HomeMy WebLinkAboutStaff Report 2710
City of Palo Alto (ID # 2710)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 4/16/2012
April 16, 2012 Page 1 of 5
(ID # 2710)
Summary Title: Modification of Renewable Portfolio Standard
Title: Finance Committee Recommendation to Adopt a Resolution Modifying the
City of Palo Alto Utilities’ Long-term Electric Acquisition Plan’s Strategy Related
to the Renewable Portfolio Standard
From: City Manager
Lead Department: Utilities
Recommendation
Staff and the Finance Committee recommend that the Council adopt a resolution approving the
proposed modifications to the Long-term Electric Acquisition Plan (LEAP) strategy related to the
Renewable Portfolio Standard (RPS), to read as follows:
Reduce the carbon intensity of the electric portfolio by acquiring renewable energy supplies by:
a. Pursuing a minimum level of renewable purchases of at least 33% of retail sales by 2015
with the following attributes:
i. The contracts for investment in renewable resources shall not exceed 30 years in
term.
ii. Pursue only renewable resources deemed to be eligible by the California Energy
Commission (CEC).
iii. Evaluate use of Renewable Energy Certificates (RECs) to meet RPS.
b. Ensuring that the retail rate impact for renewable purchases does not exceed 0.5 ¢/kWh
on average; and
c. Performing an ongoing evaluation of the Palo Alto Clean Local Energy Accessible Now
(CLEAN) program.
The Utilities Advisory Commission (UAC) recommends that the Council approve the different
version of paragraph a of the LEAP strategy related to RPS to read as follows:
Reduce the carbon intensity of the electric portfolio by acquiring renewable energy supplies by:
a. Pursuing a minimum level of renewable purchases of at least 33%, with a target of 40%,
of retail sales by 2015 with the following attributes:
i. The contracts for investment in renewable resources shall not exceed 30 years in
term.
April 16, 2012 Page 2 of 5
(ID # 2710)
ii. Pursue only renewable resources deemed to be eligible by the California Energy
Commission (CEC).
iii. Evaluate use of Renewable Energy Certificates (RECs) to meet RPS.
b. Ensuring that the retail rate impact for renewable purchases does not exceed 0.5 ¢/kWh
on average; and
c. Evaluating a Feed-In Tariff (FIT).
Additionally, the Finance Committee recommends that the Council adopt a goal to achieve a
100% Clean Electricity portfolio.
Executive Summary
The City’s Renewable Portfolio Standard (RPS) is to supply 33% of the City’s electric needs with
renewable energy by 2015. However, the City’s RPS policy needs to be slightly modified to be
consistent with State law and to clarify whether the 33% target is a minimum, or whether the
City should pursue the maximum amount of RPS resources that can be procured within the 0.5
cents per kilowatt-hour (¢/kWh) rate impact limit. The changes recommended by staff and the
Finance Committee are shown in bold italics in the table below.
Comparison of Existing and Proposed LEAP Strategy Related to RPS
Existing LEAP Strategy #3 Proposed LEAP Strategy #3
Renewable Portfolio Standard (RPS)
Reduce the carbon intensity of the electric
portfolio by acquiring renewable energy
supplies by:
a) Pursuing a target level of renewable
purchases of 33% by 2015 with the
following attributes:
i) The contracts for investment in
renewable resources shall not
exceed 30 years in term.
ii) Pursue only renewable resources
deemed to be eligible by the
California Energy Commission
(CEC).
iii) Evaluate use of Renewable
Energy Certificates (RECs) to
meet RPS.
b) Ensuring that the retail rate impact for
renewable purchases does not exceed
0.5 ¢/kWh on average; and
c) Evaluating a Feed-In Tariff (FIT).
Renewable Portfolio Standard (RPS)
Reduce the carbon intensity of the electric
portfolio by acquiring renewable energy
supplies by:
a) Pursuing a minimum level of renewable
purchases of at least 33% of retail sales by
2015 with the following attributes:
i) The contracts for investment in
renewable resources shall not exceed 30
years in term.
ii) Pursue only renewable resources
deemed to be eligible by the California
Energy Commission (CEC).
iii) Evaluate use of Renewable Energy
Certificates (RECs) to meet RPS.
b) Ensuring that the retail rate impact for
renewable purchases does not exceed 0.5
¢/kWh on average; and
c) Performing an ongoing evaluation of the Palo
Alto Clean Local Energy Accessible Now
(CLEAN) program.
April 16, 2012 Page 3 of 5
(ID # 2710)
LEAP was last updated in March 2012 when Council adopted a resolution to modify a LEAP
strategy related to the City’s study of energy storage systems (Staff Report #2581). The revised
LEAP, with the proposed changes included, is provided in Attachment B.
Finance Committee Review and Recommendation
On March 20, 2012, the Finance Committee considered the recommendation from staff and the
UAC to make a change to the RPS strategy in LEAP as highlighted below:
LEAP Strategy #3 – Renewable Portfolio Standard (RPS)
Reduce the carbon intensity of the electric portfolio by acquiring renewable energy supplies by:
a. Pursuing a minimum target level of renewable purchases of at least 33%, with a target
of 40%, of retail sales by 2015 with the following attributes:
(1) The contracts for investment in renewable resources shall not exceed 30 years in
term.
(2) Pursue only renewable resources deemed to be eligible by the California Energy
Commission (CEC).
(3) Evaluate use of Renewable Energy Certificates (RECs) to meet RPS.
b. Ensuring that the retail rate impact for renewable purchases does not exceed 0.5 ¢/kWh
on average; and
c. Evaluating a Feed-In Tariff (FIT).
The changes were recommended to clarify that RPS resources should be procured beyond the
33% RPS target level, but not more than can be procured with the rate impact limit of 0.5
¢/kWh, and that the 33% RPS minimum target is based on retail sales.
The Finance Committee discussed the recommended changes and generally supported the
recommendations, with a modification to remove the identification of a 40% RPS target and to
update the reference to a Feed-in Tariff. The Finance Committee discussed each
recommendation found in the Finance Committee report (Attachment C, Staff Report #2515):
1. The current LEAP strategy is unclear whether the RPS target is based on retail sales or
purchase volume. Before the State’s RPS law that applies to Palo Alto was adopted, Palo
Alto’s practice was to use purchase volume in calculating its RPS level, but the law
stipulates retail sales as the basis. The Finance Committee agreed with staff and the
UAC to use retail sales as the basis, consistent with State law.
2. The State’s RPS law includes interim compliance periods, but staff recommends not
complicating the City’s RPS strategy with compliance periods and the Finance
Committee agreed. Meeting the City’s internal RPS target will ensure that it will not be
out of compliance with the State law’s interim compliance period targets.
3. Staff and the UAC recommend modifications to the RPS strategy to clarify that the goal
is to procure at least 33%, but not to exceed the 0.5 ¢/kWh rate impact limitation. The
Finance Committee agreed, but voted not to include a 40% RPS target level.
April 16, 2012 Page 4 of 5
(ID # 2710)
4. The City must comply with the State’s RPS law’s restrictions on the use of Renewable
Energy Certificates (RECs), but staff does not recommend adding any additional
guidelines on the use of RECs. The Finance Committee agreed with staff’s
recommendation.
5. The City must comply with the restrictions on the types of renewable resources that can
be used for compliance with the State’s RPS law, but staff does not recommend
establishing any additional local requirements on the use of renewable resources to
meet its RPS targets. The Finance Committee agreed with staff’s recommendation.
The Finance Committee unanimously (4-0) recommended Council modify the LEAP Strategy
related to RPS as shown in the following table:
Existing LEAP Strategy #3 Finance Committee Recommendation
Renewable Portfolio Standard (RPS)
Reduce the carbon intensity of the electric
portfolio by acquiring renewable energy
supplies by:
a) Pursuing a target level of renewable
purchases of 33% by 2015 with the
following attributes:
…
Renewable Portfolio Standard (RPS)
Reduce the carbon intensity of the electric
portfolio by acquiring renewable energy
supplies by:
a) Pursuing a minimum level of renewable
purchases of at least 33% of retail sales by
2015 with the following attributes:
…
The Finance Committee then discussed another aspect of the RPS strategy that referred to
“evaluating a Feed-In Tariff (FIT).” The Finance Committee clarified that the Council had already
approved the first year of the Palo Alto CLEAN program and that it was their understanding that
the program would be reviewed and updated annually. Staff confirmed this understanding.
Thus, the Finance Committee stated that the RPS strategy needed to be updated since the
CLEAN program and rate had already been evaluated and that it should be evaluated on an
ongoing basis. The Finance Committee unanimously (4-0) recommended Council modify the
LEAP Strategy related to RPS further as shown in the following table:
Existing LEAP Strategy #3 Finance Committee Recommendation
Renewable Portfolio Standard (RPS)
Reduce the carbon intensity of the electric
portfolio by acquiring renewable energy
supplies by:
…
c) Evaluating a Feed-In Tariff (FIT)
Renewable Portfolio Standard (RPS)
Reduce the carbon intensity of the electric
portfolio by acquiring renewable energy
supplies by:
…
c) Performing an ongoing evaluation of the
Palo Alto Clean Local Energy Accessible
Now (CLEAN) program.
April 16, 2012 Page 5 of 5
(ID # 2710)
Additionally, the Finance Committee discussed how the RPS fits with a policy to achieve a
carbon neutral electric portfolio and how the voluntary 100% renewable PaloAltoGreen
program could fit into a carbon neutral, or “Clean Electricity”, portfolio. The Finance
Committee voted unanimously to recommend that the Council adopt a 100% Clean Electricity
portfolio policy.
Attachment D contains the draft excerpted minutes from the March 20, 2012 Finance
Committee meeting.
Resource Impact
Adoption of the proposed modifications to LEAP would change the way staff calculates the
City’s Renewable Portfolio Standard level – shifting from the practice of using the City’s total
purchase volume in the calculation to using the City’s total retail sales volume. This change in
practice would result in the need to procure approximately 12,000 MWh less renewable energy
per year, which staff estimates would save the City approximately $0.25 million per year.
Policy Implications
The proposed policy is compliant with state law and meets the minimum RPS requirements of
Senate Bill (SB) X1 2 on an accelerated pace. The proposed RPS policy would modify the LEAP
Strategy related to RPS by adding clarity, but would not change the general policy direction.
Environmental Review
Support of staff’s recommendation to approve the proposed modifications to the LEAP Strategy
related to RPS does not constitute a project for the purposes of the California Environmental
Quality Act.
Attachments:
Attachment A: Resolution Approving RPS Policy Modifications (PDF)
Attachment B: Modified Long-term Electric Acquisition Plan (PDF)
Attachment C: March 20, 2012 Finance Committee Staff Report (ID#2515) (PDF)
Attachment D: March 20, 2012 Finance Committee Meeting Draft Excerpt Minutes (PDF)
Prepared By: James Stack, Resource Planner
Department Head: Valerie Fong, Director
City Manager Approval: ____________________________________
James Keene, City Manager
*Not Yet Approved*
1
120406 dm 6051710
Resolution No. ______
Resolution of the Council of the City of Palo Alto Approving
Modifications to the City of Palo Alto Utilities’ Long-term
Electric Acquisition Plan (LEAP) Strategy Related to the
Renewable Portfolio Standard
WHEREAS, the Long-term Electric Acquisition Plan (LEAP) is a strategic
planning document focused on how the City of Palo Alto’s Utilities Department (CPAU)
can successfully balance environmental and economic sustainability as it provides
electric service to CPAU customers; and
WHEREAS, staff presented the Long-term Electric Acquisition Plan to the
Utilities Advisory Commission at its November 2, 2011 meeting, and the UAC voted 5 to
2 (with Commissioners Waldfogel and Barry opposed) to recommend that the City
Council approve the proposed modification to LEAP related to the strategy related to the
Renewable Portfolio Standard (RPS); and
WHEREAS, Council approved the Palo Alto CLEAN Program (Clean Local
Energy Accessible Now [a solar feed-in tariff ]) in accordance with the LEAP
Implementation Plan Goal #9 at its March 5, 2012 meeting (Staff Report 2548); and
WHEREAS, Council adopted modifications to the LEAP Implementation Plan
Items 7 and 21 to asses the needs for energy storage related to the electrical system at its
March 19, 2012 meeting (Staff Report 2581); and
WHEREAS, staff presented the Long-term Electric Acquisition Plan to the
Finance Committee at its March 20, 2012 meeting, and the Finance Committee voted
unanimously to recommend that the City Council approve proposed modifications to the
Strategy related to the Renewable Portfolio Standard (Staff Report 2515).
NOW, THEREFORE, the Council of the City of Palo Alto does hereby
RESOLVE as follows:
SECTION 1. The Council hereby adopts the resolution approving
modifications to the Long-term Electric Acquisition Plan (LEAP) Objectives, Strategies,
and Implementation Plan related to the Renewable Portfolio Standard to read as follows:
Reduce the carbon intensity of the electric portfolio by acquiring renewable energy
supplies by:
a. Pursuing a minimum level of renewable purchases of at least 33% of retail
sales by 2015 with the following attributes:
*Not Yet Approved*
2
120406 dm 6051710
i. The contracts for investment in renewable resources shall not exceed 30
years in term.
ii. Pursue only renewable resources deemed to be eligible by the California
Energy Commission (CEC).
iii. Evaluate use of Renewable Energy Certificates (RECs) to meet RPS.
b. Ensuring that the retail rate impact for renewable purchases does not exceed
0.5 ¢/kWh on average; and
c. Performing an ongoing evaluation of the Palo Alto Clean Local Energy
Accessible Now (CLEAN) program.
SECTION 2. The Council finds that any revenue derived from the
authorized adoption enumerated herein shall be used only for the purpose set forth in
Article VII, Section 2, of the Charter of the City of Palo Alto.
SECTION 3. The Council finds that the adoption of this resolution does not
constitute a project under Section 21065 of the California Environmental Quality Act
(CEQA) and the CEQA Guidelines, and therefore, no environmental assessment is
required.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
_________________________ ___________________________
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
___________________________ ___________________________
Senior Assistant City Attorney City Manager
___________________________
Director of Utilities
___________________________
Director of Administrative
Services
Long-term Electric Acquisition Plan (LEAP)
Objectives, Strategies and Implementation Plan
Approved March 7, 2011 (Resolution No. 9152)
Modified by Council March 19, 2012 (Staff Report No. 2581)
Proposed Modifications April 16, 2012 (Staff Report No. 2710)
LEAP Objectives:
1. Meet customer electricity needs through the acquisition of least total cost energy and
demand resources including an assessment of the environmental costs and benefits
2. Manage supply portfolio cost uncertainty to meet rate and reserve objectives.
3. Enhance supply reliability to meet City and customer needs by pursuing opportunities
including transmission system upgrades and local generation.
LEAP Strategies and Implementation Plan Steps:
1. Resource Acquisition – Pursue the least total cost resources including an assessment of
environmental costs and benefits to meet the City’s needs in the long term by:
a. Evaluating each potential resource on an equal basis by evaluating rate impacts and
establishing costs and values for location, time of day and year, carbon, value of
renewable supplies and any secondary benefits attributed to the resource; and
b. Including all resources – conventional energy, local and remote renewable energy
supplies, energy efficiency, cogeneration, and demand reduction – in the evaluation.
Implementation Plan Items for Strategy #1 – Resource Acquisition Estimated
Completion
1. Adjust planning and portfolio models to include an integrated and least cost
planning perspective which evaluates demand and supply side resources in an
integrated manner and includes time of delivery, locational and environmental
costs and benefits.
Dec. 2010
2. Evaluate the impacts of energy efficiency, demand reductions and electric
vehicle penetration in Palo Alto in the annual development of the electric load
forecast.
Dec. 2010
2. Electric Energy Efficiency and Demand Reduction – Fund programs that maximize
the deployment of cost-effective, reliable and feasible energy efficiency and demand
reduction opportunities as the highest priority resources by:
a. Every three years, preparing a ten-year energy efficiency plan that identifies all cost-
effective energy efficiency opportunities;
b. Using the cost of long-term renewable energy resources adjusted for time of day
factors and location as the avoided cost when evaluating cost effectiveness of energy
efficiency measures;
c. Designing and making energy efficiency programs available to all customers; and
d. Considering the impacts (costs, benefits and GHG emissions) of substituting
electricity-using appliances for natural gas-using appliances and vice versa in the ten-
year energy efficiency plan.
Implementation Plan Items for Strategy #2 – Electric Energy Efficiency and
Demand Reduction
Estimated
Completion
3. Provide quarterly updates on electric efficiency program achievements
including tracking against 10-Year Energy Efficiency goals to the UAC and
annual updates to the City Council.
quarterly
4. Develop Energy Efficiency Implementation Plan for the 2010 10-Year
Electric EE Plan addressing certain items identified in the May 2010 Council
Colleagues Memo and identification of resources and funding needed to
achieve EE goals.
Apr. 2011
5. Evaluate fuel switching energy efficiency measures and include them, if cost-
effective, in the Electric and Gas EE Implementation Plans.
Feb. 2011
6. Develop a pilot Demand Response Program for large commercial industrial
customers for implementation in summer 2011.
Apr. 2011
7. Assess the feasibility and cost-effectiveness of using current and potential
thermal energy storage (TES) systems to shift load from on-peak periods to
off-peak periods, for use in a demand response program, or for meeting any
energy storage needs. Coordinate with task 21 to develop targets, if
appropriate.
Sep. 2011
3. Renewable Portfolio Standard (RPS) – Reduce the carbon intensity of the electric
portfolio by acquiring renewable energy supplies by:
a. Pursuing a minimum level of renewable purchases of at least 33% of retail sales by
2015 with the following attributes:
i. The contracts for investment in renewable resources shall not exceed 30 years in
term.
ii. Pursue only renewable resources deemed to be eligible by the California Energy
Commission (CEC).
iii. Evaluate use of Renewable Energy Certificates (RECs) to meet RPS.
b. Ensuring that the retail rate impact for renewable purchases does not exceed 0.5
¢/kWh on average; and
c. Performing an ongoing evaluation of the Palo Alto Clean Local Energy Accessible
Now (CLEAN) program.
Proposed Implementation Plan Items for Strategy #3 – Renewable Portfolio
Standard (RPS)
Estimated
Completion
8. Fully integrate the effects on energy efficiency in the long-term electric load
forecast.
Nov. 2010
9. Evaluate the merits of implementing a feed-in-tariff (FIT) and the potential to
meet RPS goals through local renewable resources.
Jan. 2011
10. Seek UAC recommendation and Council approval of the policy elements of a
FIT to encourage local renewable resource projects.
May 2011
Proposed Implementation Plan Items for Strategy #3 – Renewable Portfolio
Standard (RPS)
Estimated
Completion
11. Continue working with NCPA to identify opportunities, including joint-
ownership, for developing qualifying renewable resources.
On-going
12. Evaluate the use of renewable energy credits (REC) to meet a portion of the
City’s RPS goal and/or greenhouse gas emission reduction goals and monitor
the regulations and requirements regarding the use of RECs to meet RPS
goals.
On-going
13. Evaluate a proposed geothermal project being considered by NCPA, including
a pre-pay option and the benefit, costs, and risks of a pre-pay structure.
June 2011
14. Conduct a Request for Proposal for eligible renewable resources including
RECs and evaluate alternative renewable resource technologies and
contracting mechanisms.
RFP in June
2011
4. Local Generation – Promote and facilitate the deployment of cost-effective local
resources by:
a. Using the renewable market price referent (MPR) adjusted for time of day factors and
location as the avoided cost when evaluating cost effectiveness of local resources;
b. Considering energy delivery cost uncertainty and strategic value options when
evaluating opportunities;
c. Evaluating a Feed-in-Tariff to promote locally sited renewable resources;
d. Evaluating cost-effective energy storage resources; and
e. Evaluating the feasibility of developing a 25 to 50 MW generating facility connect to
the City’s distribution system.
Proposed Implementation Plan Items for Strategy #4 – Local Generation Estimated
Completion
15. Provide an update of past local generation feasibility studies and actions to
UAC and Council
Dec. 2010
16. Assess the potential for and feasibility of small local distributed and non-
distributed, renewable and cogeneration projects, including using a FIT to
encourage these projects.
Jan. 2011
17. Assess the potential, benefits and costs of developing and/or joint ownership
of a 25 to 50 MW gas-fired power plant located in or near Palo Alto to meet
load, reliability and local capacity needs.
Jun. 2011
18. Evaluate the City’s PLUG-In Program to encourage cogeneration including
rules, regulations, and buy back rates and recommend modifications as
needed.
Dec. 2011
19. Following receiving Council direction from Implementation Plan Initiative
#10, develop a FIT proposal including rate, rules, regulations, standard
contract form and limits.
To be
determined
20. Assess the economics and potential of the anaerobic digester as a local
generation resource for CPAU
Sep. 2011
Proposed Implementation Plan Items for Strategy #4 – Local Generation Estimated
Completion
21. Assess the need for and value of energy storage to support local renewable
distributed generation resources. Determine any appropriate energy storage
targets to be achieved by December 31, 2016, and December 31, 2021.
Report back to the Council regarding what procurement targets, if any, are
deemed to be appropriate so that the Council may adopt such procurement
targets, if determined to be appropriate, by October 1, 2014.
Jun. 2012
5. Climate Protection – Reduce the electric portfolio’s carbon intensity by:
a. Supporting the City municipal government’s climate protection goals;
b. Promoting the use of technologies (e.g. incentives for cogeneration systems,
promotion of EVs, in-home energy displays) and programs that will reduce the
community’s carbon footprint at a cost of up to the City’s value of carbon;
c. Continuing to offer a renewable resource-based retail rate for all customers who want
to voluntarily select an increased content of non-hydro renewable energy; and.
d. Evaluating quantitative goals for possible future implementation.
Proposed Implementation Plan Items for Strategy #5 – Climate Protection Estimated
Completion
22. Promote the City’s Plug-in program to encourage development of
cogeneration systems.
On-going
23. Analyze electric vehicle (EV) charging patterns and evaluate rates to incent
nighttime EV charging.
Jun. 2011
24. Meet AB32 mandated annual reporting requirements to California Air
Resources Board on annual volumes of electricity purchases by resource.
Annually,
next in Jun.
2011
25. Track and report annually on 6 major greenhouse gas emissions (CO2, CH4,
N2O, SF6, HFCs, PFCs) for all of the City’s municipal operations and
calculate electric portfolio’s overall emissions coefficients (lbs of CO2, CH4,
and N2O per MWh of purchases).
Annually,
next in Sep.
2011
26. Evaluate the costs, benefits and impacts of the implementation of an electric
portfolio carbon neutral policy and the setting of quantitative goals (e.g.
carbon intensity, total GHG emissions).
Jan. 2012
27. Evaluate PaloAltoGreen program design and recommend modifications, as
appropriate, including constructing PaloAltoGreen to assist in meeting
Renewable Portfolio Standard goals.
Jun. 2012
6. Hydro Resource Management – Actively monitor and manage cost uncertainty related
to variations in hydroelectric supply and maximize value of hydro resources by:
a. Planning for an average hydro year on a long-term basis;
b. Utilizing cost effective hydro resource management products; and
c. Implementing opportunities to maximize benefits and reduce costs of the Western
Base Resource and Calaveras hydroelectric resources.
Proposed Implementation Plan Items for Strategy #6 – Hydro Resource
Management
Estimated
Completion
28. Evaluate potential rate adjustment mechanisms that would adjust electric rates
based on hydrologic year type and develop a recommendation for a rate.
Apr. 2011
29. Assess the value related to Palo Alto’s participation in the CAISO’s Metered
Subsystem Agreement and the use of the Calaveras hydroelectric project for
load following.
On-going
30. Identify long-term opportunities to maximize the value of the Calaveras
hydroelectric project as an energy storage resource.
On-going
31. Work with NCPA to seek opportunities to increase the efficiency of the
Calaveras hydroelectric project and implement operational value maximizing
strategies.
On-going
7. Market Price Exposure Management – Actively monitor and manage operational,
counterparty and wholesale energy price risk in the short-term (up to three to five years)
by:
a. Maintaining an adequate pool of creditworthy suppliers; and
b. Diversifying supply purchases across commitment date, start date, duration, suppliers
and pricing terms in alignment with rate stability objectives and reserve guideline.
Proposed Implementation Plan Items for Strategy #7 – Market Price
Exposure Management
Estimated
Completion
32. Evaluate a block purchase of up to 25 MW to meet base load needs for Jan-
Mar and Nov-Dec for a term of up to 5 years.
Feb. 2011
33. Conduct an RFP for new electric master agreement counterparties. Dec. 2011
34. Explore opportunities with NCPA, other municipal utilities and/or third party
suppliers to reduce scheduling and/or operating costs.
On-going
35. Continue to implement a 3-year laddering strategy to manage market price
uncertainty.
On-going
8. Transmission and Reliability – Pursue the reliability of supply at fair and reasonable
transmission and delivery costs by:
a. Actively participating through collaborative efforts with other entities, in local,
regional, statewide and federal regulatory and legislative forums;
b. Participating in transmission and reliability market design forums to ensure that
adopted market designs result in adequate reliability, workably competitive markets
and equitable cost allocation;
c. Evaluating interconnection options to the City to increase service reliability and lower
delivery costs; and
d. Exploring transmission opportunities and strategies to meet long-term renewable
portfolio objectives beyond 2020.
Proposed Implementation Plan Items for Strategy #8 – Transmission and
Reliability
Estimated
Completion
36. Investigate transmission connection voltage upgrade from 115 to 230 kV, and
the potential for a transmission reliability connection to west side.
On-going
37. Explore transmission opportunities and strategies to meet long-term renewable
portfolio objectives beyond 2020.
On-going
38. Evaluate joint efforts for power plant ownership opportunities or long-term
agreements to meet the City’s Resource Adequacy Program requirements.
On-going
City of Palo Alto (ID # 2515)
Finance Committee Staff Report
Report Type: Meeting Date: 3/20/2012
March 20, 2012 Page 1 of 7
(ID # 2515)
Summary Title: Modification of Renewable Portfolio Standard
Title: Utilities Advisory Commission Recommendation to Adopt a Resolution
Modifying the City of Palo Alto Utilities’ Long-term Electric Acquisition Plan’s
Renewable Portfolio Standard Strategy
From: City Manager
Lead Department: Utilities
Recommendation
Staff and the Utilities Advisory Commission (UAC) recommend that the Finance Committee
recommend that Council adopt a resolution approving the proposed modifications to the Long-
term Electric Acquisition Plan (LEAP) related to the Renewable Portfolio Standard (RPS), to read
as follows:
Reduce the carbon intensity of the electric portfolio by acquiring renewable energy supplies by:
a. Pursuing a minimum level of renewable purchases of at least 33%, with a target of 40%,
of retail sales by 2015 with the following attributes:
i. The contracts for investment in renewable resources shall not exceed 30 years in
term.
ii. Pursue only renewable resources deemed to be eligible by the California Energy
Commission (CEC).
iii. Evaluate use of Renewable Energy Certificates (RECs) to meet RPS.
b. Ensuring that the retail rate impact for renewable purchases does not exceed 0.5 ¢/kWh
on average; and
c. Evaluating a Feed-In Tariff (FIT)
Executive Summary
The City’s Renewable Portfolio Standard (RPS) is to supply 33% of the City’s electric needs with
renewable energy by 2015. However, the City’s RPS policy needs to be slightly modified to be
consistent with State law and to clarify whether the 33% target is a minimum, or whether the
City should pursue the maximum amount of RPS resources that can be procured within the 0.5
cents per kilowatt-hour (¢/kWh) rate impact limit. The recommended changes are shown in
bold italics in Table 1.
March 20, 2012 Page 2 of 7
(ID # 2515)
Table 1: Comparison of Existing and Proposed LEAP Strategy Related to RPS
Existing LEAP Strategy #3 Proposed LEAP Strategy #3
Renewable Portfolio Standard (RPS)
Reduce the carbon intensity of the electric
portfolio by acquiring renewable energy
supplies by:
a) Pursuing a target level of renewable
purchases of 33% by 2015 with the
following attributes:
i) The contracts for investment in
renewable resources shall not
exceed 30 years in term.
ii) Pursue only renewable resources
deemed to be eligible by the
California Energy Commission
(CEC).
iii) Evaluate use of Renewable Energy
Certificates (RECs) to meet RPS.
b) Ensuring that the retail rate impact for
renewable purchases does not exceed 0.5
¢/kWh on average; and
c) Evaluating a Feed-In Tariff (FIT)
Renewable Portfolio Standard (RPS)
Reduce the carbon intensity of the electric
portfolio by acquiring renewable energy
supplies by:
a) Pursuing a minimum level of renewable
purchases of at least 33%, with a target of
40%, of retail sales by 2015 with the
following attributes:
i) The contracts for investment in
renewable resources shall not exceed
30 years in term.
ii) Pursue only renewable resources
deemed to be eligible by the California
Energy Commission (CEC).
iii) Evaluate use of Renewable Energy
Certificates (RECs) to meet RPS.
b) Ensuring that the retail rate impact for
renewable purchases does not exceed 0.5
¢/kWh on average; and; and
c) Evaluating a Feed-In Tariff (FIT)
In this report, staff discusses several possible alternative RPS policy options. Even if the options
are not recommended at this time, they may be considered further if the City develops a plan
to achieve carbon neutrality for the electric portfolio.
Background
In April 2011, Senate Bill X1-2 (SB X1-2) extended the state’s RPS mandate to 33% by 2020 for
all utilities including the City. All California utilities are now required to meet the new RPS goals
of supplying 20% of their retails sales volume with renewable energy for the 2011 through 2013
period, supplying at least 25% by the end of 2016, and at least 33% by the end of 2020 (and
continuing every year thereafter).
SB X1-2 further establishes three different categories or “buckets” of renewable energy
products and sets limits on the degree to which a utility can rely on some categories to fulfill
their RPS requirements. (The City’s current RPS policy does not make such a distinction.) The
first category (“Bucket 1”), the state’s preferred one, consists of resources located in California
that deliver energy and environmental attributes to the purchaser as they are generated. All of
the City’s currently operating or contracted RPS resources fall into the Bucket 1 category.
“Bucket 2” resources are located out of state and deliver energy and an equal volume of
renewable attributes to the purchaser on different timing schedules to ease scheduling
burdens. “Bucket 3” resources deliver only the environmental attributes, or Renewable Energy
March 20, 2012 Page 3 of 7
(ID # 2515)
Certificates (RECs),1 and not the associated energy to the purchaser. Bucket 3 resources are the
state’s least preferred variety, but they are also the least expensive.
The new law—through Public Utilities Code section 399.30(a)—specifically applies to publicly-
owned utilities (POUs) like the City. Although the City’s current RPS target is more aggressive
than the state’s requirements, the state RPS law requires the City to formally adopt
enforcement language that recognizes certain elements of the new RPS law. In December
2011, Council approved an RPS enforcement program describing how the City will enforce its
RPS program in compliance with state law (Staff Report 2225). The approved enforcement
program mirrored the minimum requirements of SB X1-2 in order to minimize the chances of
incurring state-imposed penalties. However, the enforcement program is intended only for
compliance with state law, and does not preclude the City’s adoption of more stringent RPS
goals, such as it currently has.
Palo Alto’s Progress toward Meeting RPS Goals
The City uses California’s definition of qualifying renewable resources, which excludes large
hydroelectric plants exceeding 30 megawatts. Projects located outside of California are
considered qualifying resources, provided that they are located in the Western Electricity
Coordinating Council region (i.e., in the western U.S.) and began operating no earlier than
January 1, 2005.
The City Council has approved long-term contracts for nine in-state renewable resources. Five
of these resources are currently delivering renewable energy to the City and four are in the
permitting process. The nine contracts are expected to provide energy equal to about 28% of
the City’s retail sales volume by 2014. The retail rate impact for the nine committed contracts
is about 0.22 ¢/kWh, or a bit less than half of the allowed rate impact. If new renewable energy
contracts are executed at current costs for renewable energy, staff estimates that an RPS level
of about 35% can be achieved without exceeding the 0.5 ¢/kWh rate impact limit.
Discussion
The adoption of a statewide 33% RPS mandate presents the City with the opportunity to bring
its RPS policy more in line with the structure and details of the state policy, as well as to
consider a number of other potential changes. Some of these policy questions are addressed
below.
An RPS Target Based on Retail Sales Volume or Purchase Volume?
The state law’s RPS target levels are expressed as a percentage of a Load Serving Entity’s (LSE)
retail sales volume (as opposed to its purchase volume), whereas Palo Alto’s current RPS policy
language is unclear as to whether the target is 33% of retail sales or 33% of total purchases.
1 Renewable Energy Certificates (RECs), also known as renewable energy credits, green certificates, green tags, or
tradable renewable certificates, represent the environmental attributes of the power produced from renewable
energy projects and can be sold separately from the electricity commodity. One REC is associated with each MWh
of renewable energy generated by registered generation facilities.
March 20, 2012 Page 4 of 7
(ID # 2515)
Because of distribution system losses and other factors, the volume of an LSE’s retail sales is
slightly less than the volume of its total purchases. Therefore, a slightly smaller volume of
renewable energy is required to meet a target expressed as 33% of retail sales than is required
to meet a target expressed as 33% of energy purchases.
For consistency with the state requirement and regular and customer reporting requirements,
staff recommends clarifying the City’s RPS goal to be 33% of retail sales.
Set Compliance Period Targets?
Given that SB X1-2 includes three compliance periods with unique RPS procurement levels, the
question naturally arises whether the City should adopt interim compliance period targets to
align its RPS policy more closely with the state law. However, the City’s RPS supply already
exceeds the statewide RPS requirement for the 2011-2013 compliance period, and assuming
the City achieves its 33% by 2015 RPS target, it will have exceeded the statewide requirements
for the second and third compliance periods. Thus, staff feels there is no reason to make the
City’s RPS policy more complicated by adding interim RPS targets.
RPS Procurement Limited by Reaching the Rate Impact Limit or the RPS Target?
The current language in the City’s RPS policy—pursuing “a target level of renewable purchases
of 33% by 2015” while “*e+nsuring that the retail rate impact for renewable purchases does not
exceed 0.5 ¢/kWh on average”—is unclear as to what should happen when the 33% RPS target
is reached if the total average rate impact is less than 0.5 ¢/kWh. Should the City cease
procurement efforts once the 33% RPS target is achieved, or should it continue to procure
additional renewable energy until the rate impact limit is reached? Although the language
could be interpreted either way, staff suggests that the 33% RPS level is a target, not a limit,
while the 0.5 ¢/kWh rate impact value is clearly a limit and, thus, should be the governing
restraint.
Staff recommends modifying the RPS policy language to clarify that the goal is to procure at
least 33% of its retail sales volume from renewable energy sources, with the 0.5 ¢/kWh rate
impact limit serving as the overall restraint on the City’s RPS procurement efforts. Council
Members have made a similar point over the past year.
Change the Rate Impact Limit?
Staff recommends retaining the rate impact limit in its current form, with the 0.5 ¢/kWh rate
impact level serving as the restraint on renewable energy purchases. The RPS enforcement
policy adopted by Council in December 2011, uses the existing rate impact limit as the cost
containment provision for SB X1-2. The cost containment provision is useful to avoid being
penalized by state regulators in the event that high renewable premiums would interfere with
reaching the state RPS targets by the state deadlines.
Establish Guidelines on Use of Renewable Energy Certificates?
With the creation of the three renewable energy “bucket” categories under SB X1-2, the City
has the opportunity to establish its own guidelines on the use of these various types of RPS
March 20, 2012 Page 5 of 7
(ID # 2515)
products for meeting its own RPS target. SB X1-2 allows, but significantly limits, the amount of
Bucket 2 and 3 resources a utility may count towards its procurement requirements. The City
could take a “gold standard” approach and require that all of its RPS supply be from Bucket 1.
Or it could make it official policy to use Bucket 3 RECs only for contingency situations (e.g., if
there is a long-term outage at one of its contracted renewable resources, or a delay in the start-
up of a contracted resource).
Staff recommends preserving operational flexibility by not adopting any guidelines that further
restrict the use of Bucket 2 or Bucket 3 resources for compliance beyond the constraints
established by SB X1-2.
Establish Local Requirements for Renewable Resource Buckets?
The City could choose a policy establishing requirements to meet its RPS policy by designating
minimum and/or maximum amounts of Bucket 1, Bucket 2, or Bucket 3 renewable resources.
While the City must comply with SB X1-2, the City could adopt additional requirements. The
City’s committed renewable resources compared to SB X1-2’s procurement requirements are
illustrated in the figure below. Since all of the City’s currently contracted RPS supply consists of
Bucket 1 renewable resources, the City expects to easily comply with SB X1-2’s minimum
procurement requirements.
SB X1-2 Compliance Requirements vs. CPAU Portfolio
0
50
100
150
200
250
300
350
400
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
GW
h
p
e
r
Y
e
a
r
CPAU Committed Resources
SB X1-2 Bucket 1 Minimum
SB X1-2 Bucket 3 Maximum
CPAU RPS Goal
SB X1-2 Requirements
Because of the limits imposed on the use of Bucket 3 renewables for RPS compliance, the
incremental price (above the price of “brown” energy) for Bucket 1 resources (in-state bundled
March 20, 2012 Page 6 of 7
(ID # 2515)
energy and RECs) is significantly greater than the price of Bucket 3 resources (RECs with no
associated energy). Currently prices are approximately $40/MWh for Bucket 1 RECs (premium
over brown power) versus $5/MWh for Bucket 3 RECs.
Rather than establish a new policy on the use of the different categories of renewable
resources to achieve the RPS goal, staff recommends addressing this issue in the upcoming
discussion of the pursuit of a carbon-neutral electric portfolio. A plan to achieve carbon
neutrality will explore the question of which resources should be used for that goal and will
provide clarity on the distinction between RPS, carbon reduction, and electric portfolio carbon
neutrality goals.
Commission Review and Recommendation
Staff presented its recommendation to the UAC at its November 2, 2011, meeting. The UAC
supported staff’s recommendations, with modifications, and moved to recommend Council
approval of the following:
LEAP Strategy #3 – Renewable Portfolio Standard (RPS)
Reduce the carbon intensity of the electric portfolio by acquiring renewable energy supplies by:
a. Pursuing a minimum target level of renewable purchases of at least 33%, with a target
of 40%, of retail sales by 2015 with the following attributes:
(1) The contracts for investment in renewable resources shall not exceed 30 years in
term.
(2) Pursue only renewable resources deemed to be eligible by the California Energy
Commission (CEC).
(3) Evaluate use of Renewable Energy Certificates (RECs) to meet RPS.
b. Ensuring that the retail rate impact for renewable purchases does not exceed 0.5 ¢/kWh
on average; and
c. Evaluating a Feed-In Tariff (FIT)
The motion carried by a vote of 4-2 with Vice Chair Berry and Commissioner Waldfogel
opposed. Commissioner Waldfogel stated that he opposed the motion since he believes that
the entire 0.5 ¢/kWh rate impact limit does not need to be spent on renewables and it could be
put to better use for efficiency, other ways to reduce GHG emissions, or simply reduced rate
impact. Vice Chair Berry said that he agreed with Commissioner Waldfogel. Attachment B
contains the minutes from the November 2, 2011, UAC meeting.
Resource Impact
Adoption of the proposed modifications to LEAP is not expected to result in costs in excess of the
previously adopted 0.5 ¢/kWh rate impact limit.
Policy Implications
The proposed policy is compliant with state law and goes beyond the minimum RPS
requirements of SB X1-2. The proposed RPS policy would modify the LEAP Strategy related to
RPS by adding clarity, but would not change the general policy direction.
March 20, 2012 Page 7 of 7
(ID # 2515)
Environmental Review
Support of staff’s recommendation to approve the proposed modifications to the LEAP Strategy
related to RPS does not constitute a project for the purposes of the California Environmental
Quality Act.
Attachments:
Attachment A: Resolution Approving RPS Policy Modifications (PDF)
Attachment B: FINAL UAC Minutes of November 2, 2011 (PDF)
Prepared By: James Stack, Resource Planner
Department Head: Valerie Fong, Director
City Manager Approval: ____________________________________
James Keene, City Manager
Not Yet Approved
1
120224 dm 6051679
Resolution No. ______
Resolution of the Council of the City of Palo Alto Approving
Modifications to the City of Palo Alto Utilities’ Long-term
Electric Acquisition Plan’s Renewable Portfolio Standard
Strategy
WHEREAS, the Long-term Electric Acquisition Plan (LEAP) is a strategic
planning document focused on how the City of Palo Alto’s Utilities Department (CPAU)
can successfully balance environmental and economic sustainability as it provides
electric service to CPAU customers; and
WHEREAS, staff presented the Long-term Electric Acquisition Plan to the
Utilities Advisory Commission at its November 2, 2011 meeting, and the UAC voted 5 to
2 (with Commissioners Waldfogel and Barry opposed) to recommend that the City
Council approve the proposed modification to Long-term Electric Acquisition Plan’s
(LEAP) Renewable Portfolio Standard (RPS) strategy; and
WHEREAS, staff presented the Long-term Electric Acquisition Plan to the
Finance Committee at its March 6, 2012 meeting, and the Finance Committee voted x to
y to recommend that the City Council approve proposed modifications to the LEAP’s
RPS strategy.
NOW, THEREFORE, the Council of the City of Palo Alto does hereby
RESOLVE as follows:
SECTION 1. The Council hereby adopts the resolution approving
modifications to the Long-term Electric Acquisition Plan’s (LEAP) Renewable Portfolio
Standard strategy to read as follows:
Reduce the carbon intensity of the electric portfolio by acquiring renewable energy
supplies by:
a.Pursuing a minimum target level of renewable purchases of at least 33%,
with a target of 40%, of retail sales by 2015 with the following attributes:
i.The contracts for investment in renewable resources shall not exceed 30
years in term.
ii.Pursue only renewable resources deemed to be eligible by the California
Energy Commission (CEC).
iii.Evaluate use of Renewable Energy Certificates (RECs) to meet RPS.
b.Ensuring that the retail rate impact for renewable purchases does not exceed
0.5 ¢/kWh on average; and
c.Evaluating a Feed-In Tariff (FIT).
ATTACHMENT A
Not Yet Approved
2
120224 dm 6051679
SECTION 2. The Council finds that any revenue derived from the
authorized adoption enumerated herein shall be used only for the purpose set forth in
Article VII, Section 2, of the Charter of the City of Palo Alto.
SECTION 3. The Council finds that the adoption of this resolution does not
constitute a project under Section 21065 of the California Environmental Quality Act
(CEQA) and the CEQA Guidelines, and therefore, no environmental assessment is
required.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
___________________________ ___________________________
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
___________________________ ___________________________
Senior Deputy City Attorney City Manager
___________________________
Director of Utilities
___________________________
Director of Administrative Services
FINAL
UTILITIES ADVISORY COIVIIVIISSIOI~ MEETING
MINUTES OF I~OVEIVIBER 2, 2011
CALL TO ORDER
Chair Foster called to order at 7:05 pm the meeting of the Utilities Advisory Commission (UAC).
Present: Commissioners Berry, Cook, Foster, Keller, Melton and Waldfogel
Absent: Council Member Liaison Scharff and Commissioner Eglash
ORAL COMMUNICATIONS
None.
APPROVAL OF THE MINUTES
The minutes from the October 5, 2011 UAC meeting were approved as presented.
AGENDA REVIEW
No changes.
REPORTS FROM COMMISSION MEETING/EVENTS
Commissioner Melton reported that he attended the ground breaking ceremony for the new emergency
storage reservoir at EI Camino Park and was thankful that work was finally beginning on that project.
UTILITIES DIRECTOR REPORT
In the absence of Director Valerie Fong, Assistant Director Jane Ratchye delivered an oral report on the
following items:
1. Marketing and Efficiency Program Update -Staff proposed amending contracts with Ecology Action
to add funding for the Right Lights+ program and with OPOWER to continue the program for one year
beyond its original end date of May 2012. Both programs have had good energy efficiency results, and
the Right Lights+ program had reserved nearly all of its annual funding in the first two years of the
program with more businesses lined up to participate in lighting and sensor retrofits. On November 1,
the Finance Committee unanimously recommended approval of the amendments.
2. Residential Programs -The LED holiday light exchange will continue again this year in December.
Residents will be encouraged to exchange a working strand of incandescent holiday lights for a strand
of colored or white LED holiday lights. The new residential LED lighting rebate will begin in January
with a contest to find the "ugliesf' lighting in Palo Alto. The winning participant will get up to $400 in
free LED lights.
Utilities Advisory Commission Minutes Approved on: December 7, 2011 Page 1 016
3. PG&E Pipeline Testing Update -We have verified with PG&E that the "first segmenf' of the T-30
transmission pipeline (along Page Mill Road up to Foothill Expressway) passed its test last Sunday
without incident. The second and final segment of the T -30 pipeline is scheduled for testing tomorrow
(Nov 3) and assuming it completes without incident, the PG&E testing in Palo Alto will then be finished.
All thaI will remain is for PG&E to "tie-in" the lines back into the transmission system and restore the
various test sites to their previous condition (fill holes, repave, etc.)--scheduled to be done by
November 111h.
4. Visitors from Hunan Province, China (Oct 19) -Utilities staff hosted 25 top managers from various
government agencies within the Hunan Province who wanted to learn about how to operate successful
sustainability programs, particularly in the area of providing utilities services. Staff made presentations
and answered questions about our Climate Protection Plan, our renewable resources portfolio and
purchase strategies and our energy and water efficiency programs for all customer classes. Special
kudos to Dixon Yee from our UMS group wiho is fluent in Mandarin and translated beautifully.
5. Feed-in Tariff Program Documents Made Public -The preliminary program documents for the feed
in tariff program have been made public on the City's website at www,cityofpaloalto,orgIRenewableFIT.
The City has received questions and comments from several solar vendors and other organizations.
Staff has also been raising awareness about the program with potential host customers,
6. RPS Enforcement Program -California's new RPS law (Senate Bill XI-2) applies, for the first time, to
municipal utilities like Palo Alto in addition to investor owned utilities. With respect to the enforcement
of the law, S8 XI-2 requires that "[t]he governing board of the local publicly owned electric utility shall
adopt a program for the enforcement of this article on or before January 1, 2012," In order to meet this
deadline, staff plans to request Council approval in December 2011 of an enforcement program that
contains pro forma language on how the City will enforce its RPS regulations. The enforcement
provisions will comply with the state law, but will not necessarily be the same as the RPS strategy
adopted in the Long-term Electric Acquisition Plan (LEAP).
7. Update on Utilities Emerging Technology Demonstration Program -The City Manager requested
that the program reviewed by the UAC in October be reviewed by the Policy and Services Committee
on November 29. Council will review in December or January and staff plans to move forward with
implementation by February.
8. Halloween, Utilities Style -Utilities staff participated in the City Hall Halloween Contest with a group
costume featuring electric transmission lines and renewable resources (solar, wind and hydroelectric),
The project, which was completed on a budget of $25 (not from ratepayers!) using reused and recycled
materials, demonstrated how Utilities always works as a team to identify the lowest cost options!
9. Large Customer Load Growth -We recently learned of HP's plans to move several of its operations
from other areas of California to re-occupy several of its buildings on its Palo Alto campus and to build
a data center here in an existing building on its campus, The re-occupation may amount to 3 MW of
Utilities AdvisolY Commission Minutes Approved on: December 7, 2011 Page 2 of 6
returning load (about 1.5% of our energy load). The data center may build up to 8 MW of new load in
an existing building and add 7-12% to our energy load over the next 3 years.
UNFINISHED BUSINESS
None.
NEW BUSINESS
ITEM 1: ACTION: Update of Palo Alto Renewable Portfolio Standard (RPS) Policy
Resource Planner Dr. Jim Stack presented a summary of the written report, focusing on the policy options
for making adjustments to the Long-term Electric Acquisition (LEAP) strategy that concerns the Renewable
Portfolio Standard (RPS) in light of the new state RPS law.
Commissioner Keller asked if the City will have difficulties meeting the 33% RPS goal in the future-when
some existing contracts expire-under the rate impact limit, and whether there is an opportunity to save
money now and use it later. Stack noted that the rate impact limit is an annual limit and that "banking" is
not allowed with the rate impact limit budget.
Commissioner Cook asked for clarification on what is meant by "short-term" REC purchases? Stack
responded that any REC purchases would be intended to fill a short-term gap-up to about three years-in
the event that some resources would not come on line as planned or experience long-term outages.
Commissioner Cook noted that the state law allows utilities to establish reasonable cost containment
mechanisms and asked whether the 0.5 ¢/kWh rate impact limit would serve as Palo Alto's cost
containment measure? Stack answered that it would. Commissioner Cook stated that his preference
would be to pick a more aggressive RPS target than 33%, especially if it could be achieved within the
existing rate impact limit, and that perhaps a 40% target would be appropriate.
Commissioner Waldfogel noted that the UAC is about to review the City's greenhouse gas (GHG)
emissions policy, and that we should consider capping the RPS level at 33% and using the balance of the
money to taking a leadership position in reducing GHG emissions, going beyond what the state requires us
to do.
Commissioner Melton noted that all of our renewable energy is currenlly in Bucket 1, but inquired about
PaloAltoGreen RECs and whether they can be counted towards the RPS requirements. Stack and Ratchye
responded that the RECs purchased for PaloAltoGreen are not CEC-certified RECs, so they would not be
eligible for RPS compliance. Also, those RECs would not be eligible for RPS compliance even if they were
CEC-certified because they're part of a voluntary program.
Commissioner Melton noted that the $20 million staff identified as potential revenue from selling or
swapping excess bucket 1 resources is a lot of money and that if staff was planning to recommend against
pursuing this strategy, it should beef up its case for passing up this opportunity when going before Finance
Committee.
Chair Foster asked what could be done with the revenue from selling excess bucket 1 resources. Ratchye
responded that the money would stay in the electric fund, but could be used for any purpose in the electric
fund.
Utilities Advisory Commission Minutes Approved on: December 7, 2011 Page 3 of 6
Commissioner Waldfogel commented that striving for a higher RPS goal made sense when the 33% goal
was set, but now we've achieved our goal so perhaps we can use the remaining money for other goals
such as GHG emission reductions or energy efficiency and stake out a leadership position there.
Commissioner Melton commented that the idea of increasing the RPS goal to 40% has been floated at the
state level and asked whether there was any support in Sacramento for that idea. Stack responded that the
40% goal was mentioned in the governor's signing statement for SB XI-2, but the idea doesn't seem to
have taken off yet. Commissioner Melton noted that in an average year the supply portfolio is roughly 50%
hydro and if we had a 40% RPS he wonders whether that is too much of the portfolio to have locked in.
Stack responded that there will be less and less room for market purchases as we buy more long-term
resources, particularly in wet years. He also noted that this will mean we will be net sellers in more months
and buy less energy in the spot markets. But he noted that this just means we'll have a greater level of
market price risk.
Chair Foster asked about how we should balance spending more on efficiency vs. RPS vs. any other
program. Ratchye responded that the information to compare the costs or benefits of those alternatives
has yet to be provided to the UAC and that staff will be back next month with more information on the other
alternatives in the context of a discussion on whether to pursue a carbon-neutral electric portfolio.
Commissioner Waldfogel suggested approving staff recommendations numbers 1 (retail sales), 3 (interim
targets), and 4 (bucket sale/swap). (Referring to recommendation numbers in the presentation, not the
report.)
Chair Foster indicated that the proposed language needs to clarify which limit takes precedence: the rate
impact limit OR the 33% RPS level. Chair Foster noted that the language will be interpreted to mean that
33% is a minimum RPS level and staff will continue pursuing new renewables until the 0.5 cent limit has
been reached. Ratchye confirmed that this was the intent of staffs proposed language, but would prefer
that the language be as clear as possible.
Vice Chair Berry stated his belief that the current policy language sets the 0.5 cent rate impact limit, but
does not direct staff to use all of that money. He indicated that H is the customers' money, and there is not
a clear reason why all of the money needs to be spent.
Commissioner Melton said that the right policy decision is to recommend a 33% floor and a 0.5 cent limit,
retaining the ambiguity about what to do once the 33% level is reached if there is still additional money to
be spent under the rate impact IimH.
Commissioner Keller asked what would happen if the 33% target cannot be met without exceeding the rate
impact limit. Ratchye responded that at that point the Council could choose to stop pursuing additional
renewables-because the 0.5 cent rate impact limit is the City's cost containment measure-or approve
additional funds to be spent to achieve the 33% level.
Commissioner Waldfogel asked what the impact is of not mentioning policy update #5 (selling or swapping
bucket 1 resources) -can staff do this type of transaction, or are they prohibited? Ratchye responded that
staff can not currently do this type of transaction without receiving approval to do so from the Council.
Commissioner Melton said he does not think we need to address something staff can't currently do.
Ratchye also indicated that while staff does not currently intend to pursue this type of transaction, there is
Commission Minutes Approved on: December 7, 2011 Page 4 016
nothing precluding it from considering such transactions. Vice Chair Berry indicated that these potential
transactions may make sense to do, so we should not limit staff from acting on these opportunities.
Ratchye offered that staff return with further discussion of this topic in the ccntext of the scheduled report
for the UAC's December meeting on whether or not to pursue a carbon-neutral electric portfolio. Chair
Foster said he is not in favor of selling or swapping bucket 1 resources, but thinks there is interest from
members of the UAC to have more discussion on that topic. Vice Chair Berry said that this option may not
work for a variety of reasons, but that it cculd be beneficial and we should examine that in more detail since
there is significant money on the table for this. He would like to see the possibilities laid out in detail, with
numbers presented. Commissioner Melton agreed with Vice Chair Berry, saying that while staff has
indicated it does not think it should pursue these opportunities he wants to understand the options in more
depth. Chair Foster said he thinks there is consensus on the desire to have this issue brought back to the
UAC for further discussion in the future.
ACTION:
Commissioner Melton moved the staff recommendation. Chair Foster seccnded the molion. Chair Foster
offered an amendment to add "with a target of 40%" to provide clarity that the direction is to get as much
renewable energy as possible under the 0.5 cent/kWh rate impact limit Commissioner Melton accepted
the amendment. The motion is that the UAC recommend that Council approve the proposed modifications
to the Long-term Electric Acquisition Plan (LEAP) related to Strategy number three, Renewable Portfolio
Standard (RPS), to read as follows:
Renewable Portfolio Standard (RPS)
Reduce the carbon intensity of the electric portfolio by acquiring renewable energy supplies by:
a. Pursuing a minimum target level of renewable purchases of at least 33%, with a target of 40%, of
retail sales by 2015 with the following attributes:
(1) The ccntracts for investrnentin renewable resources shall not exceed 30 years in term.
(2) Pursue only renewable resources deemed to be eligible by the Califomia Energy Commission
(CEC).
(3) Evaluate use of Renewable Energy Certificates (RECs) to meet RPS.
b. Ensuring that the retail rate impact for renewable purchases does not exceed 0.5 ¢/kWh on
average; and
c. Evaluating a Feed-In Tariff (FIT)
The motion carried by a vote of 4-2 with Vice Chair Berry and Commissioner Waldfogel opposed.
Commissioner Waldfogel stated that he opposed the motion since he believes that the entire 0.5 cent rate
impact limit does not need to be spent on renewables and it cculd be put to better use for efficiency, other
ways to reduce GHG emissions, or simply reduced rate impact. Vice Chair Berry said that he agreed with
Commissioner Waldfogel.
ITEM 2: PRESENTATION: Preliminary Results From Fall 2011 Renewable Energy Project Request
Proposals
Resource Planner Dr. Jim Stack presented a high-level summary of the responses received to the City's
Request for Proposals (RFP) for renewable energy supplies.
Chair Foster indicated that he does not reccmmend pursuing additional landfill gas (LFG) projects due to
difficulties getting the last ones approved by Council. He also asked how the different technologies
Utilities Advisory CommiSsion Minutes Approved on: December 7, 2011 Page 5 016
compared with each other on cost. Stack responded that solar prices have fallen significantly since staff's
last renewable energy RFP two years ago -previously solar had been the most expensive technology, but
in this RFP the solar and wind proposals were the least expensive ones,
Commissioner Melton inquired about the size of the solar projects that were proposed, Stack responded
that most solar projects that were proposed were around 20 MW size, but some were proposals of small
pieces of larger projects,
Vice Chair Berry asked whether any proposals were for local solar projects, Stack responded that there
were no proposals for projects located in Palo Alto, but there were a couple of projects located in the Bay
Area.
Commissioner Waldfogel commented that this is amazing feedback from the market. He also asked
whether this information would be used in evaluating a carbon emissions policy. Ratchye responded that
one way of getting to a carbon neutral portfolio is through additional purchases of renewables, so this
information will be used to estimate the cost of carbon reduction measures that are based on increased use
of renewable energy,
Ratchye noted that staff's proposed Feed-in-Tariff rate is value-based and one component of the value
assessment is the cost of renewable energy, so these results will cause staff's Feed-in-Tariff rate proposal
to be lower than the one initially presented to the UAC.
Chair Foster asked when staff plans to come back to the UAC with the next step in this process, Stack
responded that, depending how contract negotiations go, staff could return to the UAC as early as April or
May with contracts ready for approval.
ITEM 3: ACTION: Potential Topic's) for Discussion at Future UAC
ACTION:
None.
COMMISSIONER COMMENTS
None.
Meeting adjourned at9:12 p.m.
Respectfully submitted,
Marites Ward
City of Palo Alto
Utilities Advisory Commission Minutes Approved on: December 7, 2011 Page60f6
FINANCE COMMITTEE
DRAFT EXCERPT
Meeting
March 20, 2012
2. Utilities Advisory Commission Recommendation to Adopt a Resolution
Modifying the City of Palo Alto Utilities’ Long-term Electric Acquisition Plan’s
Renewable Portfolio Standard Strategy
Resource Planner Jim Stack spoke regarding the City’s Renewable Portfolio
Standard (RPS) policy, which is part of the Long-term Electric Acquisition
Plan (LEAP). He said that staff was seeking clarity on the policy because the
City is close to meeting its 33% RPS target and staff needs to know when to
end its efforts to acquire more renewable energy resources. He also noted
that last year the state passed its own 33% RPS law, and that for the sake
of simplicity staff want to consider bringing one aspect of the City’s RPS
policy into conformance with the state’s policy. He described the City’s
progress in meeting its RPS target year by year and how much farther it has
to go to meet the target. He noted that the City also expects to receive
some additional energy not shown on the graph related to the Palo Alto
CLEAN local solar program and from responses to its recent Request for
Proposals (RFP) for renewable energy projects. He then described some of
the main elements of the City’s RPS policy: a single target of 33% by 2015
and a 0.5 cent per kWh rate impact limit. But he noted that it was unclear
whether staff should cease its procurement efforts upon reaching the 33%
RPS level, or upon reaching the 0.5 cent per kWh rate impact limit. He then
described some of the elements of the state’s 33% RPS law, including the
three multi-year compliance periods and targets, the fact that the RPS level
is expressed as a percentage of retail sales volume rather than the volume
of purchases, and that the state defines three categories or buckets of
renewable energy resources –- which the City does not do. He then
addressed the main point of clarification that staff was seeking: whether
staff should end its procurement efforts upon reaching the 33% RPS level, or
upon reaching the 0.5 cent per kWh rate impact limit. He noted that based
on current market Council Member Prices, staff believes they can achieve an
RPS level of between 36% and 40% by 2015 within the 0.5 cent per kWh
rate impact limit. He then said that staff and the UAC recommends that the
RPS policy be clarified to state that the 0.5 cent rate impact limit is the
dominant limit, and that staff should attempt to go above and beyond the
33% RPS level until reaching that limit. He noted that they feel that the 33%
RPS level is a target, not a limit, whereas the 0.5 cent/kWh rate impact
value is clearly a limit and should serve as the governing constraint on our
RPS procurement efforts. He also said that staff and the UAC recommend
clarifying that the City’s RPS level targets be expressed as a percentage of
retail sales volume, as with the state RPS mandate language. He noted the
importance of not having two different sets of numbers floating around –
one number for internal RPS accounting based on total purchase volume,
and another number based on total retail sales volume is reported to the
state. He noted that the difference between the two numbers is small
enough that it wouldn’t make much of a difference in terms of staff’s actions.
He then showed a comparison of the existing RPS policy language and the
language recommended by staff and the UAC. He then discussed some of
the possible policy changes that staff and the UAC considered but did not
recommend making. These included the establishment of compliance periods
and interim RPS targets and the establishment of restrictions or guidelines
on the use of different types of renewable energy resources.
Chair Shepherd introduced Jon Foster, the chair of the UAC, who noted that
the UAC supported staff’s recommendation.
Vice Mayor Scharff asked why the decision on whether to go above 33% RPS
is necessary right now.
Utilities Director Valerie Fong noted that staff has been evaluating responses
to its RFP which look attractive, and accepting some of them would put us
over the 33% level. She also noted that staff plans to issue another RFP for
renewable energy and we expect to be in a position again where we could
get above the 33% level within the 0.5 cent per kWh limit.
Vice Mayor Scharff asked about the timing of the next RFP.
Mr. Stack said that staff expects to bring a contract from the previous RFP to
Council in the next few months, and to release a new RFP in about a month,
with the contracts resulting from that RFP expected to be ready for Council’s
review in the fall.
Vice Mayor Scharff said that the staff report said that the City could get to a
35% RPS level within the rate impact level, but that now they are saying
that 36% to 40% is possible, and asked about the discrepancy.
Mr. Stack said that the staff report was written before the Council Member
Prices from the recent RFP had been known, and that the market Council
Member Price of renewables has fallen recently and was lower than
expected.
Vice Mayor Scharff asked about the definition of the term “carbon neutral,”
which was used in the staff report.
Ms. Fong noted that the exact definition has not been determined yet, and
that that topic needed to be discussed with the UAC and Council.
Chair Shepherd asked which resources are not considered eligible for the
RPS.
Ms. Fong noted that large hydro and nuclear resources are carbon neutral
but are not deemed RPS eligible by the state.
Vice Mayor Scharff asked whether we should focus on carbon neutral
resources and not limit ourselves to RPS eligible resources only.
Ms. Fong noted that there is a benefit to having a more diverse supply
portfolio, and the portfolio already has a large amount of hydro resources in
it.
Council Member Price noted that she would like to see a definition of carbon
neutrality, as that term is being used frequently. She also asked for
clarification on what a Renewable Energy Certificate (REC) is and how it’s
different from renewable energy.
UAC Chair Foster described three different categories of energy resources –
“brown” energy resources that emit carbon, non-carbon emitting resources
that are not considered renewable (such as large hydro), and RPS-eligible
renewable energy resources. He noted that RECs represent the renewable
energy attributes of energy that someone else is using. The utility buying
the REC in a paper transaction gets to count the REC towards its RPS
targets.
Council Member Price then asked for clarification on the rationale on
including the “target of 40%” language in the RPS policy.
Mr. Stack noted that the Governor has recently talked about raising the
state’s RPS target from 33% to 40%. He also pointed out that renewable
energy Council Member Prices have fallen recently, and in the next RFP there
may be proposals that would put the City over its 33% target and staff
would like to have the flexibility to accept those attractive offers.
Chair Shepherd asked about the timeline for the carbon neutrality
discussion.
Utilities Assistant Director Jane Ratchye responded that the first part of the
carbon neutral policy -- the discussion on whether there is support for
developing a carbon neutral plan -- will go to Council in April. Then staff will
develop the plan and bring it to the UAC in October, to the Finance
Committee in November, and to Council in December. This part will describe
how and when the City will try to achieve carbon neutrality. She also noted
that the current discussion focuses on a policy, and does not give staff the
authority to execute any contracts; the Council still has the ability to reject
contracts that staff brings to them. She said that the purpose of seeking
policy direction right now on the issue of stopping at 33% or going beyond it
was important because staff does not want to bring contracts to Council that
are rejected because Council does not want to go beyond 33%.
Council Member Burt asked what portion of the City’s portfolio currently
consists of landfill gas resources, which he says are not carbon neutral even
though they are defined by the state to be renewable. He suggested
abandoning the term “carbon neutral” in favor of the term “clean energy”
which include all sustainable energy resources, including large hydro and all
state-defined renewable resources. He also suggested avoiding a debate
about the “embedded energy” in various types of energy resources. He then
asked about the definition of “Bucket 1” renewable resources -- whether it
represented the renewable energy resources that the City has typically
purchased, or whether it could include sales of RECs without energy.
Mr. Stack replied that it referred to renewable energy resources like the ones
the City has purchased to date and did not include RECs without energy
associated with them.
Council Member Burt asked about the difference between retail sales and
purchases, and which method the City has generally used in the past.
Mr. Stack responded that the numbers cited in the staff report are expressed
as a percentage of retail sales volumes. Ms. Ratchye added that in the past,
staff has generally used total purchases as the basis of its RPS calculation.
Council Member Burt said that this point was not clear in the staff report and
should be clarified in the report that goes to Council. He noted that the City’s
past practice of using purchases as the basis of the RPS calculation under-
credits the City’s renewable procurement efforts. He then asked what the
difference is between total retail sales volumes and total purchase volumes.
Mr. Stack responded that retail sales volumes are typically 3% to 5% lower
than its total purchase volume, so a target expressed as 33% of retail sales
requires the City to purchase about one percentage point less renewable
energy than a target expressed as 33% of total purchases.
Council Member Burt then asked about how Palo Alto is doing in comparison
to other utilities on reaching the 33% RPS target.
UAC Chair Foster responded that the three investor owned utilities (IOUs)
are at roughly the 20% level, as is Palo Alto right now.
Ms. Fong noted that the other municipal utilities in California are all over the
map with respect to meeting the 33% RPS goal -- some are at less than
10% RPS, others are at higher levels than Palo Alto.
Council Member Burt asked what the City’s original RPS goal was, when the
0.5 cent per kWh goal was established.
Mr. Stack responded that in 2002 the City adopted a goal of 20% RPS by
2015, and adopted the 0.5 cent per kWh rate impact limit at the same time.
Council Member Burt said that the City should communicate that it has
achieved its original 20% RPS goal and done so way under budget. He noted
that it is a great achievement that we think it’s possible that we can get to
36% to 40% RPS level within the original budget amount, and we should
communicate that. Council Member Burt then asked what would happen to
the City’s Feed-in Tariff program if the whole 0.5 cent per kWh rate impact
limit for renewables is used up. He said that under the current RPS policy
the Feed-in Tariff program would be killed off if the whole rate impact limit is
used up. He suggested either reserving a portion of the 0.5 cent rate impact
limit for the FIT or approving an increase in the rate impact limit above the
0.5 cent level.
Ms. Ratchye noted that the FIT is an RPS resource and it would have to be
counted in the rate impact calculation, but that it is a much smaller volume
than most long-term contracts the City expects to enter into so it would
have a very small impact on the overall rate impact of renewables.
Council Member Burt suggested that when staff presents a chart showing the
City’s year-by-year progress towards its RPS target, it should also present
some scenarios for future renewable procurement efforts. He then asked
what percentage of the City’s resources are hydroelectric resources.
Mr. Stack responded that about 50% of the City’s total electric portfolio in an
average year is from hydroelectric resources.
Council Member Burt then noted that the City’s PaloAltoGreen sales
represent 6 to 7% of total sales. He pointed out that this program is a REC
sales program -- a point which he said had not been made clear to
customers. He said that staff has omitted these REC purchases from their
discussion of the City’s renewable procurement achievements, but that they
are helping the City to get closer to a carbon neutral or clean energy
portfolio.
Ms. Ratchye responded that as the City’s electric portfolio gets closer to
being carbon neutral, the PaloAltoGreen program will get harder to market,
so part of the carbon neutral plan will include a discussion on what to do
with this program and whether to have a successor program.
Council Member Burt pointed out that there are a lot of folks in the
community who are willing to pay a little more to do something for the
environment. He then noted that two of the UAC commissioners --
Commissioners Waldfogel and Berry -- suggested that the City should not go
beyond 33% RPS but rather look at other things to do with the money, like
efficiency. But he noted that the City’s efficiency investments do not come
out of the 0.5 cent renewable rate impact allocation, so he suggested that
the City could do more on efficiency and still go beyond the 33% RPS level.
He asked staff whether their calculations of RPS potential included the City’s
target of getting 7.2% load reduction by the end of the decade through
efficiency programs.
Mr. Stack responded that they did include these efficiency projections.
Council Member Burt then inquired about the City’s existing brown energy
contracts, and whether they would limit the City’s ability to procure more
renewables.
Ms. Ratchye responded that the City does have some existing short-term
brown energy contracts, but only they only go out about 18 months so they
wouldn’t limit any long-term procurement efforts.
Council Member Burt then said that he would prefer to only use RECs for
contingency purposes. He said that they are a less preferred and somewhat
contentious resource, and that if the City can achieve its goals through less
ambiguous methods it should do so.
Chair Shepherd asked staff how committed the state is to maintaining
landfill gas based electricity in its definition of renewable energy.
Ms. Fong responded that the state defined landfill gas energy as renewable
because it does reduce the amount of emissions coming out of landfills and
that it hasn’t suggested changing its definition of landfill gas as a renewable
resource.
Chair Shepherd then asked if any environmental groups were lobbying
lawmakers to change the definition of renewable resources to exclude landfill
gas.
UAC Chair Foster responded that when the City considered several landfill
gas contracts a year or two ago, the local Sierra club expressed its
opposition to this type of resource, but he said he wasn’t aware of any state
level lobbying efforts to change the renewable energy definition.
Chair Shepherd indicated that when the carbon neutral plan gets to Council,
she would like to see an indication of the risk that the resource definitions
would change in the future, and how the City would respond to such a
change.
UAC Chair Foster predicted that the rules would not change, but that if they
did they would not change retroactively. He then predicted that given all of
the discussions that Council has had about landfill gas, staff will not be
bringing any landfill gas contracts to Council anytime soon.
Chair Shepherd asked for staff’s prediction about what would happen to the
renewables market now that the whole state has to go out and get to the
33% RPS level -- would there be enough resources for everyone, and would
there be any economies of scale that might drive Council Member Prices
down in the future?
Ms. Fong responded that there was no way of knowing, but that the Council
Member Prices in the recent renewable energy RFP were lower than
anticipated. And she noted that given the “cliff” -- the dropoff in the City’s
renewable energy commitments starting around 2020 -- staff considered
now to be a good time to start filling in that gap with more long-term
contracts.
Chair Shepherd then noted that VTA has gone energy independent through
rooftop solar at their yards, and asked whether the City has considered
doing anything like that.
Ms. Ratchye responded that this was a General Fund issue, and that
Facilities staff would have to evaluate this option and determine whether
they have the money to do this.
Council Member Price asked whether the City has a policy requiring new civic
buildings to have solar panels installed or be LEED certified.
Ms. Fong responded that she was not aware of any such policy.
Chair Shepherd asked about the City’s Innovation Fund that is starting in
2015, and whether that could help the City fund RPS projects.
Ms. Fong replied that the 2015 deadline applies to the Electric Special
Projects fund, which was formerly known as the Calaveras Reserve Fund,
and that the Innovation Fund was a separate pilot program.
Chair Shepherd asked if the City could fund any of its own renewable
projects through the Electric Special Projects fund.
Ms. Fong replied that this was possible, although there were other projects
that could also be funded through that money, such as a transmission
project.
Vice Mayor Scharff noted that the only requirement for the use of the
Electric Special Projects fund is that the funds be used to benefit the City’s
electric ratepayers.
Chair Shepherd asked whether the City is being proactive in looking for
projects to spend these funds on, or whether it was being passive and
waiting for industry to come forward with projects through the CLEAN
program.
Ms. Fong responded that we’re not currently looking proactively for
renewables projects to do within the City because staff does not believe such
projects would be economical for the City -- that the cost of such projects
would not be able to beat the cost of larger scale projects done through
long-term contracts.
Vice Mayor Scharff asked how big a 25 MW solar project is in terms of land
area.
Mr. Stack responded that the rule of thumb is that solar projects occupy
about 10 acres of land per 1 MW of capacity.
Vice Mayor Scharff then asked for clarification on the discussion the UAC had
with staff about selling some of its renewable portfolio.
UAC Chair Foster responded that all of the City’s current renewable
resources are defined as Bucket 1 resources by the state, but that the state
allows utilities to use Bucket 3 resources as well as Bucket 1. So Palo Alto
could theoretically sell some of its in-state Bucket 1 resources for $40 and
then buy some cheaper out-of-state Bucket 3 resources to meet its RPS
targets.
Vice Mayor Scharff then suggested that the successor to the PaloAltoGreen
program could be a program allowing people to pay a premium to buy local
Feed-in Tariff generated energy. He said he thinks that would be a program
that the City could sell to people.
Ms. Fong responded that she thought it’s a great idea and staff would
consider it.
Vice Mayor Scharff said that he would like to see a plan to reach 100% clean
energy and that he thinks they should vote right now to recommend that the
City go with clean energy and drop the term carbon neutrality.
Ms. Fong responded that she does not think this topic was on the agenda.
Vice Mayor Scharff replied that of course it was on the agenda. And he said
that he would like to move forward towards a clean portfolio quickly -- that
he thinks we should have a goal of having a clean portfolio by sometime in
2013. He suggested replacing the phrase “with a target of 40%” from the
RPS policy language proposed by staff and the UAC with “with a target of a
clean portfolio by 2013.” He asked whether this would give clear direction to
staff.
Ms. Fong said that staff still needs direction on the definition of “clean.”
Vice Mayor Scharff responded that he thinks the definition should be non
carbon emitting resources –- carbon neutral, or carbon free.
Council Member Burt then asked what would happen to the portion of the
City’s existing renewable portfolio that would not qualify under that
definition.
Vice Mayor Scharff responded that the definition then should be state-
defined renewables plus carbon free resources.
Council Member Burt noted that with long-term contracts, often the projects
don’t come online right away. And if the goal is a clean portfolio in 2013, the
City may have signed contracts for resources in 2013 that don’t come online
right then. He also noted that it was important not to sign a blank check in
pursuing this goal.
Vice Mayor Scharff said he thinks that the target should be achieved within
the existing 0.5 cent rate impact limit.
Council Member Burt said he does not think that the goal is achievable
within the existing 0.5 cent rate impact limit, and he does not want to give
staff unachievable direction. He said that if the City were to transition the
PaloAltoGreen program to a program that purchases local solar energy, then
this energy and perhaps the Palo Alto CLEAN energy could be defined as
being outside of the 0.5 cent rate impact limit calculation.
Ms. Ratchye cautioned against trying to design the PaloAltoGreen successor
program at this meeting. She also noted that if these customers were to buy
100% of their energy from local solar projects it would cost a lot more than
they are currently paying for PaloAltoGreen.
Council Member Burt said that moving forward, he agrees with Vice Mayor
Scharff that the current discussion of the City’s RPS strategy should be
expanded to cover the clean energy portfolio goal. He said that he does not
expect this to be the last discussion they have on this subject. He said that
there are issues related to this subject that go beyond technical matters and
he thinks the committee should recommend that the Mayor appoint an ad
hoc committee comprised of two Council members, two UAC members, and
staff working together on this plan. He thinks this arrangement would
provide a valuable feedback loop that would be missing from the staff
proposal to bring a plan to Council for approval at the end of the year. He
suggested that the committee should recommend tonight that the Council
adopt the clean energy portfolio goal as policy, and that the mayor appoint
an ad hoc committee to work with staff on developing the parameters of the
plan.
Chair Shepherd asked whether this work should be done by an ad hoc
committee or by a sub-committee of the Finance Committee.
Council Member Burt said he thinks that if they can go far enough tonight to
make a recommendation to Council that they should do that as a whole
committee. Or if they needed more time to consider that recommendation to
Council then Chair Shepherd could appoint a sub-committee of the Finance
Committee to work on that before coming back to the Finance Committee
before coming to a recommendation. But he said that they would not be able
to get through all of the layers of consideration brought up by staff tonight.
And since there are a number of members of Council and the UAC who have
a lot of experience in this area, it makes sense to have a focus group of both
of those groups working with staff to come up with a better product.
Chair Shepherd stated that it was her preference to flush it out among the
Finance Committee and then go to Council with the idea of the ad hoc
committee if they think it has to go that far after working with staff and the
UAC.
Council Member Price said she thinks that some things that Council Member
Burt said make sense, but that it sounds like they are still unclear on basic
definitions and there are so many layers to this subject that need to be more
clearly understood. She said she understands that there is strong technical
and political interest in moving on this, but that it seems like it’s not a
systematic approach to move directly to an ad hoc committee or a sub-
committee right now.
Chair Shepherd said that with respect to definitions, there are arguments in
the environmental community and there are definitions from the state, and
that they simply need to decide on their own what definitions to use.
Council Member Burt said that he thinks they should attempt to take this at
the high level to Council and get Council support, and then figure out how to
flesh it out. And if the Mayor appoints two members or three members – it
could be members of this Committee or from outside it.
Chair Shepherd expressed concern that there are already two ad hoc
committees, and also pointed out there there is a nimbleness possible within
the Finance Committee.
Council Member Burt noted that this subject is a particular area of focus and
expertise, and that the members of the Finance Committee are not
necessarily the same as the subset of the Council that has interest and
background in this area.
Vice Mayor Scharff asked staff what kind of contract they were planning to
bring to Council.
Mr. Stack responded that staff was in negotiations on a 20 MW solar project
in California that would deliver 50 GWh per year to the City.
Council Member Burt asked what percentage of the City’s total load that
represented.
Mr. Stack responded that it was about 5%.
Council Member Burt then said that he thinks there are two subjects that
were being discussed. First, the direction that staff was seeking on the issue
of the RPS target. And second, the recommendation on broader policy
question about the clean portfolio.
Council Member Price suggested a colleague’s memo.
Council Member Burt said that wasn’t necessary; that that was the work of
the committee.
Vice Mayor Scharff said that he would like to first go through staff’s
questions and make motions to answer their questions. He said that the first
question to address was whether the RPS goal should be expressed as a
percentage of retail sales.
Chair Shepherd said that all of the staff’s recommendations come down to
the red highlighted language shown in one of the staff presentation slides.
Council Member Burt then said that there are some topics being discussed in
the body of the report, and then there were some recommendations on the
cover.
Vice Mayor Scharff said that, regarding the recommendations on the cover,
he was not sure what was meant by “evaluating a Feed-in Tariff.”
Ms. Ratchye pointed out the language highlighted and shown in red were the
only items that staff and the UAC were recommending changing.
Chair Shepherd said that she would like to also consider the idea of
transitioning away from the term “feed-in tariff” and toward “Palo Alto
CLEAN” even for this document. And she said that the concept of
“evaluating” the feed-in tariff should be changed to “continuously
evaluating” the Palo Alto CLEAN program since it already exists and will be
continuously updated every year.
Council Member Burt said that he agreed that since the program was already
launched, evaluating the program no longer applied, and the idea should be
expressed as “an ongoing evaluation of the Palo Alto CLEAN program.” He
then suggested addressing some of the questions posed in the staff report
that were not addressed in the recommendations section. He suggested
taking them as separate motions.
MOTION: Council Member Burt moved, seconded by Vice Mayor Scharff,
that we pursue a minimum level of renewable purchases of at least 33% of
retail sales by 2015 -- deliberately omitting the term “with a target of 40%”
from the language.
MOTION PASSED: 4-0
MOTION: Council Member Burt moved, seconded by Chair Shepherd, to
change the feed-in tariff evaluation language in part c of the RPS policy to
“on-going evaluation of the Palo Alto CLEAN program.”
MOTION PASSED: 4-0
Council Member Burt then said since those were the only actual changes to
the LEAP strategy language he did not think the other topics needed motions
in order to discuss them. The other committee members agreed.
Council Member Burt brought up the question of adopting interim compliance
period targets.
Chair Shepherd noted that the staff recommendation was to not make the
City’s RPS policy more complicated by adopting any interim targets. She said
that she agreed with that recommendation.
The other committee members said that they agreed with that as well.
Chair Shepherd then moved to the next section, on the question of having
the 33% RPS level being a target, not a limit. She and Council Member Burt
noted that this point had been covered in their earlier motion.
Chair Shepherd then moved to the next section, which covered the
recommendation to not change the rate impact limit.
Council Member Burt noted that when the Council considers the 100% clean
energy portfolio issue they may want to change that limit but it was not
necessary to do so right now. The other committee members agreed with
the staff recommendation and not to change the rate impact limit.
Council Member Burt then moved to make it policy that the City only use
Bucket 3 RECs for contingency situations.
Vice Mayor Scharff responded that he thinks the City should hold off on that
because they want to decide first on how to get to the 100% clean energy
portfolio first and retain maximum flexibility at this point on which resources
to use.
Council Member Burt then asked staff for clarification on whether they would
ever buy Bucket 3 RECs without Council authorization at this point.
Ms. Fong responded that they only buy RECs for PaloAltoGreen.
Ms. Ratchye noted that the current RPS language could be interpreted to
mean that if there is any authority left under the 0.5 cent rate impact limit,
staff should go out and spend it on RECs in order to achieve the maximum
possible RPS level. And so it might be good to be explicit about whether staff
should be able to buy RECs.
Vice Mayor Scharff said that he would support a motion stating that staff
should not buy RECs without coming to Council first for authorization.
MOTION: Council Member Burt moved that “pending broader policy
determinations it is not the policy of the LEAP program to purchase RECs to
fulfill the RPS.”
Ms. Fong noted that in the event the City is short of its legal RPS
requirement, staff might come to the Council seeking authorization to buy
short-term RECs in order to fulfill its legal requirements.
In response to that comment, Council Member Burt then added “other than
for contingency situations” to his motion. He then summarized his motion:
“Pending broader policy, it is not part of the Palo Alto LEAP program to
purchase California Bucket 3 RECs other than for necessary compliance
contingency situations.”
Chair Shepherd said that she had a question about the motion.
Council Member Burt said that they should see if there was a second for the
motion before entertaining questions about it. He then read the motion in
full again. There was no second.
Chair Shepherd said that this question might be the sort of issue that would
be best addressed by a sub-committee of the Finance Committee, working
with the UAC and staff in developing a clean energy portfolio.
Council Member Burt responded that he thinks this is something that they
should be addressing tonight, establishing what the LEAP is right now while
acknowledging that they are looking at making modifications to it in light of
broader policy recommendations.
Chair Shepherd pointed out that they have time to consider this issue later,
given that the City is not close to being out of compliance with state
requirements any time soon.
Vice Mayor Scharff asked for clarification from staff on whether they would
come to Council for approval prior to making a REC purchase if it’s not a
compliance issue.
Ms. Ratchye responded that if the City needed to buy short-term RECs for
compliance reasons, one way they could do that would be to bring master
agreements to the Council -- as was recently done for the PaloAltoGreen
program. At that point, under the current municipal code authority, staff
could make purchases of RECs for up to three year terms without coming to
Council for further approval.
Vice Mayor Scharff said that his question is whether staff would ever buy
RECs if they were already over 33% RPS, and if not there was no need to
make the restriction on the use of RECs that Council Member Burt proposed.
Chair Shepherd said that one of the take-aways she has had from this
conversation tonight is that there some issues -- such as this one -- that
they need to delve into more deeply in a different forum.
Council Member Price said that she agreed with Chair Shepherd that this
subject could be better addressed in another forum, given that it was not an
issue that would hamstring staff in the next three to six months if it was not
addressed tonight. She then asked for clarification on the timeline for
bringing forward the definition of the clean energy portfolio.
Ms. Ratchye responded that staff would be bringing forward the first part of
the discussion, about whether or not to even develop a carbon neutral plan,
to Council in April.
Council Member Price asked how the conversation tonight would impact what
staff thought it was going to do.
Ms. Fong responded that staff still planned to ask Council in April for
approval to move forward on developing a carbon neutral or clean portfolio
plan. Assuming Council approves, then staff would consider all of this
conversation as they developed the plan.
Council Member Burt said that his understanding was that staff was planning
to go forward to ask Council whether they should adopt a clean energy plan,
while Vice Mayor Scharff was suggesting a motion to go ahead and move
forward with such a plan.
MOTION: Vice Mayor Scharff moved, seconded by Council Member Price,
that the Finance Committee recommend to Council to move forward with a
100% clean electricity portfolio.
Council Member Burt said that whereas staff was planning to ask Council
whether they should look into the issue, the Committee was planning to
recommend to go ahead and look into it. He then pointed out that there was
a process question as to how to go forward with the consideration of the
issue. He then noted that there may be a legal question if they decided to
have the four members of the Finance Committee considering the issue and
then an additional member from outside the Committee joining as part of
the ad hoc sub-committee. He said they may need the City Attorney’s advice
on whether that would be a Brown Act problem.
Vice Mayor Scharff said that he thinks they should keep the discussion at the
Finance Committee level for now. He pointed out that they could invite
members of the UAC to come to certain meetings to discuss the issue, and
they could hold more meetings if necessary.
Chair Shepherd said that she would prefer that the discussion occur off-line
for now, because she was concerned about the amount of time the Finance
Committee would have to focus on the issue given the upcoming budget
related meetings.
Council Member Burt pointed out that there was an odd element to the open
meeting law that says that if two members of a sub-committee meet with
one of the other commissions, then by definition that must be an open
meeting.
Chair Shepherd suggested that they ask the UAC to come forward and guide
the Committee members on this issue.
Vice Mayor Scharff responded that that type of arrangement would not be
nimble enough. He suggested having a couple of UAC commissioners come
to a Finance Committee meeting to meet with them.
Council Member Burt pointed out that this subject was fairly complex and
required a good amount of background, and if the discussion was to take
place at the Finance Committee level it might make sense to meet with staff
to get a tutorial on these issues so that all of the Committee members would
be on the same playing field.
Chair Shepherd asked if there were any additional comments on the motion
that was on the floor.
Ms. Fong clarified that the motion was to recommend to Council that we
move forward with a 100% clean electricity portfolio.
Vice Mayor Scharff said he would like to add the word “average” to the
motion language.
Ms. Fong replied that details like that would be worked out afterward.
MOTION PASSED: 4-0
Vice Mayor Scharff then commented that he would like to explore his idea on
transitioning the PaloAltoGreen and have staff work on it.
Ms. Fong responded that staff was already planning to come back to Council
with a discussion on the future of that program.