HomeMy WebLinkAboutStaff Report 1356City of Palo Alto (ID # 1356)
Finance Committee Staff Report
Report Type:Meeting Date: 3/1/2011
March 01, 2011 Page 1 of 6
(ID # 1356)
Title: Proposed Ten-Year Gas Energy Efficiency Goals
Subject: Proposed Ten-Year Gas Energy Efficiency Goals
From:City Manager
Lead Department: Utilities
Recommendation
Staff and the Utilities Advisory Commission (UAC) recommend that the Finance Committee
recommend that the City Council approve the proposed ten-year gas energy efficiency (EE)
goals for the period 2011 to 2020.
Executive Summary
The attached report describes the process used to update the gas efficiency goals for the next
ten years that were last updated in 2007. In 2007, the ten-year goal approved by Council was
to reduce gas usage by 3.5% by 2017. The updated ten-year goal is to reduce gas usage by 5.5%
by 2020. More resources will be required to achieve this goal, which is more than 50% higher
than the previous 10-year goal.
The next step is the development of the gas and electric EE Implementation Plan, which is
expected to be complete in the Spring of 2011. That plan will contain more details on the
programs that will be implemented to achieve the EE goals and the cost of those programs.
Background
The City Council approved the 2007 Ten-Year EE Plan (2007 EE Plan) in April 2007 (CMR:216:07)
that established ten-year cumulative electric and gas efficiency goals of 3.5% by 2017. In
addition to the 10-year cumulative goal, the 2007 EE Plan established annual gas efficiency
targets for the City of Palo Alto (City).
Since the adoption of the 2007 EE Plan, annual gas savings have steadily increased each year.
However, the cumulative 3-year gas EE actual achievements for FY 2008 through FY 2010 were
lower than the goals set in the 2007 EE Plan. The table below provides a summary of the gas EE
goals and achievements for the past three years.
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(ID # 1356)
Table 1: Gas Efficiency Achievements for FY 2008-FY2010
FY 2008
(Actual)
FY 2009
(Actual)
FY 2010
(Projections)
3-Year Total
Gas Efficiency -Goals
Annual gas savings (therms)76,800 86,400 99,200 262,400
Percent of Annual load 0.25%0.28%0.32%0.85%
Gas Efficiency -Achievements
Annual gas savings (therms)35,237 88,028*106,479 229,744
Percent of Annual load 0.11%0.28%0.39%0.76%
* The gas efficiency savings in FY 2009 was originally estimated to be 146,028 therms. However, based on the
recently completed consultant’s evaluation of actual program savings, this number has been adjusted downward to
88,028 therms. Specifically, the originally assumed savings used in the replacement of steam traps at six dry-
cleaning facilities were higher than the verified savings.
Much progress has been made in expanding gas efficiency programs since 2007. In addition to
ongoing commercial and residential rebate programs, the City has contracted with third-party
vendors to deliver additional gas EE projects to customers. These include contracts with the
California Center for Sustainable Energy, which administers the Solar Water Heating program,
and Enovity, which administers the Commercial and Industrial EE Program targeting both gas
and electric efficiency opportunities for large commercial and industrial customers. A low-
income program to directly install equipment, appliances and materials such as weather
stripping was in place prior to 2007.
Discussion
Every three years, the City updates the ten-year EE goals. The Council adopted new ten-year EE
goals for electricity in May 2010 (CMR: 218:10). The attached report describes the process used
to develop the updated EE goals for natural gas and provides a recommendation for updated
annual gas efficiency targets for the period from 2011 to 2020.
This process to develop the updated goals begins with the consultant’s re-evaluation of the
energy saving opportunities. Such opportunities typically assume physical, long-lasting changes
to buildings and equipment that result in lower energy usage. First, the potential for gas energy
savings is estimated based on gas efficiency measures that are presently available commercially.
Then, the portion of “cost-effective” gas savings potential is determined by screening out the
non-cost-effective gas efficiency measures. Finally, staff proposes annual efficiency targets that
take into account customer awareness and willingness to adopt efficiency measures based on a
reasonable and feasible timeline.
Forty gas efficiency measures –19 residential and 21 commercial –were evaluated. The
maximum possible gas energy savings from these measures is estimated to be about 45% of the
total gas usage in the City. However, not all of the measures are cost-effective. The total
March 01, 2011 Page 3 of 6
(ID # 1356)
amount of gas savings that would accrue if all cost-effective measures were implemented is
about 34% of the City’s gas usage.
Based on these results and the City’s success to date in implementing gas efficiency measures,
the recommended updated gas efficiency goal is to reduce the City’s gas usage by 5.5% from
gas efficiency measures by 2020. This is an increase of over 50% from the ten-year gas
efficiency goal set in 2007. Within both the residential and commercial sectors, more than half
of the savings potential comes from space heating equipment and building shell improvements.
Figure 1 below shows the proposed new annual goals for the period 2011 to 2020 compared to
the annual goals set in 2007 and the actual achievements for FY 2007 through FY 2009.
Figure 1
Actual and New Annual Gas EE savings
0.11%
0.28%
0.39%
0.40%
0.45%
0.50%
0.55%
0.60% 0.60%
0
40
80
120
160
200
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
'000 Therms
Percentages represent EE savings relative to load
Actual
New
Gas EE targets from 2007 Gas Efficiency Plan
Additional resources beyond what was used in the last three years will be required to achieve
these new higher proposed goals. Figure 2 shows the actual gas EE program expenditures for FY
2008 through FY 2010, and the projected program expenditures to achieve the proposed gas
efficiency goals. Note that the total expenditures in FY 2009 included a one-time set up cost for
the solar water heating program. These projections will be further developed with the EE
Implementation Plan, which is expected to be presented in the Spring of 2011 to the UAC.
Figure 2
March 01, 2011 Page 4 of 6
(ID # 1356)
Actual and Projected Annual Gas EE Program Expenditures*
$0.3
$0.5
$0.6
$0.7
$0.8
$0.9
$1.0 $1.1 $1.1 $1.2 $1.2 $1.2
$0.5
$-
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
$1.4
$1.6
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Millions
Actual
Projected
* includes Solar Water Heating program costs
Retail Rate and Bill Impacts
Energy efficiency is an investment that returns savings over a 10-to 20-year period, depending
on the useful life of the EE measure. To meet the proposed ten-year gas efficiency goals, the
program costs are expected to result in retail rates that are 4% to 5% higher by 2020 compared
to retail rates if no gas EE programs were in place. However, despite the higher retail rates,
average customer bills will decline since the measures selected for implementation are cost-
effective. While participants in programs will see their bills decline, non-participants will see bill
increases.
Greenhouse Gas Emissions Reductions
The City’s 2007 Climate Protection Plan (CPP) includes an annual carbon dioxide (CO2) emissions
reduction target of 7,300 tonnes for gas efficiency programs and 1,500 tonnes for solar water
heating by 2020. The proposed ten-year gas efficiency targets, combined with the actual gas
efficiency savings since FY 2008, are projected to reduce GHG emissions by 10,200 tonnes per
year in 2020, thereby exceeding the CPP target.
Timeline
An EE Implementation Plan will be developed to meet the EE targets for both gas and electricity.
It will include the results of a current solicitation for new program ideas to be administered by
third parties. Once program proposals are received and evaluated, staff will recommend that
the City Council approve contracts for specific new EE programs. Upon approval, the programs
will be included in the implementation plan. The EE Implementation Plan will be presented to
the UAC in Spring 2011 after the solicitation process is complete. The EE Implementation Plan
will address the efficiency measures to be included in the programs, including both staff-
administered programs and those administered by third-party vendors.
March 01, 2011 Page 5 of 6
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Gas efficiency targets will be updated again in 2013. Gas efficiency equipment costs and actual
gas efficiency achievements between FY 2011 and FY 2012 will be taken into consideration at
that time when establishing new ten-year gas savings goals.
Commission Review and Recommendations
Staff provided a presentation on the proposed ten-year gas efficiency goals and the
methodology behind the estimated gas EE potential at the January 12, 2011 UAC meeting.
During the discussion, staff clarified that only efficiency savings above the City’s building code
requirements can be counted as achievements of the utility efficiency programs. The bulk of
the potential for gas savings is from improvements to space heating for residential and
commercial customers, followed by water heating. Staff confirmed that the proposed gas
efficiency goals are similar to those of the California Investor-Owned Utilities such as PG&E.
Commissioner Berry noted that unlike electric efficiency, which helps to avoid building new
generation and transmission equipment, the benefit of gas efficiency is limited to lowering
greenhouse gas emissions.
After discussion, the UAC voted 5-1 to recommend Council approval of the proposed gas
efficiency goals. Commissioner Melton opposed the motion given the challenging economic
environment that customers are currently facing. Instead, he supported maintaining the current
goals as opposed to increasing the goals and the EE program budget to meet the more
aggressive goals. The notes from the UAC’s January 12, 2011 meeting are provided in
Attachment B.
Resource Impact
Although this report contains preliminary estimates of the costs of achieving the proposed
updated ten-year gas EE goals, the EE Implementation Plan will contain further details, including
projected budgets and any additional staffing that may be required to process in-house rebates,
as well as to manage contracts for third-party administered programs.
Policy Implications
Approval of this recommendation conforms to the Council-approved Gas Utility Long-term Plan
(GULP) Guideline, which calls for the deployment of all cost-effective, reliable and feasible EE
and solar heating opportunities as high priority resources. The proposed gas efficiency goals
will also help achieve the Council approved greenhouse gas emissions 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.
March 01, 2011 Page 6 of 6
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This report was prepared jointly by Christine Tam (Resource Planner), Joyce Kinnear (Manager,
Utility Marketing Services) and Shiva Swaminathan (Senior Resource Planner).
Attachments:
·Attachment A: Gas EE Goals (DOC)
·Attachment B: UAC Minutes January 12, 2011 (PDF)
Prepared By:Christine Tam, Resource Planner
Department Head:Valerie Fong, Director
City Manager Approval: James Keene, City Manager
Page 1 of 17
2010 Gas Energy Efficiency Goals
Table of Contents
EXECUTIVE SUMMARY.............................................................................................................3
New Goals are Aggressive.........................................................................................................3
Goals Developed Using a Comprehensive Analysis .................................................................3
Detailed Implementation Plan is Being Developed...................................................................3
BACKGROUND.............................................................................................................................3
Purpose ......................................................................................................................................3
City Gas Consumption History..................................................................................................4
The 2007 Ten-Year Gas Energy Efficiency Goals and Achievements.......................................4
Gas Efficiency is Key Part of the Gas Utility Long-term Plan..................................................6
Gas Efficiency is Consistent with Climate Protection Plan.......................................................6
PROCESS........................................................................................................................................7
What are the Potential Gas Saving Measures?..........................................................................7
Profile of Palo Alto’s Gas Use.............................................................................................7
Gas Saving Measures Included in the Analysis...................................................................8
How Much Gas Savings Are Possible?.....................................................................................9
Which Measures are Cost-Effective?........................................................................................9
How Much Gas Savings Can Be Achieved From Utilities Programs?.....................................9
RESULTS......................................................................................................................................10
Summary of Achievable Gas Efficiency Savings ....................................................................10
Where Can We Get the Most Gas Savings?............................................................................11
Which Measures are Cost-Effective?......................................................................................12
Solar Hot Water Heating Systems...........................................................................................12
PROPOSED GAS SAVINGS GOALS .........................................................................................13
Proposed Annual Gas Efficiency Goals...................................................................................13
Proposed Ten-Year Gas Savings Goal ....................................................................................13
Greenhouse Gas Reductions....................................................................................................14
PROJECTED COSTS TO MEET THE PROPOSED GOALS.....................................................15
Gas Efficiency Program Costs Are Projected to Rise..............................................................15
Retail Rate and Bill Impacts....................................................................................................15
LIST OF APPENDICES................................................................................................................16
A.Cost-Effectiveness Tests for Energy Efficiency Programs............................................16
B.Gas Efficiency Measures ...............................................................................................16
C.Modeling Assumptions..................................................................................................16
D.Fuel Switching Analysis................................................................................................17
E.Sensitivity Analysis .......................................................................................................17
F.Solar Water Heating Program in Palo Alto ...................................................................17
G.Gas Efficiency Goals Comparison.................................................................................17
Page 2 of 17
List of Figures
Figure 1: Gas Usage –History and Forecast ...................................................................................4
Figure 2: 2007 Gas Savings Goals...................................................................................................5
Figure 3: Gas Uses of Commercial Customers................................................................................8
Figure 4: Gas Uses of Residential Customers .................................................................................8
Figure 5: Potential Gas Savings.....................................................................................................10
Figure 6: Gas Savings Potential by End Uses................................................................................12
Figure 7: Gas Savings –Historical Actual and Future Goals........................................................13
Figure 8: Cumulative 10-year Gas Savings...................................................................................14
Figure 9: Actual and Projected Gas EE Program Expenses .........................................................15
List of Tables
Table 1: Gas Efficiency Achievements for FY 2008-2010..............................................................5
Table 2: Estimated community-wide emissions and CO2 emissions reduction impacts of utility
program goals..................................................................................................................................6
Table 3: Potential Residential Gas Savings by End Use ...............................................................11
Table 4: Potential Commercial Gas Savings by End Use..............................................................11
Page 3 of 17
2010 Gas Energy Efficiency Goals
EXECUTIVE SUMMARY
New Goals are Aggressive
The best natural gas resource is cost-effective energy efficiency. By not buying natural gas, everyone
saves –gas consumers, the utility and the environment. Before making commitments to purchase gas
supplies, the City attempts to ensure that the gas consumption is the most efficient it can be. The
City has long had a large array of energy efficiency programs and has ramped them up in recent years.
In 2007, for the first time, the City adopted 10-year energy efficiency goals. Every three years, the
goals are re-evaluated. The goals set in 2007 were exceeded,and the proposed goals for the next 10-
years are higher still. The 10-year goal set in 2007 was to save 3.5% of the City’s gas use by FY
2017. The proposed new 10-year goal is to save 5.5% of the gas used in the City by FY 2020. This
aggressive goal is reflective of the Gas Utility Long-term Plan’s objective to “Ensure the deployment
of all feasible, reliable, cost-effective energy efficiency measures.”
The new proposed goals are based on updated technology and market parameters, as well as actual
efficiency achievements in the past three years. The cost to achieve the new aggressive goals will be
higher than it has been in the past for energy efficiency,as it gets harder to achieve new gas savings
every year.
Goals Developed Using a Comprehensive Analysis
The process used to evaluate the opportunities for gas savings involved several steps. First,40 gas
saving measures were identified. The total possible energy savings for each measure were evaluated
regardless of cost. This analysis concluded that a maximum of 45% of the City’s gas usage could be
saved if all measures were implemented by all customers. Second, the estimated cost of
implementing each of these measures was compared to the cost of buying natural gas. Measures that
are not cost-effective (i.e. avoided cost of gas is less than the measure implementation cost) are
screened out. The result of this analysis was that up to 34% of the City’s gas usage could be saved if
all cost-effective measures were fully implemented. Finally, based on actual program results to date
and projected customer awareness and willingness to adopt efficiency measures, a set of energy
savings goals over a ten-year period was developed.
Detailed Implementation Plan is Being Developed
An Energy Efficiency Implementation Plan is being prepared and is expected to be completed in the
Spring of 2011. That plan will contain details on the programs to be implemented as well as
program cost estimates and will discuss any other resources that may be needed to achieve the new
goals.
BACKGROUND
Purpose
This report provides the analysis to support staff’s recommendations for gas efficiency goals for 2011
Page 4 of 17
2011 to 2020 for the City of Palo Alto Utilities (CPAU). The purpose of this analysis is to evaluate
the opportunities for gas energy efficiency in Palo Alto and to establish a set of 10-year gas efficiency
goals. These goals will update the goals in the 2007 Ten-Year Energy Efficiency(EE) Plan approved
by the City Council in April 2007.
City Gas Consumption History
The City’s usage of natural gas is shown in Figure 1 below. The figure shows that gas usage has
declined from a peak in FY 1973 of about 45.6 million therms per year to usage in FY 2010 of about
31.8 million therms per year. Gas usage is projected to decline further due to the implementation of
gas efficiency programs to meet the proposed goals of 5.5% of the gas usage by 2020.
Figure 1: Gas Usage –History and Forecast
City of Palo Alto - Natural Gas Annual Usage
0
5
10
15
20
25
30
35
40
45
50
1971 1976 1981 1986 1991 1996 2001 2006 2011 2016
Fiscal Year
Million Therms/Year
actual forecast
New Gas Savings
from 10-year Goal
The 2007 Ten-Year Gas Energy Efficiency Goals and Achievements
The City Council approved the 2007 Ten-Year Energy Efficiency (EE) Plan (2007 EE Plan) in April
2007 (CMR:216:07) that established ten-year cumulative electric and gas efficiency goals of 3.5% by
2017. The primary aim of cost-effective EE programs is to reduce utility supply costs and hence
average customer bills while reducing the City’s carbon footprint.
In addition to the 10-year cumulative targets, the 2007 EE Plan established annual gas efficiency
targets for Palo Alto as shown in Figure 2. The total (cumulative) gas EE savings goal for the period
2008 to 2017 was 3.5% of annual gas load by 2017.
Page 5 of 17
Figure 2: 2007 Gas Savings Goals
2007 Ten Year Gas Efficiency Plan:
10-ye ar cumulative gas savings =3.5%
0.25%0.28%
0.32%
0.35% 0.36% 0.36%0.36%0.36% 0.36% 0.36%
-
40
80
120
160
200
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
'000 Therms
Percentages represent EE savings
relative to load
Since the adoption of the 2007 Ten-Year Gas Efficiency Plan,annual gas savings have steadily
increased each year. Table 1 provides a summaryof the EE goals, achievements and expenditures for
the past three years. The gas efficiency achievements include savings from the Solar Water Heating
Program.
Table 1: Gas Efficiency Achievements for FY 2008-2010
FY 2008
(Actuals)
FY 2009
(Actuals)
FY 2010
(Projections)
3-Year
Total
Gas Efficiency -Goals
Annual gas savings (therms)76,800 86,400 99,200 262,400
Percent of Annual load 0.25%0.28%0.32%0.85%
Gas Efficiency -Achievements
Annual gas savings (therms)35,237 88,028*106,479 229,744
Percent of Annual load 0.11%0.28%0.39%0.76%
Program Expenditures
Public Benefit funds $281,837 $418,684 $445,680 $1,146,201
Supplemental funds
(for solar water heating program)
$0 $89,870 $37,151 $127,022
Total Cost $281,837 $508,554 $482,831 $1,273,223
* The gas efficiency savings from FY 2009 was originally 146,028 therm. However, based on the recently completed
consultant’s evaluation of program savings, this number has been adjusted downward to 88,028 therms. Specifically, the
originally assumed savings used in the replacement of steam traps at six dry-cleaning facilities were higher than the
verified savings. The percentage of gas efficiency savings to annual load has also been reduced from 0.49% to 0.28%.
As a result of the adjustment, the three-year cumulative savings are below the goals.
Page 6 of 17
Much progress has been made in expanding gas efficiency programs since 2007. In addition to
ongoing commercial and residential rebate programs, the City has contracted with third-party vendors
to deliver gas energy efficiency projects to customers. These include contracts with the California
Center for Sustainable Energy, which administers the Solar Water Heating program, and Enovity,
which administers the Commercial and Industrial Energy Efficiency Program targeting both gas and
electric efficiency opportunities for large commercial and industrial customers. A direct install
program for low-income residential customers was in place prior to 2007.
Gas Efficiency is Key Part of the Gas Utility Long-term Plan
In August 2010, the Utilities Advisory Commission (UAC) recommended that the City Council
approve the updated Gas Utility Long-Term Plan (GULP) Objectives and Strategies with a focus on
balancing environmental and economic sustainability. The updated GULPStrategy #3 recognizes the
importance of energy efficiency as a resource.
GULP Strategy #3: Ensure the deployment of all feasible, cost-effective energy
efficiency measures by:
(a) Developing and implementing a ten-year gas efficiency plan every three years that
includes a reasonable carbon price premium for traditional gas supplies; and
(b) Considering the impact (costs, benefits, and GHG emissions) of substituting
electricity-using appliances for gas-using appliances and vice versa in the ten-year
gas efficiency plan.
Gas Efficiency is Consistent with Climate Protection Plan
The City’s Climate Protection Plan (CPP) adopted by Council in December 2007 (CMR: 435:07)
contained the table below, which summarizes the estimated community-wide 2005 CO2 emissions
from electricity and natural gas use, and projected 2020 emissions with impact of each major utility
program area for which quantitative estimates had been completed at the time of the adoption of the
CPP. The CPP establishes a goal to reduce the City’s CO2 emission to 90% of the 2005 level by
2020.
Table 2: Estimated community-wide emissions and CO2
emissions reduction impacts of utility program goals.
Electric
Metric Tons CO2/Year
Natural Gas
Metric Tons CO2/Year
Reference Year 2005 145,000 165,000
Base Case 2020
(load growth with no efficiency reduction)178,600 174,000
Efficiency -15,800 -7,300
Solar -3,800 -1,500
Mandatory Renewable Energy Supply -91,500 TBD
Voluntary Renewable Energy Supply -36,500 -16,400
Total In-Community Reduction -147,600 -25,200
Net In-City Emissions 31,000
(21% of 2005)
148,800
(90% of 2005)
Page 7 of 17
Electric
Metric Tons CO2/Year
Natural Gas
Metric Tons CO2/Year
Low-Carbon Supply
(net savings realized by state) -20,000 n/a
Net Emissions 11,000
(8% of 2005)
148,800
(90% of 2005)
As shown in Table 2, the total expected CO2 emissions reduction in 2020 from Utilities gas programs
is 25,200 metric tons (or tonnes). The projected CO2 emissions reductions for gas efficiency
programs were based on the 2007 gas EE targets. The CO2 emissions reductions estimate for solar
assumed that a solar hot water and space heating incentive program would be implemented consistent
with the California Solar Initiative and AB 1470, or 500 residential installations of solar water
heating systems. In addition, the estimates assumed 100 installations of residential solar pool heating
systems.
A voluntary renewable gas supply similar to the PaloAltoGreen program for electricity was also
assumed to account for a significant part of the CO2 emissions reductions attributable to gas utility
programs. However, the premium for renewable gas supplies was found to be too high to be
acceptable to customers. The Gas Utility Long-term Plan (GULP) Implementation Plan includes the
continued pursuit of reasonably priced non-fossil gas for a voluntary program.
PROCESS
The process of establishing a target for gas savings has several steps. The first step is to identify the
potential measures, i.e. physical, long-lasting changes to the building as well as more efficient
equipment, that result in lower gas usage. The potential for each of these measures to save gas is
estimated. Second, the cost-effectiveness of each measure is evaluated. This consists of estimating
the savings from not having to purchase gas supplies and the implementation cost of the measure,
which includes the EE program administrative cost. Finally, the fraction of the cost-effective gas
savings that can be achieved is estimated. Each of these steps is described in this section.
What are the Potential Gas Saving Measures?
Profile of Palo Alto’s Gas Use
Around 45% of the natural gas supplied to the City is consumed by residential customers, with
businesses consuming the remaining 55%. Space heating and water heating account for the bulk of
gas usage. Figure 3 and Figure 4 show how gas is used by commercial and residential customers
within CEC Forecasting Climate Zone (FCZ)4.
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Figure 3: Gas Uses of Commercial Customers within FCZ 4
Commercial Gas End Use Distribution
Heating,
38.5%
Cooling,
0.5%
Water
Heating,
34.6%
Cooking,
20.3%
Pr ocess,
5.7%Misc,0.4%
Source: Statewide Commercial End Use Study, California Energy Commission report, 2006
Figure 4:Gas Uses of Residential Customers within FCZ 4
Residential Gas End Use Distribution
Water
Heating,
48%
Space
Heating,
42%
Pool/Spa
Heating,
4%Clothes
Dryer, 2%
Range/
Oven, 4%
Source: Statewide Residential Appliance Saturation Survey, California Energy Commission report, 2010
If Palo Alto’s usage pattern mirrors that of Forecasting Climate Zone 4, then space heating and water
heating account for around 80% of the gas usage in the City. Thus, these two end uses are where the
bulk of the gas savings could accrue.
Gas Saving Measures Included in the Analysis
To help in the analysis, the City engaged a consultant to enhance the model that was developed for
members of Northern California Power Agency (NCPA) to evaluate the electric efficiency potential
for the 2010 Electric EE Plan. The model analyzed 40 gas efficiency measures –19 for residential
customers and 21 for commercial customers. These measures are listed in Appendix B and include
clothes washers, dishwashers, space heating equipment, improvements to the building shell (e.g. wall
and ceiling insulation, better windows), water heaters, low flow showerheads and faucets, pipe and
duct insulation, cooling equipment, and solar water heating equipment. Emerging technologies that
have not yet been widely commercialized or do not have reliable energy savings estimates were
excluded from the analysis.
Page 9 of 17
How Much Gas Savings Are Possible?
The total amount of gas savings that are possible if all of the identified measures are implemented is
equal to 13.8 million therms per year, or about 45% of the projected total citywide gas consumption
in 2020. The details of how much energy savings can be achieved by each measure is found in
Appendix B.
The total amount of energy that can possibly be saved is also called the “technical potential.”
Technical potential represents the amount of energy efficiency savings that could be achieved if
economic and market barriers did not exist. It takes into account the energy savings of efficiency
measures (or equipment), the quantity of applicable equipment in each facility, the number of
facilities in a utility’s service area, and the efficiency measure’s current market saturation. Technical
potential estimates include measures that may not be cost-effective. These estimates, while not
realistically obtainable, are used to establish the outer boundary of what might be achieved.
The model calculates the technical potential based on all available gas EE measures. For competing
technologies such as high-efficiency water heaters, tankless water heaters and solar water heaters,
only the most efficient technology is included in the technical potential.
Which Measures are Cost-Effective?
The cost-effectiveness of each measure was estimated based on the savings that would accrue from
not having to purchase gas supplies and the cost of installing the measures plus the cost of
administering an EE program.Details of the cost-effectiveness calculations are provided in
Appendix A. The total amount of gas savings if all of the cost-effective measures are implemented is
about 10.4 million therms per year, or about 34% of the total citywide gas consumption in 2020.
The total amount of cost-effective gas savings is also called the “economic potential.” Economic
potential represents the portion of the technical energy efficiency potential that is “cost-effective”
from a societal perspective, as defined by the Total Resource Cost (TRC) test. The model takes into
account gas, electric and water savings when determining the cost-effectiveness of efficiency
measures. Economic potential does not consider market barriers that limit a voluntary efficiency
program’s success in encouraging customers to install energy efficiency measures.
The measures that are technically feasible, but are not cost-effective include condensing water
heaters, tankless water heaters and solar water heaters. If prices for condensing water heaters and
solar water heaters decline in the future, the economic potential will increase.
How Much Gas Savings Can Be Achieved From Utilities Programs?
The total amount of gas savings that can be achieved from Utilities programs is called the “market
potential.” Market potential is an estimate of the portion of the economic potential that could be
attributed to utility energy efficiency programs. Additional gas savings are attributed to building and
appliance standards, although these savings cannot be counted towards the goals. Market potential is
modeled to vary with parameters, such as the amount of incentives, customer willingness to pull
permits, and other factors such as customer awareness and willingness to adopt measures.
Page 10 of 17
Market potential at 5.5%is less than the full economic potential of 34% because most gas EE
measures are major appliances or improvement projects requiring significant financial commitments.
For the commercial sector, business owners are not likely to invest in efficient equipment with a
simple payback over two years. Residential installation of space or water heating systems is typically
costly and complicated, often requiring construction and related permits.
Lengthy equipment turnover cycles are another market barrier to realizing the full economic
potential. Business owners and homeowners often choose to keep an older piece of equipment instead
of purchasing a new efficient model with lower energy costs, if the payback period is more than one
or two years.This is particularly true in a moderate climate where reductions in utility bills are often
not large or are limited to a short time period.Residents are often reluctant to pull permits for hot
water heaters and other similar measures. It is estimated that, in Palo Alto, less than 30% of residents
who may be installing new water heaters are pulling permits. Since utility incentives are only paid to
customers who pull all required permits, market potential for utility programs is further reduced.
The estimated market potential is calibrated based on program achievements between FY 2008 and
FY 2010. The model also calculates the future cost-effectiveness and annual costs of gas efficiency
programs, which include the program administration cost and the cost of incentives (i.e. rebates).
RESULTS
Summary of Achievable Gas Efficiency Savings
The gas EE potential model determined a technical potential of 45% gas energy savings by 2020.
Since some of the measures that are technically feasible are not cost-effective, the economic potential
is only 34% by 2020. The market potential in 2020 is 5.5% of the projected gas needs in 2020.
Figure 5 compares the technical, economic and market gas EE potential in 2020 for CPAU.
Figure 5: Potential Gas Savings
Gas Efficiency Potential Summary
0
2
4
6
8
10
12
14
16
Technical Economic Market
45%
34%
5.5%
Percentages show EE potential
relative to load forecast in 2020.
Million
therms
Page 11 of 17
Where Can We Get the Most Gas Savings?
Table 3 below shows the amount of potential gas savings for each end use for residential customers.
More detail for individual measures is available in Appendix B.
Table 3: Potential Residential Gas Savings by End Use
The potential gas savings for commercial customer end uses are shown in Table 4 below.More
detail for individual measures is available in Appendix B.
Table 4: Potential Commercial Gas Savings by End Use
Figure 6 shows the distribution of gas savings “market potential”by end use for the residential and
commercial sectors.For both sectors, much of the cost-effective efficiency potential lies in the
opportunityto upgrade building insulation and space heating equipment (HVAC/Building Shell). The
expected gas savings from replacing residential water heaters with more efficient units is small
compared to the economic potential because many residents replace their water heaters without
getting a permit, a step that is required in order to receive a rebate.This does not mean that there will
not be gas savings, just that the savings will not be counted in a Utilities program.
Gas End Uses Technical
Potential
(therms)
Economic
Potential
(therms)
Market
Potential
(therms)
Clothes washer 108,321 108,321 97,526
Dishwasher 24,240 24,240 16,275
Space Heating/Building Shell 6,040,044 5,217,176 624,305
Water Heating 3,602,769 2,171,761 180,754
TOTALS 9,775,375 7,521,495 918,860
Gas End Uses Technical
Potential
(therms)
Economic
Potential
(therms)
Market
Potential
(therms)
Cooking 773,088 673,743 13,034
Space Heating/Building Shell 2,391,079 1,773,852 506,849
Water Heating 898,861 547,602 288,930
TOTALS 4,063,028 2,956,196 808,813
Page 12 of 17
Figure 6: Gas Savings Potential by End Uses
Residential Gas EE Market Potential
by End Use (2011)
HVAC/
Building
Shell
55%
Water
Heating
16%
Appliances
29%
Comme rcial Gas EE Market Potential
by End Use (2011)
HVAC/
Building
Shell
64%
Water
Heating
34%
Cooking
2%
Which Measures are Cost-Effective?
The model projects that the gas efficiency portfolio will have a societal benefit-to-cost ratio (or TRC
ratio) of 1.3, indicating that the portfolio is cost-effective.In general, commercial gas efficiency
measures are more cost-effective than residential measures.
Some residential gas efficiency measures, such as solar water heaters and tankless water heaters, are
not cost-effective due to the high measure installation cost. Solar water heaters, while not cost-
effective, are included in the program due to state law requirements. Other measures such as clothes
washers are not cost-effective based on gas savings only, but are when gas, water and electric savings
are included.Appendix B lists the gas efficiency measures included in the analysis and the TRC ratio
for each measure based on its gas, water and electric savings. CPAU generally does not promote or
provide rebates for measures that are not cost-effective unless mandated by law, as in the case of
solar water heaters. In the case of tankless and condensing water heaters, due to customer interest in
these technologies and the potential to reduce greenhouse gas emissions, these measures were added
to the rebate program.
Solar Hot Water Heating Systems
The model assumes that the number of solar water heating systems installed by 2020 will not meet
the goals in the City’s Climate Protection Plan of 500 residential systems plus 100 solar pool heating
systems. Instead, the model projects about 300 residential solar water heaters installed between 2010
and 2020. Per state law (AB1470), the total state goal is 200,000 by 2017, of which Palo Alto’s share
is 530.Since Palo Alto started its current solar water heating (SWH)program in 2008,the program
has provided rebates for 19 systems.Despite a utility rebate of up to $1,500 per household and a
30% federal tax credit (through 2016), the upfront investment cost of a residential SWH system
remains a significant barrier to adoption.Currently, the capital cost for these systems ranges between
$7,000 and $15,000. Unless the cost of SWH systems drops significantly or the program
Page 13 of 17
implementation approach is changed, Palo Alto is not likely to meet the goals for SWH installations
by 2020.See Appendix F for a detailed discussion on the City’s solar water heating program.
PROPOSED GAS SAVINGS GOALS
Proposed Annual Gas Efficiency Goals
Based on the analysis results and the gas efficiencyachievements between FY 2008 and FY 2010, the
proposed annual incremental gas efficiency goals are 0.4%, 0.45%, and 0.5%of forecast gas load in
FY 2011, FY 2012 and FY 2013, respectively. These goals are higher than the goals set in the 2007
EE Plan. Beyond the next three years, the proposed incremental gas efficiencygoals climb to 0.55%
in FY 2014 and then level off when the annual incremental goal reaches 0.6% in FY 2016 through
FY 2020, as shown in Figure 7.
Figure 7: Gas Savings –Historical Actual and Future Goals
Actual and New Annual Gas EE savings
0.11%
0.28%
0.39%
0.40%
0.45%
0.50%
0.55%
0.60% 0.60%
0
40
80
120
160
200
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
'000 Therms
Percentages represent EE savings relative to load
Actual
New
Gas EE targets from 2007 Gas Efficiency Plan
Proposed Ten-Year Gas Savings Goal
Figure 8 shows that the proposed gas efficiency goals will reach a 5.5%cumulative load reduction by
FY 2020. This is 50% more than the 10-year gas savings goal of 3.5% that was adopted in 2007.
The proposed annual goals for FY 2011, FY 2012 and FY 2013 are 14%, 28% and 40% higher than
the gas savings achieved in FY 2010.These aggressive targets are consistent with the City’s
environmental goals and the goals of the Gas Utility Long-term Plan (GULP).
Page 14 of 17
Figure 8: Cumulative 10-year Gas Savings
10-Year Projected Cumulative Gas EE savings
5.5%
4.9%
4.3%
3.7%
3.1%
2.5%
1.9%
1.35%
0.8%
0.4%
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
'000 Therms
Percentages represent cumulative EE s avings relative to load
Natural gas usage is primarily related to comfort end uses—space and water heating. In addition,the
majority of new efficient technologies in development are for electric appliances and equipment and
not for those fueled by natural gas. These two factors in addition to the high upfront cost of many
natural gas efficiency measures, such as furnaces and hot water heaters, tend to result in lower gas
saving achievements. As experienced by CPAU, actual electric efficiency achievements were higher
than the actual gas efficiency achievements for the last three years. Likewise, future energy
efficiency targets can be expected to be lower for natural gas than for electricity. Without a decline
in upfront equipment and installation cost, the targets for the natural gas utility will be more difficult
to reach in the future than for those of the electric utility. The goals in this report must be considered
“stretch goals.” The 10-year goals are updated every three years. In three years, when the next study
of the potential for gas savings is completed, an analysis of actual achievements will be included with
the updated goals to further refine natural gas efficiency targets.
The impacts from the proposed ten-year gas efficiency targets will extend well beyond 2020. Some
gas efficiency measures, such as boilers and furnaces, can last more than 20 years. The gas savings
from EE measures installed in 2020 will degrade over time,but persist through 2039.
Greenhouse Gas Reductions
Based on the actual gas savings achievements between FY 2008 and FY 2010, and the proposed gas
efficiency targets between FY 2011 and FY 2020, the reduction in carbon dioxide (CO2) in 2020 is
projected to be 10,200 tonnes per year, of which 300 tonnes is attributed to residential solar water
heater installations. This exceeds the annual combined reduction target for gas efficiency (7,300
tonnes) and solar water heating (1,500 tonnes) programs in the City’s 2007 Climate Protection Plan
(CPP). Overall, the cost of CO2 emissions reduction is around $70 per tonne.
The CPP assumes that the number of solar water heating systems installed by 2020 will reach 600
(500 residential water heating systems plus 100 solar pool heating systems).However, the SWH
program has been experiencing slow customer uptake since its launch in 2008. The proposed 10-year
Page 15 of 17
year gas efficiency targets assume that the number of solar water heating systems installed between
2010 and 2020 to be around 300. If the CPP target for the SWH program is met, a total of 10,800
annual tonnes of CO2 reduction will be achieved.
PROJECTED COSTS TO MEET THE PROPOSED GOALS
Gas Efficiency Program Costs Are Projected to Rise
Commensurate with the higher gas savings goals, the implementation cost for gas efficiency
programs will also increase.In FY 2010, gas efficiency program expenditures, including
administrative cost and customer rebates, were approximately$500,000. The projected gas efficiency
program costs for FY 2013 are projected to be more than 60% higher than the program costs in FY
2010.Figure 9 shows the actual gas EE program expenditures for FY 2008 through FY 2010,and
the projected program expenditures to achieve the proposed gas efficiency goals.Note that the total
expenditures in FY 2009 included a one time set-up cost for the Solar Water Heating Program.
Figure 9: Actual and Projected Gas EE Program Expenses
Actual and Projected Annual Gas EE program Expenditures*
$0.3
$0.5
$0.6
$0.7
$0.8
$0.9
$1.0 $1.1 $1.1 $1.2 $1.2 $1.2
$0.5
$-
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
$1.4
$1.6
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Millions
Actual
Projected
* includes Solar Water Heating program costs
The costs projected here are preliminary estimates and will be further refined in the Energy Efficiency
Implementation Plan that will be presented in the Spring of 2011.
Retail Rate and Bill Impacts
Gas efficiency program expenditures impact retail rates in two ways.First, the program budget
increases the revenue requirements for the gas utility in the short term. For the cost-effective
measures, the savings that accrue from not having to purchase gas supplies are greater than the gas
efficiency program expenses over the lifetime of the measures since program and rebate costs occur
early in the measure life. Second, lower gas usage means that fixed costs (capital and operating costs
Page 16 of 17
to run the gas utility) must be distributed over a lower gas sales volume, which increases the gas
retail rate in both the short-and long-term.
In 1996, despite no state mandated “public benefits” charge for gas efficiency programs, the City
proactively adopted a funding target of between 0.75% and 1.25% of natural gas revenues for
Demand Side Management (DSM) programs (CMR:209:96). In 2000, however, the California
legislature mandated a new public benefits surcharge on all natural gas customers throughout the
state, including customers of publicly owned utilities,to fund gas efficiency programs (AB 1002).
The City meets the requirements of this mandate by locally providing efficiency, low income and
other natural gas programs through natural gas rates. During the last several years, the City has spent
an average of 1% of the natural gas utility’s revenues for efficiency programs, with additional funding
for the solar water heating program (which reduces natural gas purchases) coming from the natural
gas supply budget.
The retail rate impact in FY 2020 of the preliminary program budget is estimated to be between 4%
and 5% higher than with no gas EE programs. Since 1% of the gas utility revenue has already been
budgeted for gas DSM programs, which have achieved approximately 0.35% savings, the projected
additional rate impact from the higher gas EE targets in FY 2020 is between 2% and 3%.
Energy efficiency is an investment that returns savings over a 10-to 20-year period, depending on the
life of the equipment. The energy savings will result in lower average utility bills. The projected
average bill savings is around 1% by 2020 based on the gas EE program costs and proposed gas EE
savings targets.Participants in the gas efficiency programs will realize reduced gas bills, while non-
participants will experience an increase in gas bills.
The retail rate impacts expected from the proposed gas savings targets and the program funding
levels will be further refined in the EE Implementation Plan, which will be completed in the Spring
of 2011.
LIST OF APPENDICES
A.Cost-Effectiveness Tests for Energy Efficiency Programs
This appendix contains explanations of the cost-effectiveness tests used to evaluate energy efficiency
measures. It also includes a list of the criteria used to evaluate energy efficiency programs.
B.Gas Efficiency Measures
Appendix B lists the gas efficiency measures that were evaluated to determine the potential for gas
savings. It contains tables of residential and commercial gas savings measures and shows the results
of the analysis, including the Total Resource Cost cost-effectiveness test ratio and the technical and
market potential for each measure.
C.Modeling Assumptions
This appendix lists the key assumptions that were used to evaluate the cost-effectiveness of each gas
saving measure.
Page 17 of 17
D.Fuel Switching Analysis
Appendix D contains an analysis of the cost-effectiveness of switching from gas-using appliances to
electric-using appliances (and vice versa) for certain end uses (water heating and space heating). The
analysis compares the costs to the customer and to the utility of using gas versus electricity for each
of these end uses using a variety of different technologies.
E.Sensitivity Analysis
Several assumptions are made in the evaluation of the potential for gas savings and each of the
assumptions about the future is uncertain.Appendix E contains an analysis of the potential for gas
savings if some of the key assumptions are changed. For example, the sensitivity analysis shows how
the potential for gas savings change when gas prices are lower or higher than the prices assumed in
the base case analysis.
F.Solar Water Heating Program in Palo Alto
This appendix provides more detail on the evaluation of Palo Alto’s solar water heating program. It
includes an assessment of the cost of CO2 emissions reductions by water heating technologies,
including solar water heating systems.
G.Gas Efficiency Goals Comparison
This appendix compares the gas efficiency goals and achievement of CPAU with that of PG&E,
SoCalGas and SDG&E.
Page A-1
APPENDIX A: COST-EFFECTIVENESS TESTS FOR ENERGY EFFICIENCY
PROGRAMS
The primary aim of cost-effective energy efficiency programs is to reduce utility cost and hence
customer bills while improving the environment. 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, those who do not increase their equipments
efficiency will have higher utility bills.All customers have the option to participate in one or more
of the efficiency incentives.
Cost-effectiveness can be measured in many ways. The four perspectives most commonly used in
efficiency program cost-effectiveness testing are:
1.Participant:An energy efficiency measure that provides net savings to a customer is cost-
effective for them as a “participant.”If a customer’s initial investment, after
accounting for utility rebates and tax incentives, can be recouped with lower
operating cost over the life of the measure, the measure is considered cost-
effective from a participant’s perspective.
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. To be cost-
effective from the utility perspective, the cost of the program (administrative
and rebate costs) must be less than the savings from not purchasing the energy
supply.
3.Total Resource:If the combination of the utility and all customers together save money, it is
cost-effective from a “Total Resource Cost (TRC)”or societal viewpoint.
This is the cost-effectiveness criteria that is required by the CEC and is used
in CPAU reporting.For Palo Alto, the cost savings include the cost of carbon
emissions by the use of a “carbon adder” to the other supply cost savings.
4.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 effect is due to the
portion of retail revenue that must be collected to payfor fixed costs. For this
reason it is important to design diverse programs to be widely available in
order to facilitate efficiencyimplementation in as broad a manner as possible.
The Non-Participant perspective is also called the Rate Impact perspective.
The 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 achieve participation
The costs and benefits that are used to calculate the benefit-cost ratios for each of these different
perspectives are illustrated below:
Page A-2
Table A1: Cost-Effectiveness Perspectives and Associated Costs and Benefits
Cost Effectiveness Test Costs Benefits
Participant Cost Test (PCT)
Does the participant save money?
Measure Cost Incentive to customer
Bill Savings
Tax Savings
Utility Cost Test (UCT) –Average Bill
Are utility revenue requirements lowered?
Incentive to customer
Program Delivery Cost
Avoided Supply Costs
Total Resource Cost Test (TRC)
Sum of Participant + Non-participant
Are total community expenditures lowered?
Measure Cost
Program Delivery Cost
Avoided Supply Costs
Tax Savings
Rate Impact Measure (RIM)
Also known as non-participant test
Are utility rates lowered?
Incentives to customer
Lost Revenues (=Bill
Savings)
Program Delivery Cost
Avoided Supply Costs
Efficiency Program Design and Screening Criteria
Staff will 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 communitystandpoint.
This is the perspective that is required for reporting to the CEC and for comparing with other
utilities.
·Avoided supply costs include energy, transmission and distribution costs, transmission and
distribution line losses, the cost to maintain grid reliability with sufficient reserve capacity, and
externality cost.
·The Utility Cost, Participant, and Rate Impact perspectives are reviewed to maintain lower
average bills with sufficient incentives to achieve participation.
·Since there will be participants and non-participants for any program, CPAU will develop a
portfolio of programs to allow as many people as possible opportunities to participate in
programs.
·CPAU’s Low Income Program serves customers who are least able to afford efficiency upgrades
on their own. 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 reduces the total utility bill cost to these customers.
·Include a greenhouse gas adder when computing avoided supply cost. This adder is
acknowledgment of the environmental cost of greenhouse gas emissions. An actual financial cost
for greenhouse gas emissions may be levied in the future under potential “cap-and-trade”
legislation. Using a greenhouse gas adder improves the cost-effectiveness of efficiency measures
and energy savings reduce the likelihood of CPAU paying for greenhouse gas emissions
allocations associated with the energy supplies delivered.CPAU currently uses the carbon adder
stated in the Climate Protection Plan ($20/tonne in 2007 increasing by 5% per year).
Page B-1
APPENDIX B: GAS EFFICIENCY MEASURES
The tables below list the gas efficiency measures included in the EE potential analysis, the calculated
TRC ratio for each measure based on combined gas, electric and water savings, and whether CPAU
currently offers rebate for the measure. Emerging technologies that have not yet been widely
commercialized or do not have reliable energy savings estimates are excluded from the analysis.
Ground source heat pumps (GSHP) were not included in the analysis.While the installation of a
GSHP system could deliver gas and electric savings by lowering the air conditioning load and
possibly eliminating the space heating load, the applicability of this technology for the residential
sector in Palo Alto is very low due to the moderate climate and high up-front investment (a typical
installation of a GSHP system for a 2,000 square foot home costs $14,000 more than a conventional
air-conditioning system). There are other Northern California municipal utilities, including Redding
Electric and Plumas Sierra Rural Co-op, which offer rebates for residential GSHP systems. Despite
the higher summer temperatures and longer winter season in these utility service territories, payback
for a GSHP system without a utility rebate in these other areas could exceed 20 years. For the
commercial sector, the high investment cost is a major factor deterring the adoption of GSHP
systems.
There are two GSHP systems installed at Palo Alto commercial buildings–one at the Children’s
Library, and the other at the 2183 Park Blvd (McDonald Building) as a technology demonstration
project. The installation at the McDonald Building had a total project cost of around $140,000 in
2003, of which 50% was funded by the City (CMR:487:03). Based on the annual gas and electricity
savings, the GSHP installation at the McDonald Building has a payback of 11 years without the
City’s funding. The GSHP system at the Children’s Library costs around $140,000 more than a
conventional system and took almost two years to complete. Engineering staff involved in the
project cited various potential barriers to installing GSHP systems, including the lack of qualified
drillers and installers, and the high upfront cost of bore field construction.
Page B-2
Table B1: Residential Gas Efficiency Measures
Notes:
1.The technical potential for competing technologies, e.g. different water heaters, is based on
the savings of the most efficient technology of the group, with less efficient technologies
being assigned zero technical potential.
2.The technical potential assigned to solar water heaters is the total water heating potential from
the residential single family sector, while the technical potential assigned to condensing water
heaters is the total water heating potential from the residential multi-family sector. The model
assumes no solar water heating installations in the residential multi-family sector.
3.These measures are assigned a market potential even though they are not cost-effective due to
the popularity of the measures among customers and the fact that other utilities provide
rebates for these measures.
4.Measures that have no customer rebate history are assigned a market potential of zero.
5.Solar water heaters are not cost-effective but are included in the Gas Efficiency portfolio in
order to comply with state regulatory mandates.
Measure End use
category
TRC
ratio
Rebate
offered
Technical
Potential in
2020
(therms/yr)
Market
Potential in
2020
(therms/yr)
Clothes washer (Modified Energy Factor
>= 2.4, Water Factor >= 4.0)
Appliances 1.12 if gas
dryer
1.02 if elect
dryer
Yes
108,321 97,526
Dishwasher Appliances 1.07 Yes 24,240 16,275
Windows (U-factor 0.25)HVAC/Shell 0.08 No 380,167 0
Duct Sealing/ Repair HVAC/Shell 0.34 No 205,289 0
Wall Insulation (R0 to R13)HVAC/Shell 0.65 Yes 1,303,074 95,685 (3)
Ceiling Insulation (R19 to R30)HVAC/Shell 1.32 Yes 1,218,832 100,659
Furnace (AFUE 96)HVAC/Shell 1.75 Yes 1,769,722 174,691
Infiltration Control HVAC/Shell 1.76 Yes 1,162,960 95,995
Furnace (AFUE 92)HVAC/Shell 2.08 Yes 0 (1)157,275
Solar Water Heater Water Heating 0.18 Yes (5)1,675,901 (2)31,714
Tankless Water Heater Water Heating 0.58 Yes 0 (1)48,065 (3)
Condensing Water Heater Water Heating 0.96 Yes 957,714 (2)0 (4)
Low Flow Shower Water Heating 1.03 Yes 149,450 5,320
Boiler (AFUE 94) (multi-family only)Water Heating 1.11 Yes 282,952 25,704
Water Heater (Energy Factor >= 0.8)Water Heating 1.38 Yes 0 (1)41,730
Water Recirculating Pump (multi-family
only)
Water Heating 1.51 Yes
345,631 3,233
Faucet Aerator Water Heating 1.76 Yes 82,350 3,271
Water Heater (Energy Factor >= 0.67)Water Heating 3.21 Yes 0 (1)18,131
Pipe Wrap Water Heating 3.95 Yes 108,773 3,586
Totals 9,775,375 918,860
Page B-3
Table B2: Commercial Gas Efficiency Measures
Notes:
1.The technical potential for competing technologies, e.g. different water heaters, is based on
the savings of the most efficient technology of the group, with less efficient technologies
being assigned zero technical potential.
2.Convection gas ovens, efficient gas griddles, and combination ovens are not cost-effective but
are included in the Gas Efficiency portfolio to expand efficiency offerings to the hard-to-reach
restaurant sector. These measures could be cost-effective if electric savings are included.
PG&E also currently offers gas efficiency rebates for these measures.
3.Solar water heaters are not cost-effective but are included in the Gas Efficiency portfolio in
order to comply with state regulatory mandate.
Measure End use
category
TRC
ratio
Rebate
offered
Technical
Potential in
2020
(therms/yr)
Market
Potential in
2020
(therms/yr)
Combination Oven Cooking 0.56 Yes 17,024 350 (2)
Power Burner Conveyor Belt Oven Cooking 0.57 No 138,346 0
Convection Gas Oven Cooking 0.68 Yes 49,382 1,014 (2)
Efficient Griddle -Gas Cooking 0.83 Yes 57,177 1,174 (2)
Catalytic Infrared Gas Fryer Cooking 1.22 Yes 186,500 3,829
Rack/tray Oven Cooking 1.45 Yes 197,054 4,046
Rotisserie Oven Cooking 1.61 Yes 2,614 54
Vent Hood Controls Cooking 1.74 Yes 42,813 879
Charbroiler Cooking 1.80 Yes 39,101 803
Food Steamer Cooking 2.82 Yes 39,167 804
Salamander Broiler Cooking 2.95 Yes 3,295 68
Pizza Oven Cooking 3.94 Yes 615 13
Gas Boiler Tuneup HVAC/Shell 0.88 No 617,227 0
Space Heating Boiler (>= 95% efficient)HVAC/Shell 1.09 Yes 897,744 295,021
Thermostat Controls on A/C Units HVAC/Shell 3.93 Yes 765,628 186,785
Boiler Pipe Insulation HVAC/Shell 6.60 Yes 110,480 25,043
Solar Water Heater Water Heating 0.26 Yes (3)468,360 4,349
Tankless Gas Water Heater Water Heating 1.11 Yes 0 (1)54,289
Com Horizontal Axis Clothes Washer Water Heating 1.30 Yes 386,712 105,313
Hot Water Recirc Pump Time Clock Water Heating 2.77 Yes 43,789 23,599
High Efficiency Gas Water Heater Water Heating 4.14 Yes 0 (1)101,380
Totals 4,063,028 808,813
Page C-1
APPENDIX C: MODELING ASSUMPTIONS
Key assumptions used in the Gas Efficiency Potential model are listed below:
·Palo Alto’s avoided cost for natural gas supplies levelized over a 20-year period is around
$0.90/therm. This includes the cost of gas, local transportation, and a carbon adder in accordance
with the City’s Climate Protection Plan.
·The distribution of gas versus electric space heating, water heating and clothes dryers among
residential customers are based on statewide survey results.Among single family homes, the
share of gas space heating, gas water heating and gas clothes dryers are 98%, 99% and 55%
respectively (electric space heating, electric water heating and electric clothes dryers represent
2%, 1% and 45% of single family homes). The share of gas space heating, water heating and
clothes dryers are lower among multifamily homes:75%, 71% and 11% respectively.
·Utilities programs which provide rebates for residential gas water heater replacements are paid
for less than 10% of the annual water heater replacements. Part of the reason for this is the fact
that most residential customers do not apply for a rebate when changing out water heaters to
avoid the hassles and cost of getting a permit.The City issues about 275 permits for water
heaters each year, but about 1000 residential water heaters are estimated to be replaced annually
in Palo Alto (assuming one water heater per each of the 14,600 single-family homes in Palo Alto
and an average useful life of 15 years per water heater). A total of 49 and 60 water heater rebates
(excluding rebates for solar water heaters) were processed in FY 2010 and FY 2009 respectively.
·The penetration of energy efficient technologies is assumed 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.These assumptions may not be fully
accurate, but specific information about Palo Alto is not available at this time.
·Projected gas efficiency savings include savings from free-riders. Free riders are customers who
would have purchased the energy efficient equipment without additional financial incentives and,
therefore,the savings from these equipment purchases would have occurred without utility EE
programs. For electric efficiency achievements, the California Energy Commission requires that
municipal utilities establish goals that are net of free-riders. However,no such regulatory
requirement exists for setting gas efficiency goals.
·Energy savings and cost assumptions for each gas savings measure reflect the most recent data
available from Palo Alto’s efficiency program tracking database and other gas efficiencypotential
studies. The model does not assume future price declines for any of the gas efficiency measures
covered in the analysis.
Page D-1
APPENDIX D: Fuel Switching Analysis
As directed in the proposed 2010 GULP Implementation Plan and the City Council Colleagues’
Memo dated May 3, 2010, staff evaluated the cost-effectiveness of substituting gas-using appliances
for electric-using appliances and vice versa. The two measures covered under this evaluation are
residential water heaters and space heaters.The analysis found that currently there is no cost-
effective fuel switching opportunity for residential water heating and space heating.
Water Heating
Statewide, 99% of single family homes and 71% of multifamily homes have gas water heaters. Staff
reviewed the available water heating technologies for residential homes and compared the present
value of customer costs and the societal net benefits of switching from a standard gas water heater to
an alternative water heater technology. Results are summarized in Figure D1. The present value of
total customer cost includes the installed cost of the water heater, annual utility costs, minus utility
rebate and the 30% Federal Tax Credit for solar water heaters.The Federal Tax Credit for other
energy efficient water heaters is due to expire in December 31, 2010 and is, therefore,not included in
the calculation. The societal net benefit is calculated relative to a standard gas water heater; a
positive societal net benefit indicates that the measure is cost-effective compared to a standard gas
water heater, whereas a negative societal net benefit indicates that it is not cost-effective compared to
a standard gas water heater.
Figure D1
Replacing a Standard Gas Water Heater: Customer Costs & Net Benefits
($6)
($3)
$0
$3
$6
$9
$12
G1 G2 G3 G4 G5 E1 E2 E3
Thousands
Present Value of Total Customer Cost (incl. utility
rebate and federal tax incentive for SWH)
Societal Net Benefits compared to Standard Gas
Water Heater
Cost-effective when societal net benefit greater than 0
G1 = Standard gas water heater (EF = 0.62)E1 = standard electric water heater (EF = 0.90)
G2 = High-efficiency gas water heater (EF = 0.67)E2 = High-efficiency electric water heater (EF = 0.95)
G3 = Ta nkless gas water heater E3 = Heat Pump electric water heater (EF = 2.2)
G4 = Condensing gas water heater (EF = 0.8 or higher)
G5 = solar water heating with gas backup
Page D-2
Figure D1 shows that after rebates and tax incentives, high-efficiency gas water heaters, tankless
water heaters,condensing water heater, and heat pump electric water heaters all have lower total
customer costs than a standard efficiency gas water heater. The only efficiency measure that is cost-
effective from a societal perspective is the non-condensing, high-efficiency gas water heater.Solar
water heating is the least cost-effective relative to other water heating technologies due to its high
equipment installation and administration cost of a solar hot water heating incentive program.
The potential for cost-effective fuel switching is based on the societal net benefits of the three types
of electric water heaters relative to the standard gas water heater. The analysis shows that none of the
electric water heating technologies is cost-effective from a societal perspective compared to the
standard gas water heater.It is also unlikely to be cost-effective to switch from electric water heating
to gas water heating if a new gas line needs to be added.
Space Heating
Staff undertook a similar analysis for residential space heating.Based on statewide statistics,
approximately 98% of the single-family homes and 75% of the multi-family homes have gas space
heating systems (gas furnace or boilers). Staff compared the present value of customer costs and the
societal net benefits of switching from a standard gas furnace to either a high efficiency gas furnace
or an air-source heat pump.The results of the analysis are summarized in Figure D2. The analysis
found that a high efficiency gas furnace has lower customer costs compared to a standard gas furnace
and is cost-effective from the societal perspective. The high efficiency air source heat pump, on the
other hand, is more expensive and not cost-effective compared to the conventional gas furnace. Based
on this analysis, staff concludes that currently there is no cost-effective opportunity for switching
from gas to electric residential space heating systems.
Figure D2
Replacing a Conventional Gas Furnace: Customer Costs & Net Benefits
($8)
($4)
$0
$4
$8
$12
$16
Conventional Gas Furnace High Eff Gas Furnace High Eff Air Source Heat Pump
Thousands
Present Value of Total Customer Cost (incl. utility rebate)
Societal Net Benefits compared to Conventional Gas Furnace
Page F-1
APPENDIX E: SENSITIVITYANALYSIS
As part of the analysis, staff looked at other scenarios with different assumptions to compare the
projected market potential and EE program budget with the base case results. The scenario
descriptions and results are summarized below.
Scenario Results
Base Case:
·Include carbon adder as
directed in the 2007
Climate Protection Plan;
·Slow adoption of solar
water heating systems and
do not meet SWH goals by
2020
·Economic potential of gas efficiency in 2020 represents around
34% of load.
·Cumulative market potential of 5.5% by 2020.
·Annual gas efficiency program budget increase of around
$100,000 to $120,000 per year for FY 2011 through FY 2015.
·Rate impact of between 2 to 3% by 2020 due to additional
supply funds to pay for gas efficiency programs.
Scenario 1:
·High gas prices (approx.
30% higher than base case)
·Retail rates around 15%
higher than base case
·Economic potential in 2020 increases to 36% of load.
·Cumulative market potential increases to 6.2% by 2020.
·Increased gas efficiency program budget, with estimated rate
impact of around 4% by 2020.
Scenario 2:
·Do not include carbon
adder in gas cost
·Retail rate remains
unchanged
·Economic potential in 2020 decreases to 29% of load.
·No change to market potential and program budget.
Scenario 3:
·Aggressively market solar
water heating systems to
meet CPP target for the
SWH program by 2020
·Cumulative market potential increase to 5.9% by 2020.
·Program budget remains the same between 2011 and 2015, then
starts to get higher beginning 2016 as the number of rebated
SWH units begins to ramp up. Cumulative program budget
between FY 2016 to FY 2020 is around $700,000 higher than
base case, with a 0.5% higher rate impact by 2020.
Page F-1
APPENDIX F: SOLAR WATER HEATING PROGRAM IN PALO ALTO
The Palo Alto’s 2007 Climate Protection Plan (CPP)established City-wide CO2 emission reduction
goals of 15% of 2005 levels by 2020. This is equivalent to 119,140 metric tons (or tonnes)of CO2
emissions reductions per year. Specific CO2 emission reduction goals are assigned to Utilities energy
efficiency and solar energy programs, as shown in Table F1.
Table F1: CO2 emission reduction goals for utility programs by 2020
Electric
Metric Tons
CO2 per year
Gas
Metric Tons
CO2 per year
Efficiency Programs -15,800 -7,300
Solar -3,800 -1,500
Mandatory Renewable Energy Supply -91,500 TBD
Voluntary Renewable Energy Supply -36,500 -16,400
Based on the gas and electric efficiency program achievements between FY 2008 and FY 2010, and
the Council-adopted 2010 Ten-Year Electric Efficiency Plan and the proposed gas efficiency goals in
this report, Utilities is on track to meet the CPP emission reduction goals for gas energy efficiency.
There is less certainty on whether the solar programs will be able to meet the goal for CO2 emissions
reductions. The CPP called for the implementation of a solar water heating program, with a target of
500 residential systems with estimated CO2 emissions reductions of 500 metric tons per year, plus
another 100 pool heating systems, with estimated CO2 emissions reductions of 1,000 metric tons per
year, for a combined CO2 emissions reductions of 1,500 metric tons per year. The CPP made a
number of assumptions in setting these targets, including:
·The cost of a residential solar water system was assumed to be around $3,000 to $6,000;
·The average gas savings for each solar hot water heating system was assumed to be 188 therms
per year;
·The total number of pools in Palo Alto was assumed to be 4,000; and
·The average gas savings for each solar pool system was assumed to be 1,850 therms per year.
Since the launch of the Solar Water Heating (SWH)program in 2008, which is administered by the
Center for Sustainable Energy California (CSEC), rebates have been paid for 19 systems, two of
which have electric back-up water heating and do not provide gas savings. The SWH program offers
a rebate of up to $1,500 per residential solar water heating system. Due to state law requirements, no
rebate is offered for solar pool systems.Based on the systems which received rebates to date, the
average cost per system is $8,800, with average annual gas savings of 125 therms per unit1.
CSEC has evaluated the feasibility of a solar pool heating system for the Rinconada swimming pool,
the only city-owned swimming pool in Palo Alto. Annual gas savings based on a solar heating
1 This amount of energy savings is less than the energy savings estimated in the Climate Protection Plan, which
assumed gas savings of 188 therms per year for solar hot water heating. The cost for the systems is higher than the
cost assumed in the CPP.
Page F-2
system for the 7,500 square feet lap pool is around 15,000 therms.Other year-round public
swimming pools in Palo Alto are located at Palo Alto High School, Gunn High School, JLS Middle
School, Terman Middle School and Jordan Middle School.While there are swimming pools in
apartment and condominium complexes within Palo Alto, these pools are typically not heated.
The cost of CO2 emissions reduction from a solar water heating system is far higher than other energy
efficient gas water heaters. Table F2 compares the cost of CO2 emissions reduction for various
energy efficient water heating technologies including solar water heaters. Only the high efficiency
gas water heater shows a negative cost of emissions reduction, which indicates that the measure
(replacing standard efficiency gas water heater with a high efficiencygas water heater) has life-cycle
cost savings even with no carbon adder.
Table F2: Cost of CO2 emission reduction by water heating technologies
Efficient water heating technology $ per tonne of
CO2 emission
reduction
High efficiency gas water heater (EF = 0.67)($60)
Tankless gas water heater $90
Condensing gas water heater (EF > 0.8)$100
Solar water heaters $450
High efficiency air source heat pump water heater $20
The current SWH program will not likely reach the emissions reduction goal in the CPP. Staff will
review other program approaches including bulk buy and customer financing to reduce costs and
increase program participation.
Page G-1
APPENDIX G: GAS EFFICIENCY GOALS COMPARISON
The gas efficiency goals for PG&E, SoCalGas and SDG&E are adopted by the CPUC. These goals
are developed in a similar process as the CPAU’s gas efficiency goals. The recommended gas
efficiency goals for CPAU are on par with the IOUs’ gas efficiency goals.Also, the achieved gas
savings as percentage of load in 2009 for CPAU is similar to that of the IOUs.
Table G1: Gas Efficiency Goals Comparison
2006 2007 2008 2009 2010 2011 2012 2013
CPAU Goals
Achievement
na
na
na
na
0.25% 0.28% 0.32%
0.11% 0.28% 0.39%
3-yr cumulative: 0.78%
0.40%
---------
0.45%
---------
0.50%
---------
PG&E Goals
Achievement
0.26% 0.33% 0.40%
3-yr cumulative: 1.02%
0.36%
0.28%
0.39%
---------
0.41%
---------
0.59%
---------
na
---------
SoCalG Goals
Achievement
0.20% 0.25% 0.31%
3-yr cumulative: 0.72%
0.37%
0.28%
0.38%
---------
0.40%
--------
0.42%
---------
na
---------
SDG&E Goals
Achievement
0.47% 0.57% 0.68%
3-yr cumulative: 0.60%
0.63%
0.28%
0.66%
---------
0.71%
---------
0.75%
---------
na
---------
FINAL
UTILITIES ADVISORY COMMISSION – SPECIAL MEETING
MINUTES OF JANUARY 12, 2011
CALL TO ORDER
Chair Waldfogel called to order at 7:05 p.m. the meeting of the Utilities Advisory Commission (UAC).
Present: Commissioners Berry, Cook, Foster, Keller, Melton and Chair Waldfogel and Council Member
Scharff.
Absent: Commissioner Eglash
ORAL COMMUNICATIONS
None.
APPROVAL OF THE MINUTES
The Minutes from the December 1, 2010, UAC meeting was approved as presented, with the motion
moved by Commissioner Melton and seconded by Commissioner Cook.
AGENDA REVIEW
No changes to the agenda were requested.
REPORTS FROM COMMISSION MEETINGS/EVENTS
No Commission Meeting Reports.
UTILITIES DIRECTOR REPORT
Utilities Director Valerie Fong delivered an oral report on the following items:
1. Hydro Conditions: So far, Sierra precipitation has been about 200% of normal to date and snowpack
is above 150% of normal to date. Weather forecasts for three months out are for colder than average
with about average precipitation. Reservoir levels are above average with Shasta and Folsom
reservoirs at their maximum allowable levels with flood control storage reservations. Western
forecasts its Base Resource volume to be about average for the coming 12 months. NCPA forecasts
Calaveras generation to be above average.
2. Ram Geopower: In February 2008, Palo Alto agreed to participate in a Power Purchase Agreement
(PPA) between NCPA and Western Geo for up to 5 average MW of renewable geothermal energy at a
price of $98/MWh. However, Western Geo was taken over by another company and the original price
in the PPA cannot be maintained. NCPA has negotiated a replacement PPA with a new price of
$113/MWh. Silicon Valley Power (SVP) will subscribe to most of the output. We are working on a
letter of intent with SVP to allow Palo Alto to come back in a few months to subscribe to up to 30% of
the output at the same price and terms available to SVP. In exchange, Palo Alto will need to agree to
execute a withdrawal agreement from the original agreement clearing the way for SVP to move
forward. Staff hopes to bring this to UAC this summer with a recommendation and an update on our
renewable portfolio standard.
Utilities Advisory Commission Minutes Approved on: February 2, 2011 Page 1 of 7
3. Anaerobic Digester Update: In January the Public Works department will release its consultant’s
draft analysis of the feasibility of locating a compost-to-energy project at the City’s landfill site. The
project being studied would involve anaerobic digestion of yard waste, food waste, and possibly
biosolids from the wastewater treatment plant. The resulting methane would be used to generate
renewable power. The draft analysis will be released on the City’s website on January 24. The initial
results of the study will be presented to the community in February and in front of the City Council in
late March. A presentation to the UAC is planned for March or April, and all comments will be included
in the final report to Council to be delivered in September.
4. LED Holiday Light Program: Customers received a coupon in their November utility bills that allowed
them to exchange a working strand of incandescent holiday lights for a strand of LED lights. We
purchased 744 multi-colored and 96 white LED ENERGY STAR rated strands for the holiday
exchange. The lights were displayed in the office along with a watt counter to show customers the
electric usage of both old and new bulbs. We received a lot of positive feedback on our display and on
our marketing piece, which included a graph showing the difference in electric use between the bulb
types. A total of 502 strands were exchanged, equaling 12,077 kWh in savings. Approximately 300
strands remain in addition to the 100 in storage from last year. The excess strands will be placed in
storage and used for next year’s program. 330 pounds of old strands have been recycled as of
January 12, 2011, costing $165.
5. UAC Calendar: Rolling calendar of upcoming items for UAC meetings.
UNFINISHED BUSINESS
1. Utilities Advisory Commission Bylaws
The Commissioners reviewed the amendments to the UAC bylaws proposed by the UAC ad-hoc committee
(comprised of Commissioners Foster, Berry and Melton). Commissioners Foster and Melton agreed that
the amendments shown were in line with the discussion held at the meeting of the ad-hoc committee on
January 4, 2011. Commissioner Berry noted his disagreement with the requirement that Council approve
later amendments to the bylaws and also noted that the UAC would not have the discretion to appoint a
standing budget committee at a later date without going back to Council for approval. After discussion, it
was proposed to remove the sentence in Section 4.1 that stated “Standing committees may be appointed
only with the approval of the Council”. It was also proposed that Section 9.1 be amended to read “The
Bylaws shall be amended or repealed in accordance with the Code”, removing the reference to Council
approval, so that if the Code allowed for UAC approval then the UAC Bylaws would also.
ACTION: Commissioner Foster made a motion to recommend Council approval of the bylaws with the
proposed amendments. Commissioner Melton seconded the motion. The motion carried (5-1) with
Commissioner Berry voting no.
NEW BUSINESS
ITEM 1: DISCUSSION: Home Energy Reports Status Update
Utilities Marketing Services Manager, Joyce Kinnear, introduced three members of the vendor team from
OPOWER who are helping to put together the Home Energy Reports program. She then provided a
presentation on the history of the program development, a discussion of the first report roll-out in
November, and a brief overview of the customer feedback and concerns. Of note is that 18,648 customers
have received the report and only 34 have asked to op-out. About twice as many customers as the opt-out
number have requested more information on the program and about other ways that the utility can assist
Utilities Advisory Commission Minutes Approved on: February 2, 2011 Page 2 of 7
them in reducing energy usage. Most of the questions about the program have been related to concerns
about privacy and whether the neighbor comparisons are accurate. She explained that customer usage
information is kept private and that no other person can identify an individual person’s energy usage. The
explanation for how the comparison is developed and that it provides useful information to customers was
given.
Commissioner Foster raised the question about why customers who have solar electric (PV) systems can
not receive the reports. Stephanie Berner of OPOWER said that the product works on usage information,
so the modules do not work for customers who have zero usage. She pointed that that primarily due to
Palo Alto’s request, OPOWER is looking at potentially adding this capability in the future. Commissioner
Keller asked if it would be possible to add water to the reports’ energy (gas and electric) comparison.
Kinnear said that Palo Alto has requested this capability. Berner added that many utilities in the west would
like this capability, and that the addition of water to the reports is on the way.
Chair Waldfogel appreciated the discussion about privacy issues, but he wanted to make sure that all
questions were completely dealt with. He asked for specific details on the internal controls at OPOWER
and in how data transfers were completed with appropriate security. Berner responded that OPOWER gets
the customers and usage data from the City in a secure, encrypted process. OPOWER follows standards
industry controls internally for the housing of the data. Also, no individual customer or personally
identifiable information is presented to anyone other than that customer. Clayton Schloss of OPOWER
added that the website portal is also gated, so that customers can only access their own information
through the website. Chair Waldfogel requested details on the ownership of the data and its usage. Berner
responded that the data can only be used with the program and is the City’s property.
Commissioner Cook asked whether the opt-out rate (about 0.18%) is typical for this type of program.
Berner said that it is an unusually low rate. Schloss added that customers typically are the most likely to
opt out and are the most vocal in the first mailing or two. Cook also asked for more details on how the tip
module is developed for the customer reports. Berner said that the modules help to turn what is learned
from the report into action. The tips vary by both individual report and by cycle. They can be targeted to a
particular usage pattern.
Commissioner Keller wondered if customers who do reduce energy usage will receive a pat on the back.
Commissioner Foster pointed out that the program contract allows for 10 reports, and that customers
should get updates on their usage. He also mentioned that while OPOWER is serving many utilities, Palo
Alto is one of the first to have nearly all customers in the program, and he is pleased that most customers
can receive this benefit.
ITEM 2: ACTION: Water Shortage Implementation Plan
Senior Resource Planner Nico Procos provided a presentation, including the background, on the
development of the proposed plan to split up the water available in a water shortage condition (drought)
among the member agencies of the Bay Area Water Supply and Conservation Agency (BAWSCA). Under
the plan, water is divided by a formula which is weighted one-third on the Individual Supply Guarantee (the
long-term contractual entitlement) and two-thirds on a seasonal usage calculation that penalizes water use
in the summer months. The formula is also bounded so that no agency is reduced less than 10% and no
agency is reduced more than 20% more than the average reduction for all agencies. The formula also
includes an adjustment for East Palo Alto to ensure that agency has enough water to meet basic health and
safety requirements. The formula expires in 2018 and is only in effect for water shortages that require
water use reductions of up to 20%. Procos stated that, for Palo Alto, the formula is not as beneficial as the
expired formula, but results in a lower reduction than the average reduction for the BAWSCA agencies.
Utilities Advisory Commission Minutes Approved on: February 2, 2011 Page 3 of 7
Procos stated that the representatives of all the BAWSCA agencies that were involved in the development
and negotiation of the formula unanimously agreed to recommend the proposed formula to their governing
boards. If any agency does not approve the proposed formula, then the BAWSCA Board would consider
approval of a formula. If the BAWSCA Board were unable to approve a formula, then the San Francisco
Public Utilities Commission (SFPUC) would decide on the formula.
Commissioner Cook asked what happens if there is a reduction of greater than 20%. Assistant Director
Jane Ratchye replied that the SFPUC would determine the reduction formula in that event. However,
Ratchye noted that the SFPUC has adopted level of service goals for its Water System Improvement
Program such that the greatest water supply reduction is 20%. In addition, since the 1987 through 1992
drought, the SFPUC has adjusted its system operations to make water shortages less likely by preserving
water in storage rather than producing electricity and by calling for water use reductions earlier in a multi-
year drought event.
Chair Waldfogel asked if the formula would have been triggered in the past. Ratchye stated that she hadn’t
done the analysis, but said that she thinks it would have been triggered in the 1987 through 1992 drought.
Commissioner Berry inquired about the default process if any of the BAWSCA members did not approve
the new formula. Specifically, did staff have a sense what the SFPUC might do if they had to make a
decision on the process? Procos responded that the contract is clear that the BAWSCA Board of Director’s
would be given an opportunity to approve a new formula and the SFPUC would only act if the board did
not. Procos added that it is likely that the BAWSCA Board would exercise its authority to resolve the issue.
However, assuming the SFPUC was given the opportunity, Procos does not know what approach it may
take.
ACTION: Commissioner Berry made a motion to recommend Council approval of the proposed Water
Shortage Implementation Plan. Commissioner Melton seconded the motion. The motion carried
unanimously (6-0).
ITEM 3: DISCUSSION: Draft 2011 Utilities Strategic Plan
Assistant Director Jane Ratchye stated that the Utilities Strategic Plan is close to final, but that she is
soliciting additional feedback before bringing the plan back to the UAC for action at the next (February)
meeting of the UAC. She provided a presentation of the highlights of the four themes of the strategic plan:
safety and reliability, customer service excellence, cost management, and environmental sustainability.
One strategy that was added was to ensure that the strategy itself was implemented as this will require
resources to manage, track and report regularly so that the UAC and Council can follow the progress
towards completion of the initiatives and whether the performance targets are met.
Commissioner Berry stated that he was very involved with staff in the development of the strategic plan and
requested that the UAC use this opportunity tonight to provide staff feedback on the draft plan so that it can
be finalized for consideration at the next meeting.
Commissioner Keller asked why objective BP1 (ensure a reliable supply of utility resources) did not include
anything about back-up supplies and emergency preparedness. Ratchye said that not all Utilities activities
are reflected in the Strategic Plan, but it is intended to capture those areas that need continued focus and,
especially, those areas that need improvements, changes in focus, additional resources, or changes in
practice or operations. Commissioner Keller asked if there needs to be a placeholder for important issues
that may not be an issue now, but could be in the future. Ratchye stated that the strategic plan will
Utilities Advisory Commission Minutes Approved on: February 2, 2011 Page 4 of 7
necessarily change as we move forward with implementation and that new initiatives will be added as
others are completed. Since the plan will be reported on every six months, there will be opportunities to
make adjustments to the strategic objectives and performance measures. Regarding objectives BP4 and
BP6 relating to customer service, Commissioner Keller asked if there was a way to add outreach for new
development. She is concerned that there are resource efficiency opportunities for new buildings that could
be incorporated in the design phase. She suggested coordinating with the City’s Economic Development
Manager to determine any upcoming development plans. Regarding objective PT1 (be an attractive place
to work), Commissioner Keller noted that the performance measure relates only to new employees and not
to retaining valued existing employees.
Chair Waldfogel stated the draft strategic plan omits the rate of return to the City provided by the Utilities
Department and, since it is a key element of the City’s revenues and the Utilities expenses, it should be
captured in the strategic plan. He recommended the financial perspective as the location for an objective
related to the City as a stakeholder.
Council Member Scharff commented that the stable rate objective is embedded in the strategic plan, but
that is premature since the laddering strategy and rate stability issue will be reconsidered by the UAC and
Council as a result of an added implementation task in the proposed Gas Utility Long-term Plan (GULP).
He added that the performance measure for objective C3 (I expect to pay a reasonable bill) should not
necessarily be the aggregate Utilities bill, but rather each fund separately. Otherwise, the information about
the relative position of each fund is lost.
Commissioner Berry added that he did not think the performance measure for objective C3 related to the
annual rate change should necessarily be the same for all Utilities funds. Ratchye acknowledged that, at
least in the short term, rate increases for water are likely to be higher than 10% per year. Commissioner
Berry stated that, if that was the case, it is not a good idea to include a performance measure that you
know you are not likely to meet and suggested having different targets for each fund. This would signal to
the Council and public what the direction of rate changes are likely to be. Commissioner Keller added that
predictable rates are valuable if communicated to customers to allow them to make informed investment
decisions regarding efficient appliances and other improvements.
Regarding objective C4 (care for our environment), Commissioner Cook stated that environmental
sustainability should be across all operations. He indicated that he supported objective PT4 (investigate
and adopt innovative technologies) and agreed with Chair Waldfogel that the equity transfer should be
added to the financial perspective. Minimizing financial risk should be incorporated into the financial
perspective as well. Commissioner Cook also indicated that environmental sustainability should be
included in the mission statement.
Commissioner Foster agreed that environmental sustainability should be included in the mission statement
and that the last phrase “…in support of the vibrant community of Palo Alto” should be omitted.
Commissioner Foster stated that objective C1 (I receive safe and reliable service) is about service
interruptions, yet the performance measure was about response time after an interruption. He suggested
that the measure should be related to the number of interruptions/outages. Regarding objective PT4
(investigate and adopt innovative technologies), Commissioner Foster recommended additional clarity on
the performance measure target of three new technologies evaluated per year. He wanted to ensure that it
was at least a somewhat extensive evaluation, perhaps including a trial or pilot program, rather than solely
a paper economic evaluation. Commissioner Foster also stated that the performance measure and target
for objective F3 regarding rate structures essentially is a policy change and this type of policy change
should be debated and discussed prior to be incorporated into the strategic plan. Ratchye responded that
Utilities Advisory Commission Minutes Approved on: February 2, 2011 Page 5 of 7
she agreed with Commissioner Foster’s suggestion and will move the idea to a strategic initiative as
something that should be addressed and a policy call made.
Commissioner Berry stated that the performance measure for objective PT1 (be an attractive place to work)
should be employee satisfaction as determined by a regular, periodic survey. He suggested that this is the
best way to determine if employees feel that they are working in an attractive place. It is also a way for
management to address any issues that are raised. Regarding objective C1 (I receive safe and reliable
service), Commissioner Berry advised that recovery time is important as well as number of outages.
ITEM 4: ACTION: Proposed Ten-Year Gas Energy Efficiency Goals
Resource Planner Christine Tam provided a presentation on the development of the ten-year gas energy
efficiency (EE) goals. She showed that over 90% of residential gas use is for water and space heating.
For commercial customers, about 75% of gas used is for water and space heating with about 20% for
cooking. Tam stated that the goals were developed by first assessing 40 gas efficiency measures to
determine how much gas could possibly be saved. This is the technical potential and is equal to about
45% of the total gas usage. The amount that can be saved with cost-effective energy efficiency measures
is equal to about 34% of the total City gas usage. Tam indicated that there are many barriers to achieving
the entire “economic potential” and that the achievable, or “market,” potential is about 5.5% of the Citywide
gas usage. This 5.5% is the proposed ten-year gas EE goal. Commissioner Keller asked whether the
projected potential capture savings from new construction projects. Kinnear responded that only energy
savings above the City’s building code, or the CALGREEN requirements, which exceeds the Title 24
building code. UMS staff is working with the Building Planning department to offer rebates to new
construction projects with energy savings that exceeds the City’s building code.
Tam explained that the bulk of the savings potential is for space heating for both residential and
commercial customers. The next biggest end use with the potential for saving gas is for water heating. For
residential customers, barriers to achieving the full economic potential include: high upfront costs, long
payback periods, long equipment life, the fact that contractors often do not have high efficiency alternatives
in stock, and the fact that water heater permits are time consuming at a point of immediate need, thus
reducing customer compliance with requirements. For commercial customers, the barriers include the lack
of incentives for either tenants or landlords in multi-tenant, rented buildings and business uncertainty and
cash flow issues for small businesses.
Tam noted that the proposed ten-year goals are similar to those of PG&E and other California utilities.
Since the proposed annual goals are higher than in the past three years, costs for the programs – both for
program administration and rebates and incentives – are expected to increase over the ten-year period. In
summary, Tam advised that the goals are aggressive – 5.5% compared to the 3.2% ten-year goal set three
years ago. She added that the proposed goals were developed using a comprehensive analysis and that
the implementation plan – expected in the spring – will contain more details on programs and resource
requirements. The plan is to seek all gas EE savings possible and that the goals should be achievable if
the resources are increased.
Commissioner Foster asked if staff evaluated a dramatically ramped up program to capture a larger share
of the economic potential. Tam stated that scenario analyses were performed concluding that the impact
on retail rates goes up dramatically to capture a greater fraction of the potential. Commissioner Foster
added that the triple net leases definitely remove the incentive for either party – the landlord or the tenant –
to invest in improvements and equipment that would result in energy savings. He also noted the fact that
solar hot water heating systems were so non cost-effective. He said that since the potential for savings is
Utilities Advisory Commission Minutes Approved on: February 2, 2011 Page 6 of 7
Utilities Advisory Commission Minutes Approved on: February 2, 2011 Page 7 of 7
so high for the water heating end use that we need to find a way to improve the economics of solar hot
water heating installations.
Chair Waldfogel indicated that he and others on the UAC undoubtedly have many comments on how to
achieve the gas EE savings goals most effectively, but that the implementation plan may be the most
appropriate place to make those comments. At this time, the establishment of the goals is the issue.
Commissioner Berry questioned the economic incentive to save gas for the utility. He noted that for the
electric utility, avoiding increased electric load or reducing load through energy efficiency can result in
avoiding the cost of large, expensive generation and/or transmission equipment. On the gas side, this is
less apparent until there is a real market for carbon emissions.
Commissioner Melton indicated that increasing the gas EE goal is not necessarily the right thing to do. He
indicated that it may not be economic to do so and may not be the right economic environment to reduce
gas sales. He indicated support for maintaining the current goals as we need to spend more money for a
smaller result.
ACTION: Commissioner Foster made a motion to recommend Council approval of the proposed ten-year
gas energy efficiency goals for the period 2011 to 2020. Commissioner Cook seconded the motion. The
motion carried (5-1) with Commissioner Melton voting no.
ITEM 5: ACTION: Form an Ad Hoc Committee on Innovation, Technology and Projects
ACTION: Chair Waldfogel appointed Commissioners Foster, Keller and Cook to the Ad Hoc Committee
on Innovation, Technology and Projects. By Section 4.1 of the UAC’s proposed Bylaws, this Ad Hoc
committee will be in place until June 30, 2011.
ITEM 6: ACTION: Potential Topic(s) for Discussion at Future UAC Meetings
None
COMMISSIONER COMMENTS
Commissioner Cook announced that on January 25, 2011 he would be attending the first session of the
Northern California Power Agency’s (NCPA) Strategic Issues Conference – NCPA 101 History and
Introduction.
Meeting adjourned at 10:00 P.M.
Respectfully submitted,
Marites Ward
City of Palo Alto Utilities