HomeMy WebLinkAboutStaff Report 3180 City of Palo Alto (ID # 3180)
City Council Informational Report
Report Type: Informational Report Meeting Date: 10/22/2012
October 22, 2012 Page 1 of 1
(ID # 3180)
Title: Quarterly Utilities Update
Subject: Quarterly Utilities Update for 4th Quarter of Fiscal Year 2012
From: City Manager
Lead Department: Utilities
This report is provided for the Council’s information and no action is required.
Executive Summary
This update, on water, gas, electric, wastewater collection and fiber utilities, efficiency
programs, legislative/regulatory issues, utility-related capital improvement programs,
operations reliability impact measures and a utility financial summary, is for the Council’s
information. This update has been prepared to keep the Utilities Advisory Commission (UAC)
and Council apprised of the major issues that are facing the water, gas, electric, wastewater
collection and fiber utilities. The UAC received this informational report at its October 3, 2012
meeting.
Attachments:
: Attachment A: Quarterly Report for Fourth Quarter of FY 2012 (PDF)
i
Utilities Update for Fourth Quarter of FY 2012
October 2012
Table of Contents
I. Electricity ...................................................................................................................... 1
Western Area Power Administration Issues ............................................................................................. 1
Calaveras Hydroelectric Project Issues ..................................................................................................... 1
Electric Usage Trend ................................................................................................................................. 1
Electric Load and Resource Balance ......................................................................................................... 2
Electric Market Price History and Projections .......................................................................................... 2
Electric Budget and Portfolio Performance Measures ............................................................................. 3
II. Natural Gas ................................................................................................................... 9
Gas Utility Long‐term Plan (GULP) Update ............................................................................................... 9
Gas Usage Trend ....................................................................................................................................... 9
Gas Supply Portfolio ................................................................................................................................. 9
Gas Market Price History and Projections .............................................................................................. 10
Gas Pool Portfolio Average Cost vs. Market ........................................................................................... 11
Gas Budget and Portfolio Performance Measures ................................................................................. 12
III. Water ......................................................................................................................... 15
Water Availability ................................................................................................................................... 15
Regional Water Usage Trends ................................................................................................................ 15
Water Usage Trend ................................................................................................................................. 16
Bay Area Water Supply and Conservation Agency (BAWSCA) Activities ................................................ 16
Water Budget Performance Measures ................................................................................................... 17
IV. Fiber Utility ................................................................................................................. 18
Commercial Dark Fiber Service ............................................................................................................... 18
V. Public Benefit and Demand Side Management Programs ........................................... 19
Overall Summary .................................................................................................................................... 19
Renewable Energy Programs .................................................................................................................. 19
Efficiency Program Results by Program .................................................................................................. 21
Key and Major Accounts ......................................................................................................................... 22
Measurement & Evaluation Results of Energy Efficiency Programs ...................................................... 22
VI. Research and Development and Innovation ............................................................... 23
Energy Efficient Research & Development ............................................................................................. 23
Emerging Technologies Program ............................................................................................................ 24
VII. Legislative and Regulatory Issues ................................................................................ 25
State Legislative Issues ........................................................................................................................... 25
Federal Legislative Issues ........................................................................................................................ 28
State Electric Regulatory Proceedings .................................................................................................... 29
Gas Regulatory Proceedings ................................................................................................................... 30
VIII. Capital Improvement Program ................................................................................... 30
Electric Utility Capital Projects ............................................................................................................... 30
Gas Utility Capital Projects ..................................................................................................................... 30
ii
Water Utility Capital Projects ................................................................................................................. 31
Wastewater Collection Utility Capital Projects ...................................................................................... 31
Fiber Utility Capital Projects ................................................................................................................... 31
IX. Utility Financial Summary ........................................................................................... 32
Electric Utility .......................................................................................................................................... 32
Gas Utility ............................................................................................................................................... 36
Water Utility ........................................................................................................................................... 39
Wastewater Collection Utility ................................................................................................................. 42
Fiber Utility ............................................................................................................................................. 44
Utility Reserves Summary ....................................................................................................................... 44
X. Operations .................................................................................................................. 46
Reliability Impact Measures ................................................................................................................... 46
List of Figures
Figure 1: Citywide Electric Usage History .................................................................................................... 1
Figure 2: Electric Supply Resources, 2012 to 2014 – as of September 10, 2012 ......................................... 2
Figure 3: Northern California Peak Electric Prices – as of September 10, 2012 .......................................... 3
Figure 4: Actual vs. Budgeted Electric Consumption ................................................................................... 4
Figure 5: Electric Supply Cost – Budget vs. Actual ....................................................................................... 4
Figure 6: FY 2012 (Jul‐Jun) Electric Supply Costs by Category – Budget vs. Actual ..................................... 5
Figure 7: FY 2012 Electric Load and Resource Balance ................................................................................ 6
Figure 8: FY 2012 (Jul‐Jun) Electric Supply Resources – Budget vs. Actual .................................................. 6
Figure 9: FY 2012 Electric Market Prices – Budget vs. Actual ...................................................................... 7
Figure 10: FY 2012 Electric Forward Market Purchase Cost vs. Spot Market .............................................. 8
Figure 11: Citywide Gas Usage History ......................................................................................................... 9
Figure 12: Gas Supply Laddering Strategy.................................................................................................. 10
Figure 13: Natural Gas Prices – Historical and Projected ........................................................................... 11
Figure 14: Projected Drawdown from Gas Supply Reserve in FY 2013 and FY 2014 ................................. 12
Figure 15: Natural Gas Cost – Actual vs. Market Benchmarks ................................................................... 13
Figure 16: Redwood Pipeline Cost vs. Market Benchmarks ...................................................................... 13
Figure 17: Natural Gas Consumption – Budget vs. Actual ......................................................................... 14
Figure 18: Natural Gas Cost – Budget vs. Actual ........................................................................................ 14
Figure 19: FY 2012 Natural Gas Costs ($/MMBtu) – Expected vs. Actual .................................................. 15
Figure 20: Citywide Water Usage History .................................................................................................. 16
Figure 21: Water Consumption – Budget vs. Actual .................................................................................. 17
Figure 22: Water Cost – Budget vs. Actual ................................................................................................. 18
Figure 23: Electric Distribution System Reliability ...................................................................................... 47
Figure 24: Gas System O&M – Service Installations ................................................................................... 49
Figure 25: Gas Main Leaks By Type of Pipe ................................................................................................ 50
Figure 26: Gas System O&M Mainline Break Repairs ................................................................................ 51
Figure 27: Gas Main Shutdowns and Customers Affected ........................................................................ 52
Figure 28: Unplanned Gas Service Disruptions by Cause ........................................................................... 53
Figure 29: Water Main Leaks by Type of Pipe ............................................................................................ 54
Figure 30: Unplanned Water Disruptions By Cause ................................................................................... 55
iii
List of Tables
Table 1: End Use Savings* ........................................................................................................................... 21
Table 2: Electric Retail Sales and Rate ........................................................................................................ 32
Table 3: Electric Operating Activity ............................................................................................................. 33
Table 4: Electric Supply Rate Stabilization Reserve .................................................................................... 34
Table 5: Electric Distribution Rate Stabilization Reserve ............................................................................ 35
Table 6: Residential Electric Bill Comparison .............................................................................................. 35
Table 7: Commercial Electric Bill Comparison ............................................................................................ 36
Table 8: Gas Retail Sales and Rate .............................................................................................................. 36
Table 9: Gas Operating Activity ................................................................................................................... 37
Table 10: Gas Supply Rate Stabilization Reserve ........................................................................................ 38
Table 11: Gas Distribution Rate Stabilization Reserve ................................................................................ 38
Table 12: Residential Natural Gas Bill Comparison ..................................................................................... 39
Table 13: Commercial Natural Gas Bill Comparison ................................................................................... 39
Table 14: Water Retail Sales and Rate ........................................................................................................ 40
Table 15: Water Operating Activity ............................................................................................................ 40
Table 16: Water Rate Stabilization Reserve ................................................................................................ 41
Table 17: Residential Water Bill Comparison .............................................................................................. 41
Table 18: Wastewater Operating Activity ................................................................................................... 42
Table 19: Wastewater Collection Rate Stabilization Reserve ..................................................................... 43
Table 20: Residential Wastewater Collection (Sewer) Bill Comparison...................................................... 43
Table 21: Fiber Operating Activity .............................................................................................................. 44
Table 22: Fiber Rate Stabilization Reserve .................................................................................................. 44
Table 23: Utilities Reserves Summary ........................................................................................................ 45
Utilities Update for Fourth Quarter of FY 2012
October 2012
1
I. Electricity
Western Area Power Administration Issues
Western Operations
For Fiscal Year (FY) 2012, Western Base Resource supply was 407 Gigawatt‐hours (GWh), which
is about 7% above the long‐term average level. Assuming median precipitation levels going
forward, Western is projected to deliver approximately 365 GWh in FY 2013 and 361 GWh in FY
2014 (about 5% below long‐term average levels).
Calaveras Hydroelectric Project Issues
Calaveras Operations
Calaveras generation for FY 2012 was 108 GWh, which is 18% below the long‐term average
level. Assuming median precipitation levels going forward, Calaveras generation is projected to
be just 79 GWh in FY 2013 (40% below long‐term average levels), and 101 GWh in FY 2014 (23%
below long‐term average levels).
Electric Usage Trend
Figure 1 shows the Citywide electric use since FY 1983.
Figure 1: Citywide Electric Usage History
Utilities Update for Fourth Quarter of FY 2012
October 2012
2
Electric Load and Resource Balance
The size of the committed and planned market purchases over the next three calendar years
(CYs) (shown in Figure 2 below) reflects a below average level of hydroelectric output, as
discussed above. It also assumes that the Western GeoPower geothermal project begins
commercial operations in the middle of 2014 at the full project size that was originally planned
at the time of the execution of the agreement. For CYs 2012 through 2014, committed fixed‐
price forward purchases from suppliers under the Electric Master Agreements (EMAs) currently
account for approximately 467 GWh, which represents 15% of the City’s total load for that
three‐year period. Planned market purchases represent 21% of the City’s total load for this
period. Long‐term resources (everything but forward and planned market purchases) currently
account for 64% of the City’s total load over this three‐year period, a 3% increase since the last
quarterly report.
Figure 2: Electric Supply Resources, 2012 to 2014 – as of September 10, 2012
-
200
400
600
800
1,000
1,200
2012 2013 2014
An
n
u
a
l
G
W
h
Calendar Year
Planned Market
Purchases
Committed Market
Purchases
Geothermal
Wind
Landfill Gas
Calaveras
Western
19% Deficit 33% Deficit12% Deficit
Electric Market Price History and Projections
As of September 10, 2012, the price for on‐peak energy for the prompt month (October 2012)
in Northern California was $32 per megawatt hour (MWh), while the prices for November and
December were $32/MWh and $33/MWh, respectively. These values are approximately
$1/MWh higher than they were at the time of the last quarterly report.1 On‐peak prices for
1 Market prices for the previous quarterly report were from May 3, 2012.
Utilities Update for Fourth Quarter of FY 2012
October 2012
3
calendar year strips range from $40/MWh for 2013 up to $52/MWh for 2017. Prices for these
outer years have decreased – from about $0.50/MWh for 2013 up to $5/MWh for 2017 – since
the time of the last quarterly report. Figure 3 below illustrates historical monthly prices and
projected monthly forward prices for Northern California from 2004 through 2016. The
forward prices for 2014 and beyond are for a flat annual calendar year product.
Figure 3: Northern California Peak Electric Prices – as of September 10, 2012
0
20
40
60
80
100
120
140
160
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Pe
a
k
E
l
e
c
t
r
i
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P
r
i
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s
(
$
/
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)
ProjectedHistorical
Electric Budget and Portfolio Performance Measures
Figure 4, Figure 5, and Figure 6 below show the City’s electric consumption by month as well as
the supply cost by month and by cost category. The aggregate supply cost for FY 2012 was
$60.2 million, approximately $3.5 million less than the adjusted budget of $63.7 million. The
lower costs were primarily related to higher hydroelectric generation earlier in the year (see
Figure 8), which led to fewer purchases of energy in the spot market, as well as lower prices for
power purchased in the spot market (see Figure 9).
Utilities Update for Fourth Quarter of FY 2012
October 2012
4
Figure 4: Actual vs. Budgeted Electric Consumption
200
400
600
800
1,000
1,200
Lo
a
d
(
G
W
h
)
Actual Budget
Figure 5: Electric Supply Cost – Budget vs. Actual
$0
$10
$20
$30
$40
$50
$60
$70
Co
s
t
(
$
M
)
Actual Budget
Utilities Update for Fourth Quarter of FY 2012
October 2012
5
Figure 6: FY 2012 (Jul‐Jun) Electric Supply Costs by Category – Budget vs. Actual
11.49 10.13
2.29 2.32
3.02 2.72
10.94 10.23
11.36 11.47
11.39 11.26
13.24 12.08
0
10
20
30
40
50
60
70
Adjusted Budget Actual
An
n
u
a
l
C
o
s
t
(
$
M
)
Net Market +
Net Surplus
Energy
Renewables
Calaveras Debt
and O&M
Western
NCPA Services
Local Capacity
Transmission
Figure 7 and Figure 8 below summarize the City’s electric supply sources for FY 2012.
Hydroelectric power, particularly hydro power from Western Area Power Administration,
contributed more to the City’s supply portfolio early in the fiscal year than had been anticipated
at budget time, which enabled the City to purchase less market power and led to sales of
surplus energy. This was partially offset by a dry winter season during which additional market
power was purchased.
Utilities Update for Fourth Quarter of FY 2012
October 2012
6
Figure 7: FY 2012 Electric Load and Resource Balance
0
20
40
60
80
100
120
GW
h
Spot Market
Purchases
Forward
Market
Purchases
Wind
Landfill
Calaveras
Western
L
o
L
Load
Figure 8: FY 2012 (Jul‐Jun) Electric Supply Resources – Budget vs. Actual
355.2 406.8
109.7
108.065.0 68.8126.4 119.4
222.1
236.5
114.7 32.5
-70
130
330
530
730
930
1130
Adopted Budget Actual
An
n
u
a
l
G
W
h
Uncommitted/
Spot Market
Forward Market
Purchases
Wind
Landfill
Calaveras
Western
Utilities Update for Fourth Quarter of FY 2012
October 2012
7
Figure 9: FY 2012 Electric Market Prices – Budget vs. Actual
$-
$5
$10
$15
$20
$25
$30
$35
$40
$45
$50
Av
e
r
a
g
e
P
r
i
c
e
(
$
/
M
W
h
)
Prices Used for Budget Actual Price (CAISO Load Aggregation Point)
Figure 10 compares the current strategy of making laddered fixed‐price forward purchases to a
strategy of buying all market power in the spot market. The cost of making fixed price forward
purchases was roughly $4.95 million higher (72.7%) higher than it would have been at spot
market prices. This was due to substantial decreases in the price of power since the time the
purchases were made (see Figure 8).
Utilities Update for Fourth Quarter of FY 2012
October 2012
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Figure 10: FY 2012 Electric Forward Market Purchase Cost vs. Spot Market
$11.9
$7.1
$0
$5
$10
$15
$20
Cu
m
u
l
a
t
i
v
e
C
o
s
t
(
$
M
)
Cost of Forward Market Purchases
Cost at Spot Market Prices (CAISO Load Aggregation Point)
Utilities Update for Fourth Quarter of FY 2012
October 2012
9
II. Natural Gas
Gas Utility Long‐term Plan (GULP) Update
On April 23, 2012, the City Council approved amendments to the Gas Utility Long‐term Plan
(GULP) Objectives, Strategies and Implementation Plan that pertain to the discontinuation of
the gas laddering purchase strategy and the implementation of market price‐based, monthly
adjusted gas supply rates. Effective July 1, 2012, the gas supply rate for Pool customers is a
pass‐through of the bidweek gas price at PG&E Citygate, as it has been for G‐3 (large
commercial) customers.
Gas Usage Trend
Figure 11 shows the Citywide gas use since FY 1971.
Figure 11: Citywide Gas Usage History
Gas Supply Portfolio
Figure 12 shows the completed fixed‐price purchases compared to the customer load as of
September 4, 2012. While fixed‐price gas purchases have been suspended, the Pool load is
Utilities Update for Fourth Quarter of FY 2012
October 2012
10
partially hedged with fixed‐price gas through October 2013. Currently, fixed‐price purchases
make up 24% and 5% of the expected Pool load in FY 2013 and FY 2014, respectively.
Figure 12: Gas Supply Laddering Strategy
Gas Market Price History and Projections
Gas prices have increased slightly since the last update in April. Despite reductions in drilling
rigs, production remains high, keeping prices low by historical standards. The September
bidweek gas index price at PG&E Citygate was $2.90 per Million British Thermal Units (MMBtu),
which is 30% lower than the September bidweek index price a year ago. The average 12‐month
forward strip price is currently $3.80/MMBtu for 2013 and $4.18/MMBtu for 2014. Gas prices
at PG&E Citygate are expected to remain under $6/MMBtu through 2020.
Figure 13 below shows historical monthly bidweek index prices and forward natural gas prices
at PG&E Citygate as of September 4, 2012.
Utilities Update for Fourth Quarter of FY 2012
October 2012
11
Figure 13: Natural Gas Prices – Historical and Projected
$0
$2
$4
$6
$8
$10
$12
$14
Pri
c
e
s
(
$
/
M
M
B
t
u
)
Natural Gas Wholesale Prices at PG&E Citygate
as of September 4, 2012
Actual
Projected
* High and low prices in the 75th and 25th
percentile projected using Black Scholes model
Gas Pool Portfolio Average Cost vs. Market
Because of prior fixed‐price purchases, the City’s weighted average cost of gas (WACOG) differs
from the current forward market price. The City’s estimated WACOG for the pool is $4.13 per
MMBtu for FY 2013, or approximately 18% higher than the projected market cost weighted by
monthly load. As expected, since pool customers are now charged a market‐based gas supply
rate, there will be an under‐collection of gas supply revenue through October 2013. Figure 14
shows the drawdown on the Gas Supply Rate Stabilization Reserve based on the mark‐to‐
market (cost minus value) of the fixed‐price gas purchases to be delivered in FY 2013 and FY
2014.
Utilities Update for Fourth Quarter of FY 2012
October 2012
12
Figure 14: Projected Drawdown from Gas Supply Reserve in FY 2013 and FY 2014
$(1.1)
$(0.1)
$(1.8)
$(0.2)
$(1.3)
$0.0
$(2.2)
$(0.3)
$(3.0)
$(2.5)
$(2.0)
$(1.5)
$(1.0)
$(0.5)
$-
$0.5
$1.0
Mil
l
i
o
n
s
Portfolio Mark-to-Market for FY 2013 and FY 2014
September 4, 2012
FY13 Budget prices Expected High Prices Low Prices
FY2013 FY 2014
Gas Budget and Portfolio Performance Measures
Gas Commodity Cost
Figure 15 compares the City’s fixed price purchases for FY 2012 to the cost of purchasing gas at
monthly or at daily PG&E Citygate prices. The cumulative actual cost of gas for FY 2012 was
$4.2 million (40%) higher than if the gas were purchased at monthly index prices and $5.4
million (59%) higher than if CPAU had purchased gas at the daily index prices. As mentioned
above, beginning in July 2012 customers began being charged for the gas commodity on a
market‐based rate that varies each month and these above‐market costs for the prior fixed‐
price purchases will be drawn from reserves.
Utilities Update for Fourth Quarter of FY 2012
October 2012
13
Figure 15: Natural Gas Cost – Actual vs. Market Benchmarks
$0.0
$2.0
$4.0
$6.0
$8.0
$10.0
$12.0
$14.0
$16.0
Cum
u
l
a
t
i
v
e
C
o
s
t
Mill
i
o
n
s
Actual Cost Value at Monthly Bidweek Index Value at Daily Index Price
Value of CPAU’s Share of Redwood Pipeline Capacity
The City’s share of the Redwood pipeline was valued at approximately $232,000 for Q4 FY 2012.
This reflects the difference between spot market prices at the Malin, Oregon and PG&E City
Gate delivery points for that time period. At those prices, the value of the pipeline was above
the cost of $118,000. Figure 16 below shows the cost of Redwood transmission compared to
the value at month‐ahead spot market prices as well as daily spot market prices.
Figure 16: Redwood Pipeline Cost vs. Market Benchmarks
$-
$100.0
$200.0
$300.0
$400.0
$500.0
$600.0
$700.0
$800.0
$900.0
Mo
n
t
h
l
y
C
o
s
t
Tho
u
s
a
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d
s
Actual Cost Value at Monthly Bidweek Index Value at Daily Index Price
Utilities Update for Fourth Quarter of FY 2012
October 2012
14
Natural Gas Consumption and Costs: Budget vs. Actual
Figure 17 and Figure 18 below demonstrate natural gas use and costs in comparison with the FY
2012 budget. Natural gas use was 650,000 therms (2.1%) below the budget forecast. Costs
were $3.2 million (16.3%) lower than budgeted amounts. The lower costs were primarily due
to a substantial decrease in gas prices (see Figure 19) combined with the fact that a larger
percentage of the City’s gas purchases were made in the month‐ahead or day‐ahead market.
Figure 17: Natural Gas Consumption – Budget vs. Actual
0
5
10
15
20
25
30
35
Cu
m
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a
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u
m
p
t
i
o
n
(Th
e
r
m
s
)
Mi
l
l
i
o
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s
Actual Consumption
Budget Consumption
Figure 18: Natural Gas Cost – Budget vs. Actual
$0
$5
$10
$15
$20
$25
Cu
m
u
l
a
t
i
v
e
C
o
s
t
Mi
l
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i
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s
Actual Cost
Budget Cost
Utilities Update for Fourth Quarter of FY 2012
October 2012
15
Figure 19: FY 2012 Natural Gas Costs ($/MMBtu) – Expected vs. Actual
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
CG
Budget
CG
Actual
III. Water
Water Availability
Water storage levels for the San Francisco Public Utilities Commission (SFPUC) system are
approximately 84% of maximum capacity. Though storage levels are lower than this time last
year, the system is in good shape to start the new water year on October 1st.
Regional Water Usage Trends
The latest SFPUC Regional Water Consumption Report provides the current level of water usage
relative to the index period, the 5‐year average for 2007 to 2011. The results are tracked as an
indicator of conservation effectiveness. System‐wide consumption for January 1 through
September 8, 2012 is approximately 2.54 % below the index period. Palo Alto is part of the
South Bay/East Bay customer sub‐group, which is 2.02 % above the index period.
Utilities Update for Fourth Quarter of FY 2012
October 2012
16
Water Usage Trend
Figure 20 shows the Citywide water use since FY 1965.
Figure 20: Citywide Water Usage History
Bay Area Water Supply and Conservation Agency (BAWSCA) Activities
San Francisco residents will vote in November on an initiative to direct the SFPUC to prepare
two plans. The first plan will evaluate reducing or replacing water so that the Hetch Hetchy
reservoir can be drained. The second plan will address remediation for environmental damage
caused by the SFPUC system. The BAWSCA agencies, including the City of Palo Alto, use 2/3 of
the water and pay an equivalent amount of the system costs. The BAWSCA agencies contend
that any effort to change the current water supply system should involve a proportional vote of
the BAWSCA agencies.
BAWSCA has made progress on a potential debt issuance to prepay approximately $300 million
in monies owed to the SFPUC from the previous water supply contract. Assembly Bill 2167 has
been signed by the Governor, and provides additional clarification and bondholder assurance
that should strengthen any future issuance to the benefit of the BAWSCA agencies.
Utilities Update for Fourth Quarter of FY 2012
October 2012
17
Water Budget Performance Measures
Water Consumption and Supply Costs: Budget vs. Actual
Figure 21 and Figure 22 below compare actual water consumption and water supply cost to the
budget projections. Actual water use in Q4 of FY 2012 was 12% lower than budgeted and
actual supply costs were 13% lower. Cumulative water costs for FY 2012 were 6% below
budget.
Figure 21: Water Consumption – Budget vs. Actual
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
CC
F
T
h
o
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s
a
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d
s
SFPUC Invoiced
Budget Purchases
Utilities Update for Fourth Quarter of FY 2012
October 2012
18
Figure 22: Water Cost – Budget vs. Actual
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
Co
s
t
($0
0
0
)
SFPUC Invoiced
Budget Purchases
IV. Fiber Utility
Commercial Dark Fiber Service
In FY 2012, marketing and project management efforts, combined with in‐house engineering
and operational work, increased the number of commercial dark fiber customers from 69 to
80. The fiber network also serves the following City accounts: IT Infrastructure Services,
Utilities Substations, Utilities Engineering, Public Works, Water Quality Control Plant and
Community Services (Art Center). The total number of dark fiber service connections serving
commercial customers and the City is 201. Seventy‐six percent (76%) of dark fiber license
revenues are generated by commercial customers. From April 1, 2011 through June 30, 2012,
two new projects extending service to existing and new customers were completed. Seven
dark fiber service connections were disconnected.
New customers take service under Fiber Optic Rate Schedule EDF‐3. Some existing customers
with earlier, unexpired agreements take service under Fiber Optic Rate Schedule EDF‐1, the
cost of which is adjusted annually by the Consumer Price Index. Presently, 57% of the
commercial dark fiber customers are on the EDF‐1 rate and 43% are on the EDF‐3 rate schedule.
Utilities Update for Fourth Quarter of FY 2012
October 2012
19
Palo Alto Unified School District
On March 19, 2012, the City and the Palo Alto Unified School District signed a Letter of Intent to
extend dark fiber service connections to eighteen of the District’s facilities. The project will
provide dark fiber service connections to the District’s Business Office, fifteen Palo Alto‐based
schools, and two schools located on the Stanford campus. The estimated completion date of
the project is on or after July 1, 2013. The advance engineering and design work for the project
is expected to be completed by mid‐September 2012.
V. Public Benefit and Demand Side Management Programs
Overall Summary
During the latest period since the efficiency goals were last set in FY 2010, there has been a
substantial increase in the electric, natural gas and water savings goals. Programs have been
added and marketing efforts increased to meet these goals. Highlights for FY 2012 include:
• Completion of a significant industrial project at the one large data center in town,
resulting in major electric savings. Unfortunately, these savings are not replicable, as
there are no other similar facilities in Palo Alto.
• Continued delivery of the Home Energy Reports to about 19,000 residents. Each
recipient received a mailed or online report comparing individual electric and natural
gas usage with a group of 100 similarly sized, occupied homes.
• Added a loan program for residents installing efficient home comfort equipment. The
first loan was approved for issuance in August 2012.
• Continued promoting and educating about innovative technologies, such as various
types of ENERGY STAR certified LED lights.
• Worked to enhance and implement the updated and revised efficiency potential model
used by other investor and publicly owned utilities statewide.
Renewable Energy Programs
PaloAltoGreen
As of August 2012, the program has a participation rate of about 20%. The participation rate
has remained stable in the past year; however, differences in total numbers of customers and
reporting information have shown variations in participation rate from 20% to 24%. If a carbon
neutral electric portfolio plan is adopted by the City Council, the PaloAltoGreen program will
need to change to remain relevant and engaging. Staff is now reviewing the program to
develop a list of options for change. One of the primary options being reviewed is to develop
some type of community‐based solar program.
Solar Water Heating Program
California natural gas utilities were legislatively mandated to implement a solar water heating
program for customers. CPAU introduced a program during 2008 to encourage installation of
Utilities Update for Fourth Quarter of FY 2012
October 2012
20
these systems. The program incentive is an up‐front rebate applied towards the installed cost
of a new system. Under this program, 41 solar water heating systems have been installed. All
but one was residential. Of this total, seven were installed in FY2012. Marketing was greatly
enhanced this year with advertising and direct mail pieces; however, involvement remains low.
This is similar to the investor‐owned utility programs, where installations remain below goals.
Solar Photovoltaic (PV Partners) Program
As of August 2012, there have been 435 solar PV systems installed, representing over 3,435 kW
of electric generation on rooftops in Palo Alto. The residential PV Partners’ program has gone
through the original 10 “buckets” of funding capability that were set up with the
implementation of SB1. In order to continue to provide an incentive for installation of
residential solar electric systems, unused funds from commercial PV Partners’ program
“buckets” were transferred to the residential program to continue to support these systems.
The residential program is now in “bucket” 11.
Efficiency Programs
Home Energy Reports
The Home Energy Reports (HERs) are being sent to 19,056 customers as of August 2012. This
includes residential customers minus net metered customers, low income customers and those
who are new to the Utilities Department since last November, when the comparison groups
were “recharged” at the end of the control group period. Through August 2012, there have
been 283 opt‐outs (or less than 1.5%). Only 170 customers have elected to receive the reports
by email, even though this option has been advertised extensively in press releases, bill inserts,
brochures mailed directly to homes, and a Facebook page. According to OPOWER, it is normal
that very few customers sign up for emailed reports. In other utilities where all customers get
emailed reports, with only a few reports being mailed, very few customers actually access the
information available online. Customers can switch to the email reports or opt‐out by logging
on to: www.cityofpaloalto.org/homeenergyreports.
At the end of the first twelve months of the program, Palo Alto usage was analyzed both by
OPOWER and by a third party evaluator (Navigant). The analysis showed that there is a 90%
probability the HERs provided almost 1 million kilowatt hours and just over 100,000 therms in
savings for FY 2012. This is about 6.5% of the total electric savings and 50% of the natural gas
achievements for FY 2012, which included some extremely large electric efficiency projects.
These results show that the HERs are very important in achieving efficiency goals, particularly
for the natural gas utility.
Smart Energy
The City provides rebates to residents who install energy efficient appliances and equipment in
their homes or on their property. Among these are home heating and cooling systems (HVAC),
insulation, water heaters, pool pumps and power strips. Palo Alto pays rebates to customers
who have their older model, inefficient refrigerators and freezers recycled through a City
program. In FY 2012, CPAU sponsored various time‐sensitive programs to encourage
Utilities Update for Fourth Quarter of FY 2012
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21
consumers to install Compact Fluorescent Light (CFL) and ENERGY STAR certified Light Emitting
Diode (LED) bulbs and fixtures, including LED holiday lights.
Residential Refrigerator Recycling Program
A total of 162 operational refrigerators and freezers were picked up and recycled through the
contractor JACO during Fiscal Year 2012. In addition, there were 14 others recycled through
the low income program.
Low Income Program, Residential Energy Assistance Program (REAP)
Customer involvement continues to remain higher than in previous years. Last fiscal year, the
program ran out of funds by January 2012. With the beginning of this current fiscal year, the
highest energy users among the low income group are being targeted first, in an effort to get
the biggest bang for the buck for customers and the utility.
Zero Interest Loan Program
In April 2011, the Zero Interest Loan Program was launched for businesses, nonprofits, schools
and other non‐residential customers. The program offers zero interest loans up to $50,000 to
commercial and non‐profit customers to pay for the after rebate portion of an electric
efficiency measure. To date, five loans have been issued to businesses for a total of about
$85,000.
Efficiency Program Results by Program
Table 1: End Use Savings*
EE Savings by Program
Gross Annual
Energy Savings
(kWh) % Therms % CCF %
COM‐Com. Advantage/Rebates 2,311,377 15.61% 23,701 10.96% 0.00%
COM‐Right Lights/Electric 3,381,531 22.84% 0.00% 0.00%
RES‐Home Energy Report (HERs) 955,000 6.45% 110,764 51.22% 0.00%
RES‐REAP Low Income 167,564 1.13% 0.00% 0.00%
RES‐Smart Energy/Rebates 405,858 2.74% 32,558 15.06% 0.00%
RES‐Water Programs 91 0.00% 0.00% 10,647 39.14%
GEN‐Gen T&D 367,000 2.48% 0.00% 0.00%
COM‐‐Water Programs ‐ 0.00% ‐ 0.00% 16,555 60.86%
COM‐Enovity/Large Business 6,434,592 43.46% 40,223 18.60% 0.00%
COM‐Keep Your Cool/Kitchens 165,196 1.12% 0.00% 0.00%
COM‐Hospitality/Hotels, etc. 619,027 4.18% 9,004 4.16% 0.00%
Total 14,807,235 100% 216,249 100% 27,202 100%
*These are still preliminary; final results will be provided in the annual Demand Side Management Report.
Utilities Update for Fourth Quarter of FY 2012
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Key and Major Accounts
Key Account Representatives continue to work with large customers on efficiency,
conservation, rate and fiber installation issues. At the August 2012 Facility Manager’s meeting,
customers received an update on Hewlett Packard’s (HP’s) very large efficiency project at its
new data center. HP was awarded a nearly $500,000 rebate check for this project.
In addition, several businesses are working with staff to achieve awards in the Mayor’s Energy
Efficient business program. Those businesses that complete benchmarking on the Department
of Energy’s Portfolio Manager software and score about 75 out of 100 compared to similar
businesses across the nation, will be recognized at a City Council meeting in October.
The Right Lights+ program continues to perform well primarily in replacing lighting for small and
medium customers. SBW Consulting has been quite effective at installing water saving
measures for businesses. The Keep Your Cool and Hospitality programs for commercial
coolers/kitchens, hotels and other similar facilities are now underway and making good
progress. The Labs program continues to struggle, as larger customers have long budgeting and
approval cycles. Of special note is Stanford Hospital, which has been making efficiency
upgrades through nearly every program that CPAU has to offer.
Measurement & Evaluation Results of Energy Efficiency Programs
On an annual basis, CPAU budgets 4 to 5% of its total Energy Efficiency (EE) program budget on
Evaluation, Measurement and Verification (EM&V) activities by an independent consultant as
required by regulations. In addition to meeting legislative requirements (AB2021, 2006), the
goals of the EM&V effort are three‐fold: (1) obtain feedback and recommendations to improve
CPAU’s EE programs; (2) assess the effectiveness of the EE programs and the quality of the
program data; and (3) increase confidence in reported EE program results to meet ongoing
supply and climate goals.
For the FY 2011 EE programs, the EM&V effort included two new programs–Enovity’s
Commercial and Industrial Energy Efficiency Program (CIEEP) and OPOWER’s Home Energy
Report (HER). Additionally, the Commercial Advantage Program (CAP) with its many complex
and custom rebates measures was included for impact evaluation. Staff also had the consultant
conduct a process evaluation of the CPAU clothes washer rebate program to better understand
what motivates customers to buy more efficient clothes washers and to determine how to
better design the program to influence customer choices.
The evaluation revealed that the CAP and CIEEP programs had realization rates (i.e. verified
savings divided by reported savings) of 112% for CAP electric savings, 81% for CIEEP electric
savings and 129% for gas savings. This means that savings found in the field after
implementation were greater than those reported at the time the rebates were made for the
CAP and gas programs and slightly less than reported for the CIEEP electric rebates.
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Evaluation of the residential clothes washer rebate showed that over 75% of the surveyed
participants were “very satisfied” with the program. Most of the unsatisfied respondents (8%)
indicated a level of uncertainty about whether the rebate had been applied to their bill. The
consultant estimated the rate of “free‐ridership” for the clothes washer rebate to be 43%. This
means that 43% of the participants would have purchased an energy efficient clothes washer in
the absence of the CPAU rebate.
Savings from the HERs are determined in a couple of different ways. For the first year, Palo Alto
had a 1,000 member control group. The “difference of differences” in energy use between the
treatment group and the control group was compared statistically to get estimated savings
percentages. Based on the fact that this number fits in very well with documented savings in
other California utilities over the long‐term and the fact that there was an expressed desire to
include as many customers as possible in the program, the control group was eliminated in
November 2011. For FY 2012 savings, the savings percentage levels obtained through this
study were used. Since natural gas savings in Palo Alto were found to be higher than in the
surrounding utility, CPAU plans to use the more conservative statistical estimates obtained by
PG&E for future potential studies and achievement statistics.
It should also be noted that when studies are developed to show savings from recipients of the
HERs, these verified savings are then further reduced by an “attribution factor.” This factor
means that, according to studies done by the CPUC at investor‐owned utilities in California,
about 1/3 of the electric savings (20% for natural gas) from OPOWER recipients is actually
attributed to rebate programs, and thus are not included in the HER program savings estimates.
The remaining savings are attributed to the behavior changes, which are attributed to the HER
Program.
The EM&V effort for the FY 2012 EE programs will begin during fall of 2012.
VI. Research and Development and Innovation
Energy Efficient Research & Development
The American Public Power Association (APPA) awarded CPAU a $35,000 grant to develop and
demonstrate an innovative schools outreach program, designed to develop a culture of energy‐
efficiency in local Palo Alto schools. The grant is funded through APPA’s DEED (Demonstration
of Energy Efficient Developments) program and allows CPAU to work with the non‐profit
organization, Zilowatt, to create materials and tools which focus on giving feedback for energy
use behavior. The program is nearly completed and will motivate lasting changes in
conservation habits of children, their families and to identify money saving measures at the
schools facilities themselves. Some of the tools can be viewed at www.zilowatt.org.
Utilities Update for Fourth Quarter of FY 2012
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Emerging Technologies Program
The CPAU Innovation Test Bed Program (www.cityofpaloalto.org/UTLInnovation) includes the
option for businesses in the area to submit proposals to CPAU for review and potential
assistance. This new program will include CPAU partnering with individuals and companies who
want to evaluate, test and implement innovative emerging technologies, and formalizes staff
effort that was undertaken in an ad hoc manner. The goal is to find and nurture creative
concepts for ways to manage and use electricity, gas, water and fiber optics for the benefit of
CPAU customers in the long term. Proposals can be submitted during consecutive three‐month
open application windows, the second of which is due to close October 15, 2012. Two
applications were received in the first application period, both related to smart grid and energy
efficiency applications, which staff will be recommending to pursue further.
In addition to the two formal proposals received, staff has also been working with a number of
local start‐up companies over the past year to test and demonstrate various products.
Autogrid, Inc., a Palo Alto based start‐up with Stanford University roots, has been helping CPAU
implement the commercial customer demand response program since last summer. The City,
in partnership with Coloumb Technologies and Autogrid, has also demonstrated the ability to
manage electric vehicle (EV) charging to minimize the impact on the distribution system. In
addition, CPAU expects to test software from Xatori, another Palo Alto based start‐up, which is
expected to enable CPAU to get access to EV charging patterns in the City. These EV‐related
efforts, with minimal investment from CPAU, appear to be on the leading edge of
demonstration of application in California as recognized by staff from the Californian Public
Utilities Commission in a recent meeting.
Staff is engaged with SAP Labs in Palo Alto and PG&E to develop an EV buyer smart phone
“app” that will improve the experience of customers at local EV dealerships. Staff is also
exploring a partnership with Stanford University and Bidgely (a Sunnyvale based start‐up) to
test a predictive software algorithm that is designed to disaggregate residential customer
appliance electricity usage data. This pilot could help customers more effectively utilize existing
appliances and provide relevant information to help customers decide on the economic merit
of replacing identified inefficient appliances. This partnership was proposed through the
Innovation program and early testing is progress. A formal partnership is expected to be
finalized by the end of the year.
The Innovation program provides a streamlined and effective channel for CPAU to test various
techniques and technologies on the small‐scale smart grid infrastructure expected to be
installed under the Residential Customer Engagement pilot program. This will maximize the
value of the infrastructure and could help meet the objectives of the pilot program.
Utilities Update for Fourth Quarter of FY 2012
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VII. Legislative and Regulatory Issues
State Legislative Issues
CPAU staff participates on the legislative committees of the California Municipal Utilities
Association (CMUA) and NCPA. California’s two‐year 2011‐2012 legislative session wrapped up
on August 31, 2012 and the Governor has until the end of September 2012 to sign or veto bills
passed by the legislature. The following list is a summary of energy and water bills that Palo
Alto has been following through CMUA and NCPA.
AB 2227 (Bradford) – NCPA is the sponsor of AB 2227; the bill passed the legislature and has
been sent to the governor. This bill will consolidate energy reporting requirements of publicly
owned utilities (POUs), such as City of Palo Alto, for energy efficiency programs as well as other
programs that require reporting, such as the Renewable Portfolio Standard (RPS), the SB 1 solar
incentive program, and energy storage. The bill would also change from once every three to
every four years the requirement we have to reassess and report to the California Energy
Commission (CEC) on 10‐year energy efficiency targets. This four year cycle will better align
with the CEC’s biennial Integrated Energy Policy Report (IEPR). A requirement for us to post
current information on the status of our energy efficiency programs rebate funds availability
was removed from the bill in return for maintaining annual reporting to the CEC on the
progress of our energy efficiency and demand reduction programs. The chances are high that
AB 2227 will receive the Governor’s signature for a number of reasons: the legislation is
consistent with his 2011 Executive Order calling for efforts to streamline unnecessary
regulations to save the state time and money; NCPA has worked closely with the CEC and has
their support; and the legislation has earned only one no‐vote during its passage through the
legislature.
Bills Related to AB 32 (Global Warming Solutions Act):
AB 1532 (Perez) – This bill passed the legislature and has been sent to the governor. It will
create the Greenhouse Gas Reduction Fund Investment Plan and Communities Revitalization
Act (the Act) to set procedures for the investment of regulatory fee revenues derived
from the auction of greenhouse gas (GHG) allowances from the cap and trade program adopted
by the California Air Resources Board (CARB) under the California Global Warming Solutions Act
of 2006 (AB 32). Although the Act does not specify the investment of auction revenue from the
allowances allocated to electric distribution companies, it does require a description of the use
of funds received by the investor‐owned utilities. Revenue derived from the auction of
allowances allocated to POUs, such as the City of Palo Alto, are not included at this stage.
SB 1572 (Pavley) – This bill would have appropriated 70% of the cap‐and‐trade auction
revenues collected in FY 2013. It did not pass the Assembly.
AB 2404 (Fuentes) – An alternative to AB 1532, this bill would have created a “Local Emission
Reduction Fund”. Revenue collected pursuant to the cap‐and‐trade program would be
deposited in this fund. It did not pass out of the Assembly.
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AB 1906 (Nestande) – This bill would have required electric utilities that receive an allocation of
cap‐and‐trade allowances to use any proceeds from the monetization of these allowances for
the benefit of ratepayers to reduce rates that are above the cost of service. NCPA opposed this
bill because, while well intended, the mechanics of the bill are problematic, specifically as it
infringes on the rate‐making authority of POU’s governing boards. It never made it out of its
first Assembly committee.
Bills Related to the Renewable Portfolio Standard (RPS):
AB 1900 (Gatto) – This bill passed the legislature and has been sent to the governor. The bill is
intended to address the barriers to allowing biomethane to be injected into common carrier
pipelines and break down barriers to using in‐state biomethane.
AB 1990 (Fong) – This bill would have required POUs with over 75,000 customers connections
to create a Feed‐In Tariff program to stimulate the installation of renewable energy generation
in economically disadvantaged communities. It was defeated in the Senate.
AB 2196 (Chesbro) – This bill passed the legislature and has been sent to the governor. The bill
would: (1) overturn the CEC certification ban on biomethane/biogas contracts; (2) allow
biomethane/biogas to count toward RPS, and; (3) grandfather existing out‐of‐state
biomethane/biogas contracts that were entered into prior to a certain date. This is not directly
applicable to Palo Alto at this time, but has allowed a new supply of renewable resources.
AB 2390 (Chesbro) – This bill would have required the CEC to establish an incentive program to
compensate producers and collectors of biomass material associated with forest fuel reduction
and fire prevention activities that are delivered to eligible biomass facilities for use as a fuel
source. It did not pass the Senate.
Bills Related to Energy Efficiency Policy:
AB 2234 (Hill) – This bill would have expanded the Net‐Energy Metering program, by adding
“Public Agencies” to the list of eligible customer‐generators that could take advantage of a
utility’s Net‐Energy Metering program. It did not make it out of the Assembly.
AB 2249 (Buchanan) – This bill passed the legislature and has been sent to the governor.
Currently, the Solar Water Heating and Efficiency Act of 2007 excludes solar pool heating
systems from the definition of a solar water heating system. This bill would qualify that this
exclusion is limited to a single‐family residential solar pool heating system. The bill would also
clarify the statement of legislative intent to include schools in the act.
SB 594 (Wolk) – This bill passed the legislature and has been sent to the governor, who is
expected to sign it. It will expand the Net‐Energy Metering program by allowing customers
with multiple meters on adjacent or contiguous property to aggregate their electric loads. The
bill is a hold‐over from last year and was opposed in its previous form by NCPA. This new
version would allow a utility to retain any surplus generation by a customer‐generator, and
Utilities Update for Fourth Quarter of FY 2012
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count that generation towards its RPS. Other amendments in the final version ensure that local
governing bodies have the ultimate authority to permit any aggregation of meters for the
purpose of net‐energy metering, and ensure that any additional infrastructure, billing, or
administrative costs that result from such a meter aggregation program would be borne by the
customers participating in the program.
SB 1268 (Pavely) – This bill passed the legislature and has been sent to the governor. The
Energy Conservation Assistance Act of 1979 requires the CEC, until January 1, 2013, to
administer the State Energy Conservation Assistance Account to provide grants and loans to
local governments and public institutions to maximize energy use savings. This bill will extend
the act to January 1, 2018 and would additionally include measures primarily intended to
reduce peak electricity demand as “energy conservation measures”.
Bills Related to Natural Gas Pipeline Safety:
AB 1511 (Bradford) – This bill passed the legislature and has been approved by the governor
(Chapter 91, Statutes of 2012). It requires real estate sale contracts to include a specified
notice informing purchasers of residential property about the existence of a database where
information regarding gas and hazardous liquid transmission pipelines can be obtained.
AB 2559 (Buchanan) – This bill passed the legislature and has been sent to the governor. It will
provide the state's gas utilities with expedited ministerial permitting for pipeline inspection,
remediation, removal and replacement work undertaken pursuant to pipeline integrity
management.
Other Energy Related Bills
AB 1514 (Lowenthal, Bonnie) – This bill was related to excavations and would authorize the
CPUC to bring an action for enforcement. It did not make it out of the Assembly.
AB 2516 (Bradford) – This bill passed the legislature and has been approved by the governor
(Chapter 127, Statutes of 2012). It requires the California Independent System Operator
(CAISO) to conduct internal operations in a manner that minimizes cost impacts on ratepayers
and to communicate with all balancing area authorities in the state in a manner that supports
electrical reliability.
AB 2556 (Alan) – This bill would have required electric utilities to avoid excessive tree trimming
that threatens the health of a tree, to make a good faith effort to implement good forestry
practices and vegetation management practices, and to preserve the health of mountainous
lands, forest‐covered lands, and brush‐covered lands. It did not make it out of the Assembly.
SB 1496 (Simitian) – This bill would have required the CEC to conduct a study of the effect of
liquefied natural gas imports and exports on the state’s energy demand. It did not make it out
of the Assembly.
Utilities Update for Fourth Quarter of FY 2012
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Water Related Bills
AB 685 (Eng) – This bill passed the legislature and has been sent to the governor. It declares
that it is the established policy of the state that every human being has the right to clean,
affordable, and accessible water adequate for human consumption, cooking and sanitary
purposes.
AB 2167 (Hill) – This bill passed the legislature and has been approved by the governor (Chapter
251, Statutes of 2012). Allows the Bay Area Water Supply and Conservation Agency (BAWSCA)
to issue bonds to repay the costs of capital facilities.
AB 2398 (Hueso) – This bill would have enacted the Water Recycling Act of 2012, which would
establish a statewide goal to recycle a total of 1.5 million acre‐feet of water per year by the
year 2020 and 2.5 million acre‐feet of water per year by the year 2030. It did not make it out of
its first Senate committee.
Federal Legislative Issues
Key issues in the federal arena this year are: impacts of the FY 2013 Federal budget; cyber
security legislation; hydro reform; federal clean energy standards; and the ongoing Central
Valley Project Improvement Act (CVPIA). Staff will continue to work with NCPA and CMUA on
these issues to protect and advance the City’s interests in accordance with the Utilities 2012
legislative guidelines. Updates on these issues from the last quarterly report include the
following:
Cyber Security – Prior to Congress’s August recess, the Senate debated and ultimately rejected
new cyber security legislation offered by Senators Joe Lieberman (I‐CT) and Susan Collins (R‐
ME) – the Chairman and Ranking Member, respectively, of the Senate Homeland Security
Committee. Opponents and supporters of the Lieberman‐Collins bill left the door open for
reconsidering the issue in September, and both sides publicly stated their willingness to
continue negotiations. However, the fundamental disagreement over issuing federal cyber
security standards of any kind is unlikely to be resolved anytime soon and it seems doubtful
that the matter will be brought to a successful conclusion this fall. However, NCPA continues to
monitor this closely.
DOE Initiative Regarding the PMAs – The Department of Energy (DOE) has embarked on an
initiative to reshape the role of the federal power marketing agencies (PMAs), including the
Western Area Power Administration (WAPA, or Western). Palo Alto staff along with NCPA staff
and other members participated in a DOE and WAPA stakeholder workshop to provide input on
the initiatives presented by DOE Secretary Steven Chu in his March 16th memorandum on the
future of the Power Marketing Administrations (PMAs). NCPA members’ elected officials and
utility directors questioned the less‐than‐open process, insisted that DOE adhere to the
“beneficiary pays” principle, reminded DOE of Western’s statutory mission to deliver power to
its customers at cost‐based rates, informed DOE of significant progress already made to date in
modernizing systems that Western’s Sierra Nevada Region participates in, and challenged
Utilities Update for Fourth Quarter of FY 2012
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Secretary Chu’s assertion that Western and its “aging” infrastructure needed to be “dragged
into the 21st century.” Recommendations from DOE are anticipated before the end of the year.
State Electric Regulatory Proceedings
California Air Resources Board (CARB) and AB 32 Implementation
CARB’s full focus remains on implementation of the cap‐and‐trade program. The first auction
for cap‐and‐trade allowances is scheduled for November 2012, and an August 2012 practice
auction was used to test the new systems. CPAU designated its 2013 allocation of cap‐and‐
trade allowances to be deposited in the holding account for future consignment to the CARB
auctions. Staff will request a recommendation from the UAC on a policy for the use of the
auction proceeds.
California Energy Commission Rulemaking on Emission Performance Standards (EPS)
The CEC issued an order in January 2012 opening a rulemaking to consider whether to modify
its regulations to, among other things, establish a filing requirement for all POU investments in
non‐emissions performance standard compliant facilities regardless of whether the investment
could be considered a covered procurement. The intent was for the POUs to provide more
reports and information for review. Subsequent filings are proposing dropping the current EPS
below the 1,100 pounds of carbon dioxide for each megawatt of power that is generated to
something as low as 825‐850 pounds per megawatt hour, with some accommodations made for
smaller facilities.
California Energy Commission Renewable Portfolio Standard Enforcement Regulations
The current draft regulations would still significantly expand the City’s RPS reporting
requirements to the CEC. NCPA’s position is that the CEC has the authority to only determine
whether local governing boards and districts are correctly applying the RPS statute. The
anticipated release of CEC’s formal proposed regulations is now delayed to February 2013.
Staff will continue to coordinate with NCPA and CMUA, who are actively involved in the CEC
proceeding.
State Water Resources Control Board and Delta Reform Act
Delta Flow Criteria refer to new rules requiring flows into the Delta (released from reservoirs)
to be based on high fractions of unimpaired inflow levels in winter and spring months when
reservoirs are normally trying to refill by retaining most inflow water.
The State Water Resources Control Board (SWRCB) developed Delta Flow Criteria in 2010 as
required by legislation passed in 2009. The SWRCB did not evaluate the water supply, energy
or environmental impacts of the implementation of the Delta Flow Criteria. A consortium of
water and power organizations, including NCPA and Western, has modeled the criteria and
found severe impacts of the Flow Criteria on the environment, water supply, power system and
recreation. Some environmental groups are dismissing the studies and claiming that analysis is
a delaying tactic. The studies show that current environmental operation conditions including
river flows and river temperatures cannot be met if the Delta Flow Criteria are implemented.
Utilities Update for Fourth Quarter of FY 2012
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Water supply suffers severely and power supply is impacted along with the investment
expenses, fossil fuel consumption and greenhouse gas emissions needed to make up for
crippled hydro generation. The consortium continues to produce and share its studies and feels
more study of the goals and impacts of the Delta Flow Criteria are needed before a prudent
science‐based decision can be made. The SWRCB has scheduled workshops in August,
September and October to look at various issues including the water, power and environmental
impacts.
Gas Regulatory Proceedings
There is no update from the last quarterly report. PG&E’s proposed safety upgrades and cost
allocation methodology will double the local transportation rate for CPAU from $0.025 to
$0.050 per therm. Staff is monitoring the proceeding to determine the rate impact of pipeline
safety enhancement work on the PG&E system.
VIII. Capital Improvement Program
Electric Utility Capital Projects
The Electric Utility continues to focus on its Capital Improvement Projects including the
following projects that either have been recently completed or are currently ongoing:
The $800,000 contract for the rebuilding of the Hewlett Subdivision electric system is
40% complete.
The $1.5 million contract to reconductor the overhead 60kV line on Alma St. from
Addison Ave. to El Carmelo Ave. was completed.
The $900,000 contract to convert existing High Pressure Sodium (HPS) streetlight
fixtures to Light Emitting Diode (LED) lights is 50% complete.
The final service conversions for the $3.2 million Underground District 45 Project were
completed.
The $550,000 project to rebuild the electric system at Maybell and convert the voltage
from 4 kilovolts (kV) to 12kV is 80% complete.
The $600,000 contract to rebuild the underground electric system on Middlefield Rd.
between San Antonio Rd. and Oregon Expressway is waiting for Council Approval.
The $1 million contract to purchase a replacement for Hanover Transformer 22 has been
awarded. The Project will be completed in 2012 after the transformer is delivered.
The contract for approximately $250,000 for a Smart Grid Pilot is currently being
reviewed for final scope of work. The final contract will be awarded by November.
Gas Utility Capital Projects
The Gas Utility continues to focus on its Capital Improvement Projects including the following
projects that either have been recently completed or are currently ongoing:
The $4.4 million contract for the replacement of 38,000 linear feet of gas main pipe and
260 services with PE pipe is 85% complete (Gas Main Replacement Project 18/19A).
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The estimated $15.5 million contract for the replacement of approximately 70,000
linear feet of gas main pipe and 1400 services with PE pipe is currently out to bid (Gas
Main Replacement Project 19B/20/21). The project will be awarded in October.
The replacement of the regulating equipment at Gas Stations 2 and 4 has been
completed.
The replacement of the regulating equipment at Gas Station 1 is scheduled to be
completed in October.
The installation of remotely monitored cathodic protection for the steel gas pipes was
completed in July of 2012.
Water Utility Capital Projects
The Water Utility’s Capital Improvement Projects include the following projects that either have
been recently completed or are currently ongoing:
The $4.2 million water main replacement project will replace 20,000 linear feet of PE
pipe, 290 services, and 33 hydrants (Water Main Replacement Project 23/24). The
project has started on Alma Street and is approximately 10% complete.
The $8.6 million contract for the construction of the El Camino Reservoir, pump station
and well is 55% complete.
The $4.8 million contract for the rebuilding of the Mayfield Pump Station is 65%
complete.
The $2 million contract for the seismic retrofit of Mayfield and Boranda Reservoirs is
45% complete.
The$ 2.6 million contract for the rehabilitation of the five existing wells is 95% complete.
The wells are currently going through final testing.
Wastewater Collection Utility Capital Projects
The Wastewater Utility continues to focus on its Capital Improvement Projects including the
following projects that either have been recently completed or are currently ongoing:
The Notice of Completion has been filed for Wastewater Project 21, a project to replace
wastewater collection pipeline.
The $4 million contract for the replacement of approximately 18,000 linear feet of pipe,
approximately 300 sewer service laterals, and 50 manholes has been awarded
(Wastewater Project 22/23). Construction is expected to start in October 2013.
The $ 3.5 million to perform closed circuit TV scans of sanitary sewer laterals for the
presence of gas crossbores is 50% complete.
Fiber Utility Capital Projects
The Fiber Optics Utility continues to focus its Capital Improvement Projects on fiber system
expansion and customer acquisition. Current projects include:
East Meadow Circle fiber loop completed
Palo Alto Unified School District network in design phase
District 45 fiber undergrounding to be completed by October, 2012
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32
Rebuilding and future‐proofing of congested Stanford Research Park fiber routes
Capital build‐ins to Multi‐Tenant Buildings to reduce customer costs to connect to the
fiber network.
IX. Utility Financial Summary
Electric Utility
Retail Sales Volume and System Average Retail Rate
Table 2 below shows the Electric Fund’s retail sales volumes and resulting system average retail
rate for FY 2011 and FY 2012. For the period ending June 30, 2012, sales volumes were 1.5%
lower than budget estimates, and the system average retail rate was 0.9% lower.
Table 2: Electric Retail Sales and Rate
Electric ‐ Retail FY 2011
Audited
Actuals
FY 2012
Adopted
Budget
FY 2012
Unaudited
Actuals
Difference
of Adopted
Budget and
Actuals
%
Variance
to
Budget
Jul 10‐Jun 11 Jul 11‐Jun 12 Jul 11‐Jun 12
Sales Units (kWh)
System Average Retail Rate
($/kWh)
946,518,275
0.11970
957,214,712
0.11660
942,563,887
0.11558
(14,650,825)
(0.00102)
‐1.5%
‐0.9%
Utilities Update for Fourth Quarter of FY 2012
October 2012
33
Operating Activity
Table 3 below contains a summary of the Electric Fund’s overall activity for FY 2012.
Table 3: Electric Operating Activity
Electric ‐ Operating
Activity
All figures in thousands (000’s)
Adjusted
Budget
FY 2012
Unaudited
Actuals
Jul 11‐Jun12
Projected
Activity
N/A
Projected
FY 2012
Activity
Variance
to
Budget
Electric Supply Fund
Net Sales * $ 67,131 $ 65,163 $ ‐$ 65,163 $ (1,968)
Other revenues 8,627 8,929 ‐8,929 302
Purchase cost to serve retail load (61,338)(55,526)‐(55,526) 5,812
Other expenses ** (10,642)(8,852)‐(8,852) 1,790
Surplus Energy costs (2,416)(3,198)‐(3,198) (782)
Surplus Energy revenues 2,249 2,323 ‐2,323 74
Total $ 3,611 $ 8,839 $ ‐ $ 8,839 $ 5,228
Electric Distribution Fund
Net Sales * $ 44,805 $ 43,414 $ ‐$ 43,414 $ (1,391)
Other revenues 3,078 3,261 ‐3,261 183
Other expenses ** (46,191) (47,235)‐ (47,235) (1,044)
Total $ 1,692 $ (560)$ ‐$ (560) $ (2,252)
* Includes misc. sales, adjustments, discounts, and bad debt
** Includes debt service, reserve transfers, salaries, allocated charges, other misc. expenses and
encumbrances
As of June 2012, the cost of purchases to serve retail load was $5.8 million lower than the
adjusted budget, primarily due to a decrease in market prices, a moderate increase in hydro
generation, and a decrease in Western and NCPA services costs. Revenues related to Central
Valley Project Operations and Maintenance (CVP O&M) repayments are also projected to
decrease by $1.7 million, and this is offset by an equal decrease in CVP O&M costs that is
factored into the purchase costs2. Additionally a decrease of $1.9 million related to the sales
variance is also reflected in the variance to budget figures reported. Surplus energy sales have
increased, with revenues increasing by $74,000 and corresponding surplus energy costs
increasing by $782,000. The $1.8 million in lower other expenses is primarily due to supply
funded solar program spending coming in below budget due to lower than expected market
demand, as well as lower than expected purchase costs for PaloAltoGreen.
2 CVP O&M Loan Advance and Loan Credits are planned payments and equal amounts of credits associated with
the financing of operations and maintenance of eleven federal dams, power plants, and transmission facilities as
part of the Western Area Power Administration’s CVP system. The loan advance and loan credits are a financing
mechanism to facilitate the maintenance and upgrades at these federal facilities. The actual cost of these projects
is included in the charges associated with the Western Power.
Utilities Update for Fourth Quarter of FY 2012
October 2012
34
The net effect of these changes is a projected $8.8 million funding of the Electric Supply Rate
Stabilization Reserve (E‐SRSR), as opposed to the$3.6 million funding that is in the adjusted
budget.
For the Electric Distribution Fund, the FY 2012 variance to budget reflects decreased sales of
$1.4 million. Other expenses were higher by $1.0 million, mainly due to increase in allocated
charges. The increase in allocated charges is due to a combination of factors including salaries
and benefits ($884,000) and cost plan allocations ($361,000). The net effect of this is a
projected $560,000 drawdown of the Electric Distribution Rate Stabilization Reserve (E‐DRSR),
as opposed to a $1.7 million funding per the adjusted budget.
Electric Supply Rate Stabilization Reserve
As a result of the changes in operating activity, the E‐SRSR is expected to have an ending
balance of $65.9 million, which is above the long‐term maximum E‐SRSR reserve guideline level
as shown in Table 4 below.
Table 4: Electric Supply Rate Stabilization Reserve
Estimated Electric Supply Rate Stabilization Reserve
All figures in thousands (000’s)
FY 2012 Adopted Budget Beginning Balance $ 41,931
Changes to FY 2012 Beginning Balance per FY 2011 Accounting $ 15,159
FY 2012 Beginning Balance after accounting changes $ 57,090
Net sum of FY 2012 Unaudited Actuals to date * $ 8,839
Current Projected Reserve Balance as of End of FY 2012 $ 65,929
Net sum of Projected Activity through Year End $ ‐
Estimated FY 2012 Ending Balance $ 65,929
Adopted Budget E‐SRSR Minimum Guideline $ 31,018
Adopted Budget E‐SRSR Maximum Guideline $ 62,035
* Includes Encumbrances for CIP & Operations
Electric Distribution Rate Stabilization Reserve
As a result of the changes described above, the E‐DRSR is expected to have an ending balance
of $8.68 million, which is within the E‐DRSR long‐term minimum and maximum reserve
guideline levels as shown in Table 5 below.
Utilities Update for Fourth Quarter of FY 2012
October 2012
35
Table 5: Electric Distribution Rate Stabilization Reserve
Estimated Electric Distribution Rate Stabilization Reserve
All Figures in thousands (000’s)
FY 2012 Adopted Budget Beginning Balance $ 9,205
Changes to FY 2012 Beginning Balance per FY 2011 Accounting $ 35
FY 2012 Beginning Balance after accounting changes $ 9,240
Net sum of FY 2012 Unaudited Actuals to date * $ (560)
Current Projected Reserve Balance as of End of FY 2012 $ 8,680
Net sum of Projected Activity through Year End $ ‐
Estimated FY 2012 Ending Balance $ 8,680
Adopted Budget E‐SRSR Minimum Guideline $ 6,391
Adopted Budget E‐SRSR Maximum Guideline $ 12,782
* Includes Encumbrances for CIP & Operations
Electric Special Projects (ESP) Reserve
No new projects have been identified for funding from the ESP Reserve. The largest project
being evaluated is a second transmission line that could have the potential of using a significant
part of the ESP Reserve. The estimated balance of the ESP Reserve is $50.32 million as of the
end of FY 2012.
Bill Comparison
The last electric rate adjustment was a 10% increase effective July 1, 2009. Table 6 presents
residential monthly bills for Palo Alto and surrounding cities for a several usage levels for the
summer (May through October) billing period based on published rates as of July 1, 2012. As
shown, Palo Alto has the lowest bills for low usage residential customers. For those using the
median amount of electricity, Palo Alto is the lowest for summer bills. For larger users, Santa
Clara customers have the lowest bills with Palo Alto the second lowest. Note that for the
median residential usage, PG&E customers pay 29% more than Palo Alto’s customers in the
summer.
Table 6: Residential Electric Bill Comparison
Residential Monthly Electric Bill
As of July 1, 2012
Season Usage (KWh/mo) Palo Alto PG&E Santa Clara Roseville
Summer
(May‐Oct)
300 $ 28.57 $ 38.54 $ 30.43 $ 44.18
(Median) 365 $ 37.04 $ 47.75 $ 37.25 $ 51.55
650 $ 76.33 $ 125.90 $ 67.17 $ 90.71
1200 $ 172.03 $ 310.49 $ 124.79 $ 177.88
Utilities Update for Fourth Quarter of FY 2012
October 2012
36
Table 7 presents monthly electric bills for commercial customers for various usage levels. Note
that Palo Alto commercial customer bills are significantly lower than PG&E’s and comparable to
those in Santa Clara and Roseville.
Table 7: Commercial Electric Bill Comparison
Commercial Monthly Electric Bill
As of July 1, 2012
Usage (KWh/mo) Palo Alto PG&E Santa Clara Roseville
1,000 $ 140 $ 225 $ 156 $ 138
160,000 $ 21,290 $ 26,976 $ 17,756 $ 20,571
500,000 $ 61,395 $ 79,044 $ 54,354 $ 69,891
2,000,000 $ 213,070 $ 273,815 $ 210,131 $ 230,167
Gas Utility
Retail Sales Volume and System Average Retail Rate
Table 8 below shows the Gas Fund’s retail sales volume and system average retail rate for FY
2011 and FY 2012. For FY 2012, sales were lower than budgeted by 2.3%. Note that the system
average rate for the gas utility also includes sales to large customers that are on the G‐3 rate
schedule, which is based on market rates for natural gas.
Table 8: Gas Retail Sales and Rate
Gas – Retail FY 2011
Audited
Actuals
FY 2012
Adopted
Budget
FY 2012
Unaudited
Actuals
Difference
of Adopted
Budget and
Actuals
%
Variance
to
Budget
Jul 10‐Jun 11 Jul 11‐Jun 12 Jul 11‐Jun 12
Sales Units (Therms)
System Average
Rate ($/Therm)
30,913,503
1.392
30,684,615
1.412
29,983,194
1.389
(701,421)
(0.023)
‐2.3%
‐1.6%
Utilities Update for Fourth Quarter of FY 2012
October 2012
37
Operating Activity
Table 9 below contains a summary of the Gas Fund’s overall activity for FY 2012.
Table 9: Gas Operating Activity
Gas ‐ Operating Activity All figures in thousands $ (000’s)
Adjusted
Budget
FY 2012
Unaudited
Actuals
Jul 11‐Jun12
Projected
Activity
N/A
Projected
FY 2012
Activity
Variance to
Budget
Gas Supply Fund
Net Sales * 25,485 23,662 ‐23,662 (1,823)
Other revenues 429 244 ‐244 (185)
Purchase costs (18,497)(16,235)‐(16,235) 2,262
Other expenses ** (9,576)(8,841)‐(8,841) 735
Total (2,159) (1,170) ‐ (1,170) 989
Gas Distribution Fund
Net Sales * 17,593 17,371 ‐17,371 (222)
Other revenues 1,325 1,614 ‐1,614 289
Other expenses ** (19,018) (18,011)‐ (18,011) 1,008
Total (100)975 ‐975 1,075
* Includes misc. sales, adjustments, discounts, and bad debt
** Includes reserve transfers, salaries, allocated charges, other misc. expenses and encumbrances
For the Gas Supply Fund, the variance of $1.8 million in net sales is predominantly due to the
lower than expected market rates for G‐3 (non‐pool) customers. For FY 2012, purchase costs
are expected to be $2.3 million lower than budgeted. Lower than expected other expenses in
the Distribution Fund are mainly due to lower than expected demand side management
(energy efficiency program) expenses.
Gas Supply Rate Stabilization Reserve
As shown in Table 10 below, based on activity to date and projections for the fiscal year, the
Gas Supply Rate Stabilization Reserve (G‐SRSR) is expected to have an ending balance of $7.6
million, which is within the long‐term minimum and maximum G‐SRSR guideline levels.
Utilities Update for Fourth Quarter of FY 2012
October 2012
38
Table 10: Gas Supply Rate Stabilization Reserve
Estimated Gas Supply Rate Stabilization Reserve
All Figures in thousands (000’s)
FY 2012 Adopted Budget Beginning Balance $ 3,215
Changes to FY 2012 Beginning Balance per FY 2011 Accounting $ 5,574
FY 2012 Beginning Balance after accounting changes $ 8,789
Net sum of FY 2012 Unaudited Actuals to date * $ (1,170)
Current Projected Reserve Balance as of End of FY 2012 $ 7,619
Net sum of Projected Activity through Year End $ ‐
Estimated FY 2012 Ending Balance $ 7,619
Adopted Budget G‐SRSR Minimum Guideline $ 4,849
Adopted Budget G‐SRSR Maximum Guideline $ 9,698
* Includes Encumbrances for CIP & Operations
Gas Distribution Rate Stabilization Reserve
As shown in Table 11 below, the Gas Distribution Rate Stabilization Reserve (G‐DRSR) is
expected to have an ending balance of $8.4 million, which is higher than long‐term maximum
G‐DRSR guideline levels.
Table 11: Gas Distribution Rate Stabilization Reserve
Estimated Gas Distribution Rate Stabilization Reserve
All Figures in thousands (000’s)
FY 2012 Adopted Budget Beginning Balance $ 10,048
Changes to FY 2012 Beginning Balance per FY 2011 Accounting $ (2,649)
FY 2012 Beginning Balance after accounting changes $ 7,399
Net sum of FY 2012 Unaudited Actuals to date * $ 975
Current Projected Reserve Balance as of End of FY 2012 $ 8,374
Net sum of Projected Activity through Year End $ ‐
Estimated FY 2012 Ending Balance $ 8,374
Adopted Budget G‐DRSR Minimum Guideline $ 2,676
Adopted Budget G‐DRSR Maximum Guideline $ 5,353
* Includes Encumbrances for CIP & Operations
Bill Comparison
Table 12 presents residential monthly bills for Palo Alto and surrounding cities for several usage
levels for the Summer (May through October) billing period based on published rates as of July
1, 2012. As Palo Alto’s gas commodity rates now fluctuate monthly with short‐term market
prices, bills have decreased but are still slightly higher than PG&E’s for all usage levels. For the
median usage level, PG&E customer bills are 15% lower than Palo Alto customer’s bills.
Utilities Update for Fourth Quarter of FY 2012
October 2012
39
Table 12: Residential Natural Gas Bill Comparison
Residential Monthly Natural Gas Bill
As of July 1, 2012
Season Usage Palo Alto
Menlo Park, Redwood City,
Mountain View, Los Altos, and
Santa Clara (PG&E Zone X)
Roseville
(PG&E
Zone S)
therms $ $ $
Summer
(May‐Oct)
15 21.50 17.24 17.62
(Median) 18 23.84 20.78 22.00
30 38.30 38.31 39.53
45 57.66 60.23 61.44
Table 13 below presents monthly bills for commercial customers for various usage levels. Note
that bills for Palo Alto customers are slightly higher than for PG&E customers for smaller
commercial customers, but bills are significantly higher for larger commercial customers due to
larger relative distribution costs.
Table 13: Commercial Natural Gas Bill Comparison
Commercial Monthly Natural Gas Bill
As of July 1, 2012
Usage Palo Alto PG&E
Therms/mo $ $
500 550 466
5,000 4,829 4,026
10,000 9,794 6,810
50,000 47,526 30,459
Water Utility
Retail Sales Volume and System Average Retail Rates
Table 14 below shows the Water Fund’s retail sales volume and the system average retail rate
for FY 2011 and FY 2012. For the period ending June 30, 2012, sales have been lower by 3.4%
from the adopted budget for the same period. The system average rate goes up with a
reduction in sales, since the share of fixed charges increase as a percent of total sales revenue.
Utilities Update for Fourth Quarter of FY 2012
October 2012
40
Table 14: Water Retail Sales and Rate
Water – Retail FY 2011
Audited
Actuals
FY 2012
Adopted
Budget
FY 2012
Unaudited
Actuals
Difference
of Adopted
Budget and
Actuals
%
Variance
to
Budget
Jul 10‐Jun 11 Jul 11‐Jun 12 Jul 11‐Jun 12
Sales Units (CCF)
System Average Rate ($/CCF)
4,992,423
5.484
5,243,069
5.847
5,063,004
5.859
(180,065)
0.013
‐3.4%
0.2%
Operating Activity
Table 15 below contains a summary of the Water Fund’s overall activity for FY 2012. Water
sales revenues were lower by $158,000 due to reduced water demand, offset by year end
accounting estimates for unbilled revenue related to FY 2012 which will not be collected until
FY 2013. It should be pointed out that expected water demand used in the long range financial
projections for the water utility factored in most of this demand reduction observed for this
fiscal year. The variation from revised water demand that was used for rate setting purposes
was only 1%. The lower demand expectation coupled with a lower than budgeted wholesale
rate from SFPUC results in a reduction of $884,000 in expected supply costs. Additionally, there
is a variance of $3.0 million in other expenses mostly due to depreciation expenses as a result
of completion of large capital projects.
Table 15: Water Operating Activity
Water ‐ Operating
Activity
All figures in thousands (000’s)
Adjusted
Budget
FY 2012
Unaudited
Actuals
Jul 11‐Jun12
Projected
Activity
N/A
Projected
FY 2012
Activity
Variance to
Budget
Net Sales to date * $ 30,652 $ 30,494 $ ‐$ 30,494 $ (158)
Other revenues to date 2,544 3,293 ‐3,293 749
Purchase costs to date (15,774)(14,889)‐(14,889) 884
Other expenses to date ** (18,573)(21,541)‐(21,541) (2,968)
Total $ (1,151) $ (2,643) $ ‐$ (2,643) $ (1,492)
* Includes misc. sales, adjustments, discounts, and bad debt
** Includes reserve transfers, salaries, allocated charges, other misc. expenses, and
encumbrances
Water Rate Stabilization Reserve
As shown in Table 16, the net result of all changes in projected activity is a decrease of $2.6
million to the Water Rate Stabilization Reserve (W‐RSR), resulting in a projected W‐RSR ending
balance of $8.0 million. This is within the long‐term minimum and maximum levels for the W‐
RSR.
Utilities Update for Fourth Quarter of FY 2012
October 2012
41
Table 16: Water Rate Stabilization Reserve
Estimated Water Rate Stabilization Reserve
All Figures in thousands (000’s)
FY 2012 Adopted Budget Beginning Balance $ 15,148
Changes to FY 2012 Beginning Balance per FY 2011 Accounting $ (4,509)
FY 2012 Beginning Balance after accounting changes $ 10,639
Net sum of FY 2012 Unaudited Actuals to date * $ (2,643)
Current Projected Reserve Balance as of End of FY 2012 $ 7,996
Net sum of Projected Activity through Year End $ ‐
Estimated FY 2012 Ending Balance $ 7,996
Adopted Budget W‐RSR Minimum Guideline $ 4,300
Adopted Budget W‐RSR Maximum Guideline $ 8,600
* Includes Encumbrances for CIP & Operations, bond related debt removed
Bill Comparison
Palo Alto’s water rates increased on July 1, 2012 by an overall water revenue increase for FY
2013 of 15%. Table 17 presents average monthly residential bills for Palo Alto and surrounding
cities for various usage levels based on published rates as of July 1, 2012.
Table 17: Residential Water Bill Comparison
Residential Monthly Water Bill ($/month)
As of July 1, 2012
Usage CCF/mo Palo Alto
Menlo
Park
Redwood
City
Mountain
View
Los
Altos
Santa
Clara Hayward
4 31.90 35.21 33.72 17.59 26.46 12.68 19.20
(Winter median) 7 48.04 50.90 44.09 30.85 36.09 22.19 31.50
(Annual median) 9 62.16 61.36 51.53 39.69 42.52 28.53 39.70
(Summer median) 14 97.46 88.65 73.67 61.79 59.35 44.38 61.78
25 175.12 149.35 140.55 110.41 96.80 79.25 118.43
*Based on the FY 2011 BAWSCA survey, the share of SFPUC as source of potable water supply was 90%
for Menlo Park, 100% for Redwood City, 86% for Mountain View, 12% for Santa Clara and 100% for
Hayward.
Utilities Update for Fourth Quarter of FY 2012
October 2012
42
Wastewater Collection Utility
Operating Activity
Table 18 contains a summary of the Wastewater Collection Fund’s overall activity for FY 2012.
Table 18: Wastewater Operating Activity
Wastewater
Collection ‐ Operating
Activity
All figures in thousands (000’s)
Adjusted
Budget
FY 2012
Unaudited
Actuals
Jul 11‐Jun 12
Projected
Activity
N/A
Projected
FY 2012
Activity
Variance to
Budget
Net Sales to date * $ 14,371 $ 14,094 $ ‐$ 14,094 $ (277)
Other revenues to date 1,497 1,746 ‐1,746 249
Treatment costs to date (7,954)(8,895)‐(8,895) (941)
Other expenses to date ** (7,232)(8,091)‐(8,091) (859)
Total $ 683 $ (1,145)$ ‐$ (1,145) $ (1,828)
* Includes misc. sales, adjustments, discounts, and bad debt
** Includes reserve transfers, salaries, allocated charges, other misc. expenses, and
encumbrances
Wastewater Collection Rate Stabilization Reserve
The Wastewater Collection Fund sales revenues tend to be very stable as 53% is from
residential customers, whose rate consists of fixed monthly service charges. Some component
of business sales revenues is based on winter water use levels which tend to be rather stable as
well, and as a result, there is only a slight variance of $277,000 to the budget. Allocated
charges from the treatment plant were higher by $941,000 largely due to increases in the
treatment plant operating costs and increased cost plan allocations from the City to the plant.
Other expenses were also higher, primarily due to a one‐time adjustment to depreciation
expenses.
The result of these changes is that the adopted budget reserve drawdown of $1.289 million is,
instead, projected to be a $1.145 million drawdown for FY 2012, resulting in a Wastewater
Collection Rate Stabilization Reserve (WC‐RSR) ending balance of $4.75 million. This is slightly
above the long‐term maximum reserve guideline level of $4.3 million.
Utilities Update for Fourth Quarter of FY 2012
October 2012
43
Table 19: Wastewater Collection Rate Stabilization Reserve
Estimated Wastewater Collection Rate Stabilization Reserve
All Figures in thousands (000’s)
FY 2012 Adopted Budget Beginning Balance $ 5,850
Changes to FY 2012 Beginning Balance per FY 2011 Accounting $ 46
FY 2012 Beginning Balance after accounting changes $ 5,896
Net sum of FY 2012 Unaudited Actuals to date * $ (1,145)
Current Projected Reserve Balance as of End of FY 2012 $ 4,751
Net sum of Projected Activity through Year End $ ‐
Estimated FY 2012 Ending Balance $ 4,751
Adopted Budget WC‐RSR Minimum Guideline $ 2,156
Adopted Budget WC‐RSR Maximum Guideline $ 4,311
* Includes Encumbrances for CIP & Operations, bond related debt removed
Bill Comparison
Palo Alto’s wastewater collection rates changed on July 1, 2012. The rate change resulted in an
5% increase in overall revenues. Table 20 presents typical monthly residential bills for Palo Alto
and surrounding cities based on published rates as of July 1, 2012. Note that, even after the
residential rate increase, the bill for a Palo Alto customer is just 77% of the average of the bills
for the six comparator cities.
Table 20: Residential Wastewater Collection (Sewer) Bill Comparison
Residential Monthly Wastewater Collection Bill
As of July 1, 2012
Palo Alto Menlo Park Redwood City Mountain View Los Altos Santa Clara Hayward
29.31 62.67 57.88 24.25 29.25 29.20 26.47
Utilities Update for Fourth Quarter of FY 2012
October 2012
44
Fiber Utility
Operating Activity
Table 21 contains a summary of the Fiber Fund’s overall activity for FY 2012.
Table 21: Fiber Operating Activity
Fiber – Operating
Activity
All figures in thousands $ (000’s)
Adjusted
Budget
FY 2012
Unaudited
Actuals
FY 2012
Projected
Activity
FY 2012
Projected
FY 2012
Activity
Variance
to Budget
Net Sales to date * 3,349 3,362 ‐ 3,362 13
Other revenues to date 310 436 ‐436 126
Other expenses to date ** (2,060)(1,457)‐(1,457) 603
Total 1,599 2,340 ‐2,340 741
* Includes misc. sales, adjustments, discounts, and bad debt
** Includes reserve transfers, salaries, allocated charges, other misc. expenses, and encumbrances
Fiber Rate Stabilization Reserve
Actual and projected sales data for dark fiber service connections for FY 2012 indicate that
revenues were $13,000 higher than expected compared to budget; however, actual and
projected expenses were lower by $603,000, mainly due to increases in the backlog of CIP
projects. The Fiber Optics Fund has encumbered $446,000 and $259,000 from prior year
budgets for customer connections and network system improvements, respectively. As shown
in Table 22, the Fiber Optics Rate Stabilization Reserve (F‐RSR) is projected to be $12.5 million
as of the end of FY 2012. This is above the F‐RSR long‐term maximum guideline level of $1.7
million for FY 2012.
Table 22: Fiber Rate Stabilization Reserve
Estimated Fiber Rate Stabilization Reserve
All Figures in thousands (000’s)
FY 2012 Adopted Budget Beginning Balance $ 9,406
Changes to FY 2012 Beginning Balance per FY 2012 Accounting $ 724
FY 2012 Beginning Balance after accounting changes $ 10,130
Net sum of FY 2012 Unaudited Actuals to date * $ 2,340
Current Projected Reserve Balance as of End of FY 2012 $ 12,470
Net sum of Projected Activity through Year End $ ‐
Estimated FY 2012 Ending Balance $ 12,470
Adopted Budget F‐RSR Maximum Guideline $ 1,675
* Includes Encumbrances for CIP and Operations
Utility Reserves Summary
A summary of fiscal year beginning and expected ending reserve balances along with minimum
and maximum guidelines is provided for each Utility reserve in Table 23 below.
Utilities Update for Fourth Quarter of FY 2012
October 2012
45
Table 23: Utilities Reserves Summary
Beginning
Reserve
Balance as
of 6/30/11
FY 2011
(ASD)
Ending
Reserve
Balance as
of 06/30/12
FY 2012
(ASD)
Minimum Maximum
Electricity
Supply/Commodity 57,091$ 65,930$ 31,018$ 62,035$
Distribution 9,240 8,680 6,391 12,782
CIP 13,648 14,545
Public Benefit 3,139 1,149
ESP 55,558 50,320
All Others 3,977 6,681
Sub total Cash Reserves 142,653$ 147,305$
Net Capital Investment 161,700 166,085
Total 304,353$ 313,390$
Gas
Supply/Commodity 8,789 7,619$ 4,665$ 9,330$
Distribution 7,399 8,374 2,676 5,353
CIP 15,862 16,015
All Others 3,264 5,746
Sub total Cash Reserves 35,314$ 37,754$
Net Capital Investment 70,538 76,606
Total 105,852$ 114,360$
Water
Distribution 10,639$ 7,996$ 4,614$ 9,229$
CIP 13,087 13,382
All Others 5,133 4,940
Sub total Cash Reserves 28,859$ 26,318$
Net Capital Investment 70,538 70,454
Total 99,397$ 96,772$
Fiber Optic
Distribution 10,130$ 12,470$ 670$ 1,675$
CIP 721 697
All Others 1,089 1,085
Sub total Cash Reserves 11,940$ 14,252$
Net Capital Investment 6,940 7,226
Total 18,880$ 21,478$
Wastewater Collection
Distribution 5,896$ 4,751$ 2,156$ 4,311$
CIP 10,140 10,944
All Others 1,110 1,100
Sub total Cash Reserves 17,146$ 16,795$
Net Capital Investment 66,452 67,677
Total 83,598$ 84,472$
Budgeted Reserve
Guideline Range for
FY 2012
Utility Fund Reserve
Quarterly Projections - Unaudited
As of 06/30/2012 - UNAUDITED
(in thousands)
Utilities Update for Fourth Quarter of FY 2012
October 2012
46
X. Operations
Reliability Impact Measures
Electric
1. FY 2011 Distribution System Service Reliability Indices and Definitions (Figure 23)
Gas
1. Gas System O&M – Service Installations (Figure 24)
2. Gas Main Leaks By Type of Pipe (Figure 25)
3. Gas System O&M Mainline Break Repairs (Figure 26
4. Gas Main Shutdowns and Customers Affected (Figure 27)
5. Gas Service Disruptions by Cause (Figure 28)
Water
1. Water Main Leaks by Type of Pipe (Figure 29)
2. Unplanned Water Service Disruption (Figure 30)
Utilities Update for Fourth Quarter of FY 2012
October 2012
47
Figure 23: Electric Distribution System Reliability
Fiscal Year: 2011 -- 2012
Distribution System Service Reliability Indices
Month
Mo
m
e
n
t
a
r
y
Su
s
t
a
i
n
e
d
Ov
e
r
h
e
a
d
Un
d
e
r
g
r
o
u
n
d
Ot
h
e
r
Sto
r
m
No
n
-
S
t
o
r
m
To
t
a
l
#
o
f
Ou
t
a
g
e
s
Customers
Affected
(I)
Customer
Minutes of
Interruption
(J)
Customer
Momentary
Outage
Impact
(K)
Total
Number of
Customers
Served
(L)
SAIDI
(Minutes)
(J) / (L)
SAIFI
(I) / (L)
CAIDI
(Minutes)
(J) / (I)
MAIFI
(K) / (L)
Jul-11 3 2 1 3 3 106 6610 28600 0.23 0.004 62.4
Aug-11 5 4 1 5 5 1012 66286 28600 2.32 0.035 65.5
Sep-11 1 1 1 1 600 600 28600 0.021 0.021
Oct-11 1 1 1 1 20 1880 28600 0.07 0.001 94.0
Nov-11 28600
Dec-11 1 1 1 1 2250 29250 28600 1.02 0.079 13.0
Jan-12 2 2 2 2 1268 118510 28600 4.14 0.044 93.5
Feb-12 2 1 1 2 2 135 42422 28600 1.48 0.005 314.2
Mar-12 2 2 2 2 102 36547 28600 1.28 0.004 358.3
Apr-12 1 3 2 2 2 4 450 49430 250 28600 1.73 0.016 109.8 0.009
May-12 2 5 7 7 7 1897 190027 762 28600 6.64 0.066 100.2 0.027
Jun-12 1 1 1 1 1435 76140 28600 2.66 0.050 53.1
Fiscal YTD TOTAL 4 25 22 2 3 18 11 29 9275 617102 1612 28600 21.58 0.32 66.53 0.06
55 0.9 61 1.5
88 1.1 85 5.4
160 1.74 130 11.1
630 4.5 825 13.7Fourth Quartile Industry Values per IEEE Std. 1366-2003
First Quartile Industry Values per IEEE Std. 1366-2003
Second Quartile Industry Values per IEEE Std. 1366-2003
Third Quartile Industry Values per IEEE Std. 1366-2003
Utilities Update for Fourth Quarter of FY 2012
October 2012
48
DEFINITIONS
Customer Average Interruption Duration Index (CAIDI) ‐ the average time to restore service.
CAIDI = (Sum of Customer Minutes Interrupted) / (Total Customers Interrupted)
Customer Minutes of Interruption‐ Summation of [(# of customers affected) x (Duration of Interruption)]
IEEE 1366 Index "Quartile" Data ‐ First Quartile: 25% of survey respondents had an index less than this number; Second Quartile:
50% of survey respondents had an index less than this number; Third Quartile: 75% of survey respondents had an index less than
this number; Fourth Quartile: 100% of survey respondents had an index less than this number.
Momentary Average Interruption Frequency Index (MAIFI) ‐ the average number of momentary interruptions that a customer will
experience during a given time frame.
MAIFI = [Sum of (Momentary Interruptions x Customers Affected)] / (Total Customers Served)
Momentary Interruption ‐ An interruption of duration limited to the period required to restore service by an interrupting device.
Sustained Interruption ‐ Any interruption not classified as a momentary event.
System Average Interruption Duration Index (SAIDI) ‐ Measure of the total duration of an interruption for the average customer
during a given time frame.
SAIDI = (Sum of Customer Minutes Interrupted) / (Total Customers Served)
System Average Interruption Frequency Index (SAIFI) ‐ the average number of times a customer will experience an interruption
during a given time frame.
SAIFI = (Total Customers Interrupted) / (Total Customers Served)
Utilities Update for Fourth Quarter of FY 2012
October 2012
49
Figure 24: Gas System O&M – Service Installations
Utilities Update for Fourth Quarter of FY 2012
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Figure 25: Gas Main Leaks By Type of Pipe
Utilities Update for Fourth Quarter of FY 2012
October 2012
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Figure 26: Gas System O&M Mainline Break Repairs
Utilities Update for Fourth Quarter of FY 2012
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Figure 27: Gas Main Shutdowns and Customers Affected
Utilities Update for Fourth Quarter of FY 2012
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Figure 28: Unplanned Gas Service Disruptions by Cause
Utilities Update for Fourth Quarter of FY 2012
October 2012
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Figure 29: Water Main Leaks by Type of Pipe
Utilities Update for Fourth Quarter of FY 2012
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Figure 30: Unplanned Water Disruptions By Cause