HomeMy WebLinkAbout2003-12-01 City Council (2)City of Palo Alto
City Manager’s Report
TO:HONORABLE CITY COUNCIL
FROM:CITY MANAGER DEPARTMENT: UTILITIES
DATE:DECEMBER 1, 2003 CMR:526:03
SUBJECT:UTILITIES STRATEGIC PLAN PERFORMANCE REPORT
JANUARY 2003 THROUGH JULY 2003
This is an informational report and no Council action is required.
BACKGROUND
On May 21, 2001, the City Council approved the Utilities Strategic Plan Implementation
Plan [CMR:223:01] and directed staff to make periodic progress reports on the
performance of the Utilities in meeting the objectives of the strategic plan. Staff
committed to update the Utilities Advisory Commission (UAC) and City Council twice
per year.
The attached October 1, 2003 UAC report covers the period January 2003 through July
2003 and is report #5. The report includes the City of Palo Alto Utilities (CPAU) overall
"Balanced Scorecard" (BSC) and a brief discussion!explanation of the major
accomplishments and activities under each performance measure for this reporting
period. The report concludes with Action Plans for each area in which an objective goal
was not met.
BOARD/COMMISSION REVIEW AND RECOMMENDATIONS
The Utilities Strategic Plan performance Balanced Score Card was presented and
discussed at the October 1, 2003 UAC meeting. Comments were generally positive and
indicated that the Commission felt that staff is moving in the right direction. Key
commission questions and comments are summarized below with staff responses.
CMR:526:03 Page 1 of 4
Clarify the "’minus" score received in the BSC for the business customer
perception under the Customer and Community perspective, and describe what
would bring that score to at least a "zero "’ or a "’plus. ""
In Spring 2003, RKS Research & Consulting conducted its bi-annual survey of
California Businesses on behalf of all of the California Municipal Utility (CMUA)
members. Although overall CPAU scores ranked higher than other California
municipal utilities and NCPA pool members in general, Palo Alto business
customers awarded CPAU a lower than average score in customer perception of
reliability, based primarily on their recollection of how many service disruptions
and/or power quality interruptions they had experienced during the year. Staff
believes that this result can be improved with better communication with business
customers, along with accelerated implementation of planned electric infrastructure
improvements.
For benchmarking purposes, staff reviewed the electric outage records for last year,
and compared CPAU’s average outage minutes per customer, as measured by
System Average Interruptible Duration Index (SAIDI), to nationwide average for
the American Public Power Association’s (APPA) annual survey, as well as
APPA’s results for the average for California IOU’s. In FY 2002/2003, CPAU’s
reliability goal was to achieve a SAIDI equal to or below 60 minutes. CPAU
achieved a SAIDI of 43 minutes, better than the SAIDI for neighboring
communities served by PG&E, but slightly above the average index of West Coast
APPA member utilities.
2. What is the difference between measure goal value and measure goal statement?
The "measure goal statement" is a qualitative description of CPAU’s goal for a
specific metric. The "measure goal value" is the quantitative number
corresponding to that goal.
It would be far more useful to simply compare our electric rates (residential,
commercial, industrial) by way of bill comparison with not only PG&E but also
with Santa Clara and Roseville. The same applies to water and gas rate
comparisons.
The current performance measure for Competitive Rates compares the average
overall (electric, water and gas) monthly utility bill broken down by type of
customer (residential, commercial, industrial) benchmarked against the same bills
CMR:526:03 Page 2 of 4
in neighboring communities. Staff will include, in the next update, comparisons to
other local municipalities for specific commodities for which data is readily
available.
With regards to the comment made about staff developing pe~formance measures
for wastewater efficiency, we may want to monitor metal discharge into the bay as
a potential benchmark.
Waste water treatment is handled at the Regional Water Quality Control Plant
(RWQCP), which does not fall under the jurisdiction of the Utilities Department.
It is run by the Public Works Department in joint agency with neighboring
communities. The Utilities Department is responsible for transporting the
wastewater using the wastewater distribution system to the RWQCP. Staff is still
developing meaningful metrics for tracking wastewater utility performance.
5. What dollar amount does the 2.4 percent change in CIP funding listed in Action
Plan #1 represent?
Staff will incorporate dollar amounts into future reporting. From Page 144 of the
2003-2005 Adopted Budget, "Total CIP expense in the Electric Fund is projected
to be $12.5 million in 2003-2004, a 2.4 percent increase above the $12.2 million in
2002-03." The 2.4 percent translates to $300,000.
POLICY IMPLICATIONS
This report supports the existing Council-approved Utilities Strategic Plan [CMR 432:02]
and Utilities Strategic Implementation Plan [CMR:223:01].
ATTACHMENTS
A:October 1, 2003 UAC Report.
B:Minutes from UAC Meeting October 1, 2003
PREPARED BY:
Senior Market Analyst
CMR:526:03 Page 3 of 4
DEPARTMENT HEAD:
CITY MANAGER APPROVAL:
of Utilities
Assistant City Manager
CMR:526:03 Page 4 of 4
MEMORANDUM
1
TO:UTILITIES ADVISORY COMMISSION
FROM:UTILITIES DEPARTMENT
DATE:
SUBJECT:
OCTOBER 1, 2003
UTILITIES STRATEGIC PLAN PERFORMANCE UPDATE
REPORT COVERING JANUARY 2003 THROUGH JUNE 2003
~QUEST
This report is the semi-annual update on the Utilities
Commission’s information only. No action is necessary.
SUMMARY
Strategic Plan and is .for the
The City of Palo Alto Utilities (CPAU) overall "Balanced Scorecard" for the period
beginning in January 2003 and ending in June 2003 is shown below:
Figure 1. Semi-Annual Utilities Overall Balanced Scorecard, January 2003 -June 2003
(Exceed Goal = +, Achieve Goal= 0, Fail in achieving Goal= -)
A.Customer &
Community
D. People
The remainder of this report consists of three parts. The first part will provide a topline
view of the "balanced scorecard" for the Utility’s Strategic Plan performance for the
period beginning in January 2003 and ending in June. The overall score in each
perspective is computed as the simple average of all of the scores received for the
objective measures under each perspective. The second part of the report will provide a
brief discussion/explanation of the major accomplishments and activities under each
performance measure for this reporting period. In addition, the second part of this report
will present an Action Plan for each area in which a score of (-) "minus" was achieved
for failing to reach the objective goal. The goal is to achieve a (+) "plus" score in these
areas when the second semi annual update report is presented and succeed in exceeding
the Strategic Plan Objectives. A score of (0) indicates that the goal was achieved for
measures that include a "high" and "low" range. The third part will provide action plans
for each area in which a (-) score was achieved.
BACKGROUND
On November 13th, 2000 the Palo Alto City Council (Council) approved the Utilities
Strategic Plan [CMR 418:00] and directed the City Manager to return to Council with an
implementation plan at a future date.
On May 21, 2001, Council approved the Utilities Strategic Implementation Plan
[CMR:223:01 ] and directed staff to make periodic progress reports on the performance of
the Utilities in meeting the objectives of the strategic plan. Staff committed to update the
UAC and City Council twice per year about the perfo~ .... nce of Utilities.
The first strategic plan performance report was presented to the UAC in November 2001,
and to City Council in January 2002 [CMR:129:02]. This initial report focused on
performance measures. Council indicated a desire to be presented with a discussion of
activities. This report provided key accomplishments and activities as well as key
performance measuresfor each of the strategic objectives. The report also included
discussion of recommended modifications to the Utilities Strategic Plan in order to adapt
to the changing utility industry environment.
The next update was provided to the Commission in April 2002. In October 2002, the
UAC was presented with another Strategic Plan Performance Report. Proposed changes
to the Strategic Plan were unanimously approved by the UAC. City Council approved
the revisions in the Strategic Plan Performance Report in November 2002 (CMR 432:02).
The Utility Strategic Plan is included in this report as Attachment A.
On March 5, 2003, the UAC approved the "balanced scorecard" approach presented by
staff as the method to set targets and to present the semi-annual strategic planning
performance measurement. In addition, the UAC made a few suggestions with regards to
the presentation of the final performance scorecard and benchmarking with comparable
utilities. Staff has included the recommendations by the UAC in this report.
2
DISCUSSION
I.Utilities Semi-Annual Balanced Scorecard
The Balanced Scorecard tracking methodology will assist in performance
measurement and promote a better understanding of CPAU’s strategic business
processes. It is expected that the scorecard will evolve over time and respond to
changes in the business climate, just as the Strategic Plan will evolve.
Figure 2 belov~ provides a topline overview of the Utilities overall performance for
the period January 2003 through June. As indicated earlier, within each
perspective, there are objective measures that determine if CPAU had achieved a
pre-determined goal (Attachment B, Balanced Score card Measures Summary,
provides a crosS-reference relating each of the 4 perspectives to specific
performance measures). The (+) "plus", (0) "zero", or (-) "minus" in each of the
four categories indicates the average overall performance score achieved for the
period being reported.
Figure 2
Utilities Balanced Scorecard, January 2003 -June 2003
By Objective
A. Customer & Communit~
1.Customer Satisfaction +
2.Reliability +
3.Unique MunicipalValue +
1.Safety
2.Attract & Retain TBD
3.Train & Develop "TBD
4.Gallup +
Each perspective and category was examined for alignment with CPAU’s
Strategic Plan to ensure that all four strategic objectives and all seven strategies
were integrated within the balanced scorecard approach. Many of the measures
are also collected by outside entities like APPA and RKS Research, and have in
some cases provided benchmarking opportunities. Staff feels that benchmarks are
useful for analysis, discussion and management, providing learning opportunities
in the strategic planning process and can help identify action steps that CPAU can
take to improve in all four Perspectives. However, benchmarks were not the sole
basis for the "correct" level of performance.
To measure customer satisfaction in the Customer and Community perspective,
three indices serve as useful indicators of achieving strong customer satisfaction.
These are the Residential Customer Satisfaction Index, the Business Customer
Satisfaction Index and the Customer Service Gap Analysis, which is the difference
between customer reported utility performance and customer expectations.
Service reliability is measured in terms of service interruption minutes per
customer per year. The value of local municipal ownership includes unique Public
Benefit and Demand Side management program offerings, as well as accelerated
infrastructure replacement programs to minimize maintenance costs in the future.
In the Environmental perspective, Utilities will continue to provide Public
Benefits and Demand Side Management Program offerings specific to its customer
sectors such as the new "Palo Alto Green" program, and implement the Long-term
Electric Acquisition Plan (LEAP) to manage the City’s Supply portfolio by
securing energy supplies for CPAU customers, including an aggressive 20%
renewable portfolio by 2015.
In the Financial persPective, Utilities’ competitiveness and overall efficiencies are
assessed by comparing Palo Alto rates with the rates of other local municipal
utilities (Muni’s) and investor-owned utilities (IOU’s). Historical comparisons are
also disaggregated by sector: Residential, Commercial, and Industrial. The
financial strength and robustness of the Utility Enterprise Funds are examined by
reviewing CPAU’s bond rating, debt service coverage and whether the reserve
fund balances fall within Council guidelines. In addition, two indices serve as
useful indicators of achieving Strategic Plan objectives: the variation between
budget plans and actual expenditures, and the Customer Accounting Ratio
(customer service and sales expenses per customer). In addition, three comparable
American Pubic Power Association indices are tailored to track Electric Fund
health: O&M expenses per circuit-mile, total O&M per kilowatt-hour (kWh) sold,
and number of customers per employee. Stability of returns to the community are
also assessed by reviewing the variation in transfers to the City’s General Fund.
To measure progress in the People perspective, CPAU compares the rate of OSHA
(the Federal Occupational Safety and Health Act) incidents against other utilities,
examines the employee turnover rate, tracks training and development and focuses
on building a stronger workplace program based on the results of the Gallup Q12
survey.
At this time, the Perspectives are presented in no particular order, i.e. they are not
arranged in order of importance. No item is weighted more heavily than another
at this time. For the future, staff is examining the integration of "customer value
management" into this process. Customer value management techniques
determine which measures and goals customers value the most, and then placesan
emphasis on the measures that customers find most important.
A. Customer & Community
Customer Satisfaction
Residential Customer Satisfaction Index (RCS)
(see Note 1)
Business Customer Satisfaction Index (BCS)
Gap Analysis
Reliabili _ty
Residential Customer Perception - reliability
(see Note 1)
Business Customer perception - reliability
System Average Interruptible Duration Index, (SAID!)
Service Interruptions per customer- Gas
Service Interruptions per customer - Water
+
+
+
Unique Municipal Value
Maintain local control
Accelerated CIP - Electric
Accelerated CIP - Gas
Accelerated CIP - Water
Public benefit and DSM program offerings
City facility efficiency
+
+
+
+
+
+
Notes:
The residential Customer Satisfaction Index (RCS) and the Residential Customer
perception measure of reliability are obtained from the CMUA Residential
Benchmark Survey of California Customers. The survey will be conducted in the
Spring of 2003 and the updated Index will be reported in the May 2004 report.
6
D. People
Safe _ty
Safe workplace
Safety education
(see Note 1)
TBD
Attract & Retain
Compensation
(see Note 2)
Employee tenure
Retirements
(see Note 3)
Employee turnover ratio
(see Note 4)
TBD
+
TBD
TBD
Train & Develop
Employee training and development
(see Note 5)
Gallup
Job Satisfaction Index
Notes:
TBD
1. Attendance at Safety meetings is mandatory. Staff will begin to track
employee attendance.at pre-scheduled monthly safety meetings and report
on the performance in the May 2004 update report.
2. Staff is working with the Human Resources Division to benchmark
compensation plans with other local Muni’s.
3. Staff continues to work on this areaand will develop a plan to mitigate the
expected increase in- employee retirees in the coming few years.
4. Staff is working with the Human Resources Divisionto examine the
employee turnover ratio :
5. Staff will be tracking the number of employee hours dedicated to training
and development andworkwith the Human Resources Division to
benchmark against industry standards.
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Action Plans
Staff developed the accompanying action plans, which reflect recommendations and
actions to mitigate the minus scores received.
Action Plan 1: Improve Electric Reliability Perception of business customers
In Spring 2003, RKS conducted its bi-annual survey of California Businesses on behalf
of all of the California Municipal Utility (CMUA) members. Although overall CPAU
scores ranked higher than other California Munis and NCPA pool members in general,
Figure 3 below shows that Palo Alto Business customers awarded CPAU a lower than
average score in reliability, based primarily on their recollection of how many service
disruptions and/or power quality interruptions they had experienced during the year.
Figure 3
Electric Business Customer Perception - Service Disruptions
The reliability of the distribution system continues to be a high priority. For
benchmarking purposes, staff reviewed the electric outage records for last year, and
compared CPAU’s System Average Interruptible Duration Index (SAIDI) to APPA’s
nationwide average, as well as to the average for California IOU’s. Figure 4, below,
shows CPAU’s SAIDI reliability .Index over a 10 year period compared to the
nationwide average for APPA member utilities and to that of California IOU’s (IOU
SAIDI statistics collected from the CPUC website). In FY 2002/2003, CPAU’s
reliability goal was to achieve a SAIDI equal to or below 120 minutes. CPAU achieved a
SAIDI of 142 minutes.
10
6OO
5O0
40O
Figure 4
Annual Electric System Average interruptible Duration Index
(SAIDI)
(Including storm relate~! outages)
300
200
100
However, it should be noted that the SAIDI ratio is influenced by the way a utility
records its outages. For example, some utilities may not record outages less than 30
minutes in duration, while others may not include outages caused by storm damage. To
mitigate this difference in reporting style, CPAU will begin to report its SAIDI excluding
storm-related outages as well for benchmarking purposes. Figure 5, below, shows
CPAU’s SAIDI reliability Index excluding storm-related outages. In FY 2002/2003,
CPAU’s reliability goal was to achieve a SAIDI equal to or below 60 minutes. CPAU
achieved a SAIDI of 43 minutes.
11
250 ¯
200-
15o.
loo
50
Figure 5
Annual System Average Interruptible Duration Index (SAIDI) "
(Excluding storm related outages)
Staff will continue to focus efforts on replacing and maintaining the aging infrastructure
and improve reliability. In fact, the Electric Fund is moving forward with projects to
guarantee a high level of customer service. Through its CIP program for system
reconstruction and improvements, the Electric Utility is devoting significant funding to
maintaining the reliability of service to its business and residential customers. The
increase in CIP funding from FY 2002/03 is approximately 2.4%.
Furthermore, a Utilities Marketing Plan will implement an interactive online link with
customers, while the Customer Service Call Center will continue to monitor call response
times to ensure prompt attention to customers.
Action Plan 2: Reduce OSHA Incident Rate to "0"
Although safety activities are not mentioned specifically in the Utilities Strategic Plan,
proper safety equipment, training activities, and statistics are monitored and reported on
an ongoing basis. Furthermore, even though OSHA recordable injuries dropped in
number since the last report, the fact that a goal of "0" reportable injuries was not
achieved made it necessary to assign a score of (-) minus to this performance measure.
12
Annual OSHA Incidence Rate - Electric
To mitigate the low score received for this reporting period, CPAU will continue to
conduct mandatory monthly safety meetings on subjects related to office and field work
safety. In addition, a new performance, indicator to measure staff attendance at the
monthly safety meetings will be used across all Utility Divisions to ensure staff
participation.
Action Plan 3: Provide programs and services to meet customer interests
Among various programs and services asked of business customers in the CMUA 2003
Statewide Survey of California Businesses, most reported interest in having the ability to
view electricity usage on their utility’s website followed closely by green energy
programs. In response to these interests, in FY 2003/2004 CPAU customers will see the
launch of a host of new customer services over the internet including "My Utilities
Account" to enable customers to pay their utility bill and view their account and billing
information on-line, Automated Meter Reading for remote meter reading, and 15 minute
interval consumption data for load profiling and usage analysis.
In addition, the new "Palo Alto Green" program offers "new" renewables (as defined by
the California Energy Commission). This program has achieved 90% of its goal so far
this fiscal year.
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ATTACHMENTS
A: Utilities Strategic Plan
B: Balanced Scorecard Measures Summary Tables
PREPARED BY:
Taha Fattah
S eni or UtiJj,~i es M~rke~yst
Karl E..Knapp /"~"
Senior Resource Planner
REVIEWED BY:
Scott Bradshaw, Assistant Directo ._~7-
Randy Baldschun, Assistant Director;z~
Girish Balachandran, Assistant Director/~
DEPARTMENT HEAD:
tor of Utilities
14
ATTACHMENT A
Utilities Strategic Plan*
MISSION
"To build value for our citizen owners to provide dependable returns to the City and citizens of
Palo Alto and to be the preferred f!!! se~ice utility provider whiIe sustaining the environment."
SUPPORTING OBJECTIVES
l. Enhance customer satisfaction by delivering valued products and services.
2. Invest in u~!!ity infrastructure to deliver reliable service.
3. Provide superior financial performance to the City and competitive rates to customers.
4. To identify and maintain the unique advantages of municipal ownership.
KEY STRATEGIES, Years 2001-06
STRA TEGY 1:
STRATEGY 2:
STRA TEG Y 3:
STRATEGY4:
’STRA TE~Y 5:
STRATEGY 6:
STRATEGY 7:
Operate distribution systems in a cost-effective manner.
Preserve a supply cost adyantage ~ompared to the marke~ pri~e.
Streamline and manage business processes to allow CPAU to work efficiently
and cost-effectively.
Deliver products and services valued by our customers, and continue to bdild
CPAU brand presence.
Attract and retain employees with Critical skills, and..knowled~e. .......
M~intain stable Gen.eml Fund transfers, and maintain financial strength.
Implement programs that improve .the quality of the environment.
KEY STRATEGIES with TACTICS
STRATEGY 1: Operate distribution systems in a cost-effective manner.
A. Accelerate the capital improvement program to reduce maintenance costs in later years when
competition may become more intense.
B. Develop multi-year supplement contracts with !ocal contractors to reinforce staffs installation of new
water, gas, and wastewater services.
C. Provide customized reliability solutions to meet customer needs.
D..~dentify and implement measures to reduce the frequepcy of contractors accidentally rupturing mains.
STRATEGY 2: Preserve a supply cost advantage compared tot_he market price.
A. Explore alternative supply methods and projects to control the cost of electric, gas, and water
commodities to meet existing and future customer needs.
B.Investigate partnerships, alternative sources, and projects to secure low cost, reliable transmission for
commodity supplies.
C.Manage exposure to energy corrmaodity price risk.
D.Enhance wholesale revenues through optimization of contractual rights for transmission and
generation.
E.Work through partner agencies such as BAW-UA, TANC and NCPA to become a more effective voice
for our mutua! benefit.
STRATEGY 3: Streamline and manage business processes to allow CPAU to work efficiently & cost
effectively.
A.Develop, execute, and monitor service level agreements with other City Departments.
B.Review the Municipal Code for governance and organization changes, which could improve Utilities
communication and success.
C.Examine outsourcing for cost-effective opportunities.
D.Support City effort to streamline budget, administrative, and regulatory processes.
E.Protect customer confidentiality to the greatest extent possible, as allowed by governing law.
F.Track and evaluate other departments’ charges to Utilities accounts.
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