, while he is fine with supply funds
paying for capital or commodities, he is concemed about these funds paying for headcount. Chair
Melton pointed out that he felt the report was unclear on where the funds would come from to pay
for this staffing. Fong said that the supply budget pays for staff to schedule and purchase
commodities, She further pointed out that all transactions in the Utilities Department require
human effort to implement and complete, programs. Waldfogel said that staffing is a small
percentage of total cost in supply budgets, but a greater percentege in the marketing budgets.
Fang said that the Northem California Power Agency's (NCPA's) power management cost and
bond refinancing costs should also be counted as staffing costs in supply. NCPA's activities in
managing resources make the City's staffing costs for supply activities look small.
Chair Melton pointed out his concern that an increase in budget of $1.2 million from supply would
go to fund marketing staff. Fong said that the marketing staff members are procurement staff
they procure energy efficiency. Just as the resources staff procures commodities, the EE staff
procures efficiency resources. Waldfogel said that the percentage of staffing costs is higher in
marketing than is the case in the supply areas. Kinnear explained that while the average
commodities contract may have six counter-parties, DSM programs have 25,000 counter-parties,
In addition, a DSM contract of $100,000 requires nearly the same effort to complete the purchase
process as does a several million dollar contract for supplies. There are many more moving parts
in the efficiency area, and it is more costly to staff these areas. Commissioner Eglash summed up
the conversation by stating that the EE programs are cost effective, but require more staffing to
Implement. Kinnear agreed.
ACTION: Commissioner Keller made a motion to recommend that the City Council approve the
proposed 2010 10-Year Electric Energy Efficiency Plan. Commissioner Ameri seconded the
motion. The motion passed unanimously (6-0).
EXCERPTED DRAFT MINUTES OF FINANCE COMMITIEE
Regular Meeting of April 6,2010
ATTACHMENT D
Chair Schmid called the meeting to order at 7:10p.m. in the Council Chambers, 250 Hamilton Avenue,
Palo Alto, California.
Present: Schmid (Chair), Espinosa, Klein, Scharff
Absent: None
6. Utilities Advisory Commission Recommendation that the City Council Approve the 2010 Ten-Year
Electric Energy Efficiency Plan
Assistant Director Jane Ratchye presented the Ten-Year Electric Energy Efficiency (EE) Plan. Ratchye
first stated that state law requires municipal utilities such as Palo Alto's to develop 1 O-year electric EE plans
every three years and submit the plans to the Califomia Energy Commission. In addition, the Council
approved Climate Protection Plan relies on energy efficiency to meet the greenhouse gas (GHG) emission
reduction goals. Ratchye explained that the first Ten· Year Electric EE Plan was adopted by Council in
. 2007 and that plan had a goal of reducing electric energy use in the City by 3.5% by 2016. The annual
savings goals established in the 2007 EE Plan were exceeded for fiscal years (FYs) 2008 and 2009 and
are projected to be exceeded for FY 2010.
Ratchye stated that the development of an EE plan first requires the establishment of the amount of, or
potential for, energy savings in the City. The City partnered with other municipal utilities that are members
of the Northern California Power Agency (NCPA) to engage a consultant to develop a model to assess the
EE potential. The model first detenrnines how much EE savings could occur (the '1echnical potential"), then
the measures that are cost-effective (the "economic potential"), and then, finally, the amount of EE savings
that can be achieved (the "market potential"). Ratchye showed the model results: technical potential EE
savings of 27%, economic potential savings of 26% and the market potential of 7%.
Ratchye explained that there are many reasons that the market potential is only 7% and not closer to the
26%, which is determined to be cost-effective. There are many barriers to achieving all of the economic
potential including the fact that some equipment continues to work long after ils expected lifetime and
owners are reluctant to replace working appliances or equipment. In addition, customers are faced with
competing uses for their financial resources. Finally, not all customers have the information or are willing to
make a change and there are many behavioral or preferences that result in people not choosing to
purchase and install the most energy efficient technologies. Based on these known barriers, the EE targets
must be set to be realistic and achievable.
Ratchye explained that the EE savings that are allowed to be counted are prescribed and only include the
difference between the amount of energy that would be consumed by a new, standard efficiency device
and a higher efficiency version of the device. Ratchye used the example of the energy use of a refrigerator
to explain the concept. A 20·year old refrigerator uses about 1,500 kilowatt-hours per year (kWhfyr) while a
new standard refrigerator uses 600 kWhfyr and a new high efficiency model uses 400 kWh/yr. The amount
of energy savings that can be counted for the EE Plan goals is only 200 kWh/yr, or the difference in energy
use between the standard and high efficiency models.
Ratchye discussed a graph showing the cumulative EE goals in the proposed 2010 EE Plan and pointed
out that the bulk of the savings come from commercial customers since residential customers make up only
about 20% of the total electricity used in the City. Ratchye stated that lighting measures provide the bulk of
the EE savings in the proposed plan, for both commercial and residential customers.
Ratchye noted that additional expenditures for EE would be needed to achieve the higher goals in the
proposed 2010 EE Plan. She explained that state law requires the utility to collect a fraction of total
revenue for Public Benefits programs. These funds can be used for cost-effective EE programs, new
renewable energy, research and development projects, and low-income assistance programs. About $1.8
million of the Public Benefits funds are allocated to EE programs. However, to meet the new goals,
additional funds will come from supply resource funds to reflect the City's stated goal and practice of
prioritizing EE as the first priority energy resource. The City understands that EE is the best way to meet
energy demands as it has the lowest environmental impact and is the cheapest, especially when compared
to the cost of renewable power.
Ratchye explained that implementing EE programs will result in .a rate impact for two reasons. First, the
cost of the programs must be recovered by rates and second, since energy usage goes down, the fixed
costs of running the utility are spread over fewer kWh sold. At the same time, there are savings in costs
from having to buy less energy. Overall, the rates are expected to increase by about 5-7% by 2020, but the
average bill will decrease by about 1 % by 2020.
Ratchye explained that the Utilities Advisory Commission (UAC) reviewed the 2010 EE Plan. In
accordance with the August 2009 Council direction for staff to work with the UAC to review efficiency and
renewable supply policy and plans, in November 2009 the UAC reviewed the methodology staff proposed
to use when developing the EE Plan. The UAC supported staff's plan to compare the cost of EE with the
cost of renewable energy supplies. In February 2010, the UAC reviewed the draft 2010 10-year Electric EE
Plan and in March 2010, the UAC unanimously recommended that Council approved the plan.
Ratchye ended by summarizing the proposed 2010 10-Year Electric EE Plan. The plan sets incremental
savings goals for each year -for FY 2011, the savings goal is to achieve 0.6% of the projected annual
energy use. The plan also sets a cumulative savings goal of 7.2% of projected annual energy use by
2020. In addition, the plan provides an estimated cost to achieve the goals -continued use of about
$1.8milion per year of Public Benefits funds supplemented by supply resources funds. The exact amount
requested every year will be established in the annual budget process.
Council Member Espinosa pointed out that the City of San Francisco has been engaged in a green initiative
to provide incentives for Energy Efficiency. He asked about whether other municipalities or utilities have
had a focus on residential appliances. Utilities Marketing Services Manager Joyce Kinnear responded that
refrigerators are the appliances with the greatest potential for savings, both for recycling older, still working
units and for purchasing new, high efficiency models. She stated that nearly all utilities offer similar rebates
for both of these programs. On further questioning by Espinosa on whether any utilities have emphasized
refrigerators through greater incentives, Kinnear replied that most programs are similar. For example, in
Santa Clara residents are required to recycle an old refrigerator before receiving a rebate for a new one,
and that Alameda had slightly different requirements for recycling.
Council Member Kiein asked how much a resident would save by purchasing a new refrigerator. Ratchye
explained the difference between a 20-year old refrigerator (using an estimated 1,500 kWh per year). the
energy requirements of a standard new refrigerator (600 kWh per year), and a new high efficiency model
(400 kWh per year), She explained that a resident purchasing a new high efficiency model would show
1,100 kWh per year of savings, but that the utility could only report 200 kWh per year of savings, The
resident's payback would be about 6,5 years, including the utility's $50 rebate,
Council Member Scharff asked if the City is saving energy and not just requesting the businesses and
residents save energy and asked about the Light Emitting Diode (LED) streetlight replacement program,
He wanted to know how efficient the current lights and a comparison with the new lights, Ratchye replied
that the current High Pressure Sodium (HPS) lights are more efficient than some, but that the new LED's
will be even more efficient The City has received a federal government stimulus grant to replace about
600 of the City's 6,300 streetlights, A few of these new lights are currently being tested in the block around
City Hall and at other locations throughout town,
Council Member Scharff requested an update on the LED pilot project Resource Planner Christine Tam
reported that LED lights save about 40% of the energy used by HPS lights, Considering the high upfront
cost. lower energy usage, and less maintenance requirements, the payback to the City is about 10 to 14
years. She noted that the City's cost for electricity is less than retail at about 8 cents per kWh, Utilities
Director Fang added that the lights operate only at night and not during peak periods, which is part of the
reason that the payback is so long, In addition, the street lights currently use only about 0,4% of the City's
total electricity usage so the savings will not have a huge impact on the City's electricity usage,
Chair Schmid asked why cost-effective efficiency measures are about 27% of the Utility's electric load, but
only 7% is considered possible in a 10-year horizon. Ratchye responded that getting to 27% would require
replacing the same measures, but just many more of them. She reviewed a list of the top 15 efficiency
measures for commercial customers, Schmid added that a change in incentives might make a difference
and increase efficiency, Since energy efficiency is most cost-effective, WOUldn't an increase in incentives
result in more savings? Kinnear explained that there are many factors that go into an efficiency upgrade,
Many behavioral issues explain why purchases are made even if they are cost-effective, The research is
very mixed on whether increaSing incentives actually result in additional efficiency results, Schmid stated
that renewable energy is very expensive and energy efficiency should be integrated with renewable energy
programs, Ratchye explained that the measures are cost-effective in that they cost less than the supply
side alternative and that the rebate amount does not figure into the calculation, Increasing incentives to a
high degree would require that costs would go up for all utility customers to pay for these incentives,
Schmid returned that the householder who implemented the measure with a greater rebate would benefit
from the program and suggested that staff look more thoroughly at integrating EE potential and renewable
energy purchases,
MOTION: Council Member Espinosa moved, seconded by Council Member Klein to recommend that
Council approve the City Council Approve the 2010 Ten-Year Electric Energy Efficiency (EE) Plan for the
period 2011 to 2020.
MOTION PASSED 4-0