HomeMy WebLinkAboutStaff Report 6990
City of Palo Alto (ID # 6990)
City Council Staff Report
Report Type: Informational Report Meeting Date: 6/27/2016
City of Palo Alto Page 1
Summary Title: Utilities Quarterly Update
Title: City of Palo Alto Utilities Update for the Third Quarter of Fiscal Year
2016
From: City Manager
Lead Department: Utilities
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 and
Utilities Advisory Commission’s (UAC) information. This update has been prepared to keep the
UAC and Council apprised of the major issues that are facing the water, gas, electric,
wastewater collection and fiber utilities.
Items in this quarterly report that are related to five topics highlighted at the joint UAC/Council
meeting that was held on April 20, 2015 include:
1. Fiber to the premises (FTTP): fiber optics updates start on page 15.
2. Undergrounding of electric lines: no update in this quarterly report; the UAC received an
update at its January 2016 meeting.
3. Second electric connection: no update in this quarterly report; an update was provided
in the last quarterly report (Staff Report 6672).
4. Electrification: no update is provided in this quarterly report; the heat pump water
heater pilot was described in the last quarterly report (Staff Report 6672).
5. Recycled water: an update is provided on page 13.
Items of special interest this quarter include:
an update on the water supply status and a description of the State Water Resource
Control Board’s drought regulations (page 12)
a chart showing the City’s water use compared to savings targets (Figure 11, page 13)
an updated chart showing participation in the PaloAltoGreen Gas program since the
program launch (Figure 14, page 20)
a statement that all rebate funds for the PV Partners program are exhausted (page 21)
a list of the Spring Utilities workshops and outreach events (page 21)
City of Palo Alto Page 2
the status of the financial reserves as of the end of the third quarter of FY 2016 for all Utilities
funds (Table 11, page 34)
Attachments:
Attachment A: Utilities Update for the Third Quarter of FY 2016 (DOCX)
Utilities
Quarterly
Update
Third Quarter of
Fiscal Year 2016
June 2016
ATTACHMENT A
Utilities Quarterly Update for Third Quarter of FY 2016
June 2016
i
Utilities Quarterly Update
Table of Contents
I. Electricity ................................................................................................................... 1
Electric Supplies ............................................................................................................................................ 1
Electric Budget and Portfolio Performance Measures ................................................................................. 4
II. Natural Gas................................................................................................................. 8
Market Price History and Projections ........................................................................................................... 8
Gas Supply Retail Rates ................................................................................................................................. 9
Gas Budget and Portfolio Performance Measures ....................................................................................... 9
III. Water ....................................................................................................................... 12
Water Availability ........................................................................................................................................ 12
Recycled Water Project ............................................................................................................................... 13
Water Budget Performance Measures ....................................................................................................... 14
IV. Fiber Optics .............................................................................................................. 15
Commercial Dark Fiber Service ................................................................................................................... 15
Google Fiber ................................................................................................................................................ 16
Fiber and Wireless Telecommunications Project Manager ........................................................................ 18
Citizen Advisory Committee ........................................................................................................................ 18
V. Public Benefit, Demand Side Management Programs and Communications ............... 18
Energy Efficiency, Water Conservation and Local Renewable Energy Program Achievements ................. 18
Water Conservation .................................................................................................................................... 20
Communications Update ............................................................................................................................ 21
VI. Research and Development and Innovation .............................................................. 24
Program for Emerging Technologies ........................................................................................................... 24
Customer Connect Pilot Program ............................................................................................................... 25
VII. Legislative and Regulatory Issues .............................................................................. 26
Summary ..................................................................................................................................................... 26
State Legislative Issues ................................................................................................................................ 26
Federal Legislative Issues ............................................................................................................................ 28
State Regulatory Proceedings ..................................................................................................................... 29
VIII. Utility Financial Summary ......................................................................................... 29
Electric Utility Overview .............................................................................................................................. 29
Gas Utility Overview.................................................................................................................................... 30
Wastewater Collection Utility Overview ..................................................................................................... 30
Water Utility Overview ............................................................................................................................... 31
Fiber Optic Utility Overview ........................................................................................................................ 31
Financial Projections and Operations Reserve Balances ............................................................................ 31
CIP Reserves (Reappropriations and Commitments) Summary ................................................................. 33
Residential Bill Comparisons (based on 30 day bills) .................................................................................. 35
Non-Residential Bill Comparisons ............................................................................................................... 36
CIP Project Detail ........................................................................................................................................ 36
Utilities Quarterly Update for Third Quarter of FY 2016
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List of Figures
Figure 1: Electric Supply Resource Projection, 2015 to 2017 (as of May 5, 2016) ...................................... 2
Figure 2: Northern California Peak Electric Prices (as of May 3, 2016) ....................................................... 3
Figure 3: FY 2016 Electric Load and Resource Balance ................................................................................ 6
Figure 4: FY 2016 Electric Market Purchase Costs and Market Prices ......................................................... 7
Figure 5: Natural Gas Prices – Historical and Projected as of May 2, 2016 ................................................. 8
Figure 6: CPAU’s Gas Commodity Rates—July 2012 through May 2016 ...................................................... 9
Figure 7: Cumulative Redwood Pipeline Cost vs. Market Benchmarks ..................................................... 10
Figure 8: Natural Gas Consumption – Budget vs. Actual ........................................................................... 11
Figure 9: Natural Gas Supply Cost – Budget vs. Actual .............................................................................. 11
Figure 10: FY 2016 Natural Gas Prices ($/MMBtu) – Expected vs. Actual ................................................. 12
Figure 11: Water Use Compared to Target for Compliance Period ............................................................ 13
Figure 12: Water Consumption – Budget vs. Actual .................................................................................. 14
Figure 13: Water Cost – Budget vs. Actual ................................................................................................. 15
Figure 14: PaloAltoGreen Gas Program Performance ................................................................................ 20
List of Tables
Table 1: FY 2016 Electric Utility Supply Cost Summary ................................................................................ 4
Table 2: FY 2016 Electric Load and Generation Compared to Budget Projections ....................................... 5
Table 3: Spring 2016 Events and Workshops .............................................................................................. 21
Table 4: Status to date of all applications to the Program for Emerging Technologies ............................. 25
Table 5: Financial Projections, FY 2016 ....................................................................................................... 32
Table 6: FY 2016 Operations Reserves ($000) ............................................................................................ 32
Table 7: Electric CIP Reappropriations and Commitments ......................................................................... 33
Table 8: Gas CIP Reappropriations and Commitments ............................................................................... 33
Table 9: Wastewater Collection Utility CIP Reappropriations and Commitments ..................................... 33
Table 10: Water Utility CIP Reappropriations and Commitments .............................................................. 33
Table 11: FY 2016 Q3 Reserve Report from the City’s Financial System .................................................... 34
Table 12: Residential Electric Bill Comparison ($/month) .......................................................................... 35
Table 13: Residential Natural Gas Bill Comparison ($/month) ................................................................... 35
Table 14: Residential Water Bill Comparison ($/month) ............................................................................ 35
Table 15: Residential Wastewater Collection (Sewer) Bill Comparison ($/month) .................................... 35
Table 16: Median Residential Overall Bill Comparison ($/month) ............................................................. 36
Table 17: Non-Residential Electric Bill Comparison ($/month) .................................................................. 36
Table 18: Non-Residential Natural Gas Bill Comparison ($/month) ........................................................... 36
Table 19: Electric Utility CIP Project Detail (pg 1/2) ................................................................................... 37
Table 20: Gas Utility CIP Project Detail (pg 1/2) ......................................................................................... 39
Table 21: Water Utility CIP Project Detail ................................................................................................... 41
Table 22: Wastewater Collection Utility CIP Projects ................................................................................. 42
Utilities Quarterly Update for Third Quarter of FY 2016
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I. Electricity
Electric Supplies
Western Area Power Administration (Western) Issues
Unfortunately the ongoing drought continues to keep projected Western Base Resource
generation levels well below long-term average levels (399 gigawatt-hours, or GWh). For the
third quarter of FY 2016, Western supply delivered 0 GWh (64 GWh below long-term average
levels, and 12 GWh lower than in FY 2015). Even assuming median precipitation levels going
forward, Western is projected to supply only 264 GWh in FY 2016 (34% below long-term
average levels).
Calaveras Hydroelectric Project Issues
Dought conditions are lessening their impact on Calaveras, as the reservoir has benefited from
average precipitation during the El Niño winter. A federal flush requirement (releasing a certain
volume of water to flush out sediment downstream) occurred over several weeks in March also
helped to greatly increase generation. For the third quarter of FY 2016 Palo Alto’s share of this
project’s generation was 53.3 GWh (121% above the long-term average level, and 368% higher
than in FY 2015). Assuming median precipitation levels going forward, Calaveras is projected to
deliver 106 GWh in FY 2016 (19% below long-term average levels).
Renewable Energy Contract Summary
Since the last quarterly report, construction was completed on the third of the City’s five utility-
scale solar photovoltaic (PV) projects, the 20 megawatt (MW) Frontier Solar project in
Stanislaus County. A ribbon-cutting event was held in May to commemorate its completion,
and the project is expected to begin full commercial operation in June or July. Meanwhile, the
remaining three solar PV projects that are in the development process (Elevation Solar C,
Western Antelope Blue Sky Ranch B, and Wilsona Solar) continue to make good progress
toward completion.
Electric Load and Resource Balance
The size of the committed and planned market purchases over the last, current and next two
calendar years (CY) (shown in Figure 1 below) reflects a significantly below average level of
hydroelectric output, as discussed above. For CYs 2015 and 2016 combined, committed fixed-
price forward market purchases currently account for approximately 474 GWh, which
represents 24% of the City’s total load for the two-year period. Net planned market purchases
represent another 13% of the City’s total load for this period. (There are currently no planned
forward market purchases for CY 2017). Long-term resources (everything but forward and
planned market purchases) currently account for the remaining 76% of the City’s total load over
the three-year period of CY 2015 through CY 2017.
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Figure 1: Electric Supply Resource Projection, 2015 to 2017 (as of May 5, 2016)
Electric Market Price History and Projections
As of May 3, 2016, the price for on-peak energy for June 2016 in Northern California was $25.93
per megawatt-hour (MWh)1, while the prices for July 2016 and August 2016 were $31.68/MWh
and $34.27/MWh, respectively. These values are all approximately $0.30/MWh higher than
they were at the time of the last quarterly report.2 On-peak prices for calendar year strips are
in the range of $33 to $38/MWh for 2016 through 2018. These prices are approximately
$2.48/MWh higher than they were at the time of the last quarterly report. Figure 2 below
illustrates historical monthly on-peak prices and projected monthly forward prices for Northern
California from 2005 through 2023.
1 Note that $30 per megawatt-hour is equal to 3 cents per kilowatt-hour.
2 Market prices for the previous quarterly report were from January 26, 2016.
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Figure 2: Northern California Peak Electric Prices (as of May 3, 2016)
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Electric Budget and Portfolio Performance Measures
Electric Supply Cost Summary Compared to Budget Estimates
Table 1 below shows the City of Palo Alto Utilities’ (CPAU’s) supply cost by cost category
through the third quarter of FY 2016. Supply costs were $1.2 million (2.0%) under budget
primarily due to the FY 2015 NCPA true-up refund (designated to each supply cost category
accordingly). However, transmission costs were higher than expected.
Table 1: FY 2016 Electric Utility Supply Cost Summary
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Electric Usage and Generation Summary Compared to Budget Estimates
Table 2 and Figure 3 below summarize the City’s electric supply sources through the third
quarter of FY 2016. Hydroelectric generation was split, with Western substantially below
budget projections due to drought conditions, and Calaveras substantially above budget due to
increased required flow and precipitation.
Table 2: FY 2016 Electric Load and Generation Compared to Budget Projections
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Figure 3: FY 2016 Electric Load and Resource Balance
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Electric Market Prices and Costs Compared to Budget Estimates
Figure 4 shows monthly market prices and the cost of purchasing energy from the market.
Electric market prices through the third quarter of FY 2016 were lower due to continued lower
natural gas prices that impact the electricity markets. The cost of market purchases through the
third quarter of FY 2016 was about $2.56M higher than it would have been if all energy had
been purchased in the spot market3. As discussed previously, the total cost of market purchases
in the third quarter was lower than budgeted due to higher than projected output from
hydroelectric resources.
Figure 4: FY 2016 Electric Market Purchase Costs and Market Prices
3 Note that some market purchases are made on a forward basis to lock in market prices.
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II. Natural Gas
Market Price History and Projections
Ample supply and large volumes of gas in storage continue to keep gas prices low. Forward gas
prices at PG&E Citygate are in the $3.00 - $3.50 per million British Thermal Units (MMBtu)4
range for the next 12 months. Figure 5 below shows historical monthly bidweek index prices
through May 2016 and forward natural gas prices at PG&E Citygate as of May 2, 2016.
Figure 5: Natural Gas Prices – Historical and Projected as of May 2, 2016
4 Note that 1 million British Thermal Unti (MMBtu) is equal to 10 therms. Therefore, a gas cost of $3 per MMBtu is
equivalent to 30 cents per therm.
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Gas Supply Retail Rates
Since July 1, 2012, the commodity portion of CPAU’s retail gas rates for all customers varies
every month depending on the market price of natural gas. Figure 6 below shows the actual
commodity rates charged from July 2012 through May 2016. These rates can also be found on
the web site at: http://www.cityofpaloalto.org/civicax/filebank/documents/30399. Note that
gas commodity rates are currently at their lowest level since July 2012 when these costs began
being passed on directly to customers on a monthly basis.
Figure 6: CPAU’s Gas Commodity Rates—July 2012 through May 2016
Gas Budget and Portfolio Performance Measures
Value of CPAU’s Share of Redwood Pipeline Capacity
Figure 7 below shows the cost of the Redwood gas transmission line compared to the value at
month-ahead spot market prices as well as daily spot market prices. The Redwood pipeline
allows the City to buy gas at the receipt point of Malin, Oregon and transport the gas to “PG&E
Citygate”, which is normally a higher value receipt point. The City’s share of the Redwood
pipeline was a net benefit to the Gas Utility of approximately $213,000 through the third
quarter of FY 2016. This is the difference between the value of Redwood capacity of $598,000
(the difference of the monthly index prices at the ends of the Redwood pipeline in Malin,
Oregon and PG&E Citygate) and the transportation cost of using the Redwood pipeline of
$385,000.
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Figure 7: Cumulative Redwood Pipeline Cost vs. Market Benchmarks
Natural Gas Consumption and Costs: Budget vs. Actual
Figure 8 and Figure 9 compare actual natural gas use and supply costs with the FY 2016 budget.
Natural gas use through the third quarter of FY 2016 was 15% below the budget forecast, and
costs were 53% lower than budgeted amounts. Gas usage was lower than estimated in the
budget since the weather has been much warmer than average. Reduced gas usage may also
be impacted by the drought and customer’s reduced usage of (hot) water. Lower than
budgeted gas prices were a main contributor to the lower than budgeted commodity cost.
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Figure 8: Natural Gas Consumption – Budget vs. Actual
Figure 9: Natural Gas Supply Cost – Budget vs. Actual
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Figure 10 shows actual gas prices at PG&E Citygate (CG) versus gas prices that were projected
at the time the FY 2016 budget was developed. Since July 2015, gas prices have been lower
than budget. The price of gas is passed directly to consumers through the monthly-varying,
market-based commodity portion of CPAU’s gas retail rate so commodity prices—and
commodity revenues—are lower than projected.
Figure 10: FY 2016 Natural Gas Prices ($/MMBtu) – Expected vs. Actual
III. Water
Water Availability
Precipitation was around average for the season although a full recovery from the drought will
require normal amounts and above normal precipitation over several years. Water storage
utilized by City’s water supplier, the San Francisco Public Utilities Commission (SFPUC), has
been an effective tool for managing the system and has benefited from recent precipitation,
but is still heavily impacted by the consecutive dry years. As of May 8, 2016 the total water in
storage for the SFPUC’s regional water system was 72% of the system’s capacity; in a normal
year, the amount of water in storage is about 82% of the system’s capacity.
The State Water Resources Control Board (SWRCB) mandated that Palo Alto reduce potable
water use for the compliance period (June 1, 2015 through February 28, 2016) by 24%
compared to usage during the same period in 2013. On February 2, 2016, the SWRCB extended
the mandate through October 31, 2016. On May 9, Governor Brown issued a new order
extending the emergency regulations through January 2017 and directed the SWRCB to make
adjustments based on local water supply and demand conditions. On May 18, the SWRCB
ordered water supply agencies to self-certify the level of available supplies based on a
prescriptive methodology that assumes that the next three years have the same (dry)
conditions as in 2013 through 2015 and that water usage is equal to the average of 2013 and
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2014. By June 8, the SFPUC must determine whether these conditions would result in a water
supply shortfall and, if so, that will become the “conservation standard”, or mandate for water
use reduction through January 2017, for agencies such as CPAU that purchase all of its potable
supplies from the SFPUC. Compliance with the new standard begins June 1, 2016.
To achieve mandatory water use reductions, CPAU placed particular emphasis on continuing to
irrigate and protect the health of trees in the City while still reducing outdoor irrigation. As of
May 5, the City’s water use was 31% less than 2013 for the compliance period and is on track to
meet the 24% target, as shown in Figure 11 below.
Figure 11: Water Use Compared to Target for Compliance Period
Recycled Water Project
Since the City Council certified the Final Environmental Impact Report for expanding the
recycled water pipeline system to reach the Stanford Research Park on September 28, 2015
(Staff Report 5962), staff has issued a request for proposals for pre-design work, and
preparation of a business plan for the project as well as examining alternatives such as installing
equipment to purify treated wastewater to potable water standards. Responses are due back in
May with interviews to follow in June 2016.
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Water Budget Performance Measures
Figure 12 and Figure 13 below compare actual water consumption and water supply cost to the
FY 2016 budget projections. The community has responded with substantial water savings
CPAU has been working diligently with the City’s interdepartmental drought team to ensure the
message about necessary water use reduction has been widespread, and to develop innovative
solutions to help the City and community members meet its water use reduction target. Actual
water use through the third quarter of FY 2016 was 9% lower than budget estimates. Actual
supply costs through the third quarter of FY 2016 were 8% below budget, mostly due to the
lower consumption.
Figure 12: Water Consumption – Budget vs. Actual
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Figure 13: Water Cost – Budget vs. Actual
IV. Fiber Optics
Commercial Dark Fiber Service
The total number of commercial dark fiber customers was 105 as of the end of the third quarter
of FY 2016. There was no change in the total number of customers from Q1 2016 to Q3 2016,
but the total number of active dark fiber service connections serving commercial customers and
the City increased from 232 to 234 (some customers have multiple connections). Commercial
customers generate 81% of the dark fiber license revenues. Through the end of the third
quarter of FY 2016, seventeen new dark fiber service connections to existing and new
customers were completed, while twenty service connections were disconnected.
Dark Fiber Optic Network Audit and Process Improvements
Based on a request for proposals process, a vendor was selected in February 2016, to provide
professional services to perform a physical inventory of the dark fiber optic network. The
purpose of the audit is to improve the operation and maintenance of the network. The
retrieved data from the audit confirms complete fiber routes and usage to optimize network
reliability, minimize outages and improve efficiency in designing and installing new connections.
The audit facilitates the collection of information and data that will verify customer connectivity
and populate the geographical information system (GIS). The audit began February 22, 2016
and was completed April 29, 2016. The vendor audit reports were submitted for approval by
staff as the audit progressed for each individual enclosure/splice point in the fiber backbone.
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In addition to the network audit, the fiber customer service team is working on streamlining
existing customer engagement processes using a recently purchased Autodesk platform. The
revamped system will facilitate inter-departmental collaborations and cut down on customer
sign-up processes significantly.
Google Fiber
Staff has reviewed Google Fiber’s Draft Project Description (“Fiber to the Premises City-Wide
Master Plan”) and the City Attorney’s office and department staff are currently working with
Google’s business staff and legal counsel to finalize a Master Encroachment Agreement (MEA)
for use of the public rights-of-way. The MEA will also facilitate a project determination under
the California Environmental Quality Act.
Other activities for the proposed project include finalizing a Master License Agreement (MLA)
for use of City-controlled space on utility poles and conduit, discussions regarding a potential
co-build,, in addition to hiring temporary or contract resources for the proposed project.
Substantial staff and third-party contracting resources for legal services, engineering,
inspection, planning and administration will be required in order to prepare for and implement
any approved project by Google Fiber. The City has already incurred, and will incur, costs and
expenses beyond what the City would otherwise recover under the Municipal Fee Schedule and
will request that Google reimburse the City for such costs and expenses.
On March 28, 2016, in anticipation of Google Fiber’s fiber optic network build-out, Utilities
issued a request for proposals to add temporary resources to supplement and assist staff to
perform the administrative, engineering, and operations tasks necessary to do a complete
review of the large volume of pole attachment applications as well as inspections before and
after construction. Staff estimates that 30 percent of the poles will require make-ready and/or
replacement to accommodate new attachments by Google Fiber. Four bids were received and
vendor interviews are being scheduled.
Staff plans to bring a recommendation to the Council for the MEA, MLA and other aspects of
the project by summer or early fall 2016.
Fiber-to-the-Premises Network Co-Build Opportunities
Based on Council direction, the City Manager and Chief Information Officer met with Google
Fiber officials in January and February 2016, to explore what a conceptual “co-build” model for
citywide fiber-to-the-premises. The key objective for these discussions was to explore the
feasibility of the City collaborating with Google as it builds its network to install City fiber and
supporting infrastructure, possibly aerially and underground, in furtherance of a parallel
citywide dark fiber network. The intent of the discussions was to form a basis for a set of
principles to pursue a model.
Staff has met with Google representatives to develop technical specifications for a co-build that
will lead to a draft Term Sheet, including cost sharing considerations. Once the a Term Sheet is
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drafted and cost sharing methodologies are understood and negotiated by both parties, the
City Attorney’s office and Google’s legal counsel will meet to discuss legal and regulatory issues
affecting a co-build proposal. The City’s Chief Information Officer has also met with AT&T
representatives regarding a co-build opportunity.
AT&T GigaPower
In April 2014, AT&T announced its plan to bring gigabit-speed broadband to the Silicon Valley
area and other cities throughout their operating territory. AT&T’s “GigaPower” service is an
upgrade to its existing U-verse service and will be deployed to residents initially in
neighborhoods with high potential for adoption. AT&T plans to begin construction and provide
GigaPower service to selected Palo Alto neighborhoods in 2016 under phase one of its project.
AT&T is currently working with the City to secure permits to install two cabinets for its
GigaPower launch in Palo Alto. Each cabinet serves approximately 400 premises. It is expected
that AT&T will install approximately 25 additional cabinets in 2016/2017, with long-term plans
to install a total of approximately 54 cabinets to provide GigaPower throughout most of the
city. AT&T has informed staff that the GigaPower upgrade is contingent on achieving a
sufficient customer take-up rate for service during its phased rollout.
Fiber-to-the-Premises Master Plan and Wireless Network Plan
Staff is currently working on the following tasks for the FTTP and wireless plans as directed by
the Council on September 28, 2015:
1. Identifying disagreements with the Citizen Advisory Committee (CAC) regarding detailed
assumptions, and their impacts, used to forecast the capital additions in the FTTP Master
Plan prepared by CTC Technology & Energy (CTC). Staff and CTC met with the CAC in
January and February to review the cost estimates in the FTTP Master Plan for outside plant
construction and the assumptions developed to support the cost estimates. As a result of
these meetings, the CAC is now in agreement with the FTTP network cost estimates in the
report.
2. Developing a “Dig Once” ordinance: Staff is working with CTC to evaluate existing dig once
models, ordinances and strategies implemented by other municipalities and counties. CTC’s
findings and recommendations will be completed by mid-May and staff anticipates
reviewing them with the Council by late summer or early fall 2016.
3. Developing and issuing a request for information (RFI) to explore potential municipally-
owned and public-private partnership models for FTTP. The RFI was issued in May 2016.
4. Developing information and a scope of work to issue RFP(s) to expand Wi-Fi access in
unserved City facilities and retail areas, in addition to dedicated wireless communications
for Public Safety and Utilities: Staff expects to issue the RFP(s) by June 30, 2016.5
5 1) Citywide Mobile Data Network for Public Safety; (2) Point-to-Multipoint Network for Secure City Enterprise
Access (Public Safety & Utilities); (3) Extension of existing City Wi-Fi to unserved City facilities & public areas/parks,
and an evaluation of expanding wireless access in retail areas.
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Fiber and Wireless Telecommunications Project Manager
On November 30, 2015, Council approved hiring a temporary Fiber and Wireless
Telecommunications Project Manager for up to 3 years at an annual cost of $228,000. This
position will manage various City fiber and wireless initiatives, including working as a special
point of contact for the City if Google Fiber builds its network in Palo Alto. The interview
process is underway and a candidate is expected to be selected by the end of June.
Citizen Advisory Committee
Staff continues to meet on a regular basis with the committee regarding fiber and wireless
initiatives. In April 2016, the City Manager invited the six current committee members to renew
their memberships and serve for the next 24 months (May 1, 2016 - April 30, 2018). All of the
current members agreed to continue to serve. The City Manager also plans to recruit 3 to 5
new members to the committee and expects to appoint them by June 30, 2016.
V. Public Benefit, Demand Side Management Programs and
Communications
Energy Efficiency, Water Conservation and Local Renewable Energy Program Achievements
CPAU offers a wide range of customer programs and services to encourage energy and water
efficiency and customer-owned renewable generation. Some of these programs are
administered by CPAU staff, although the majority of the energy and water savings are
achieved through third-party administered programs. The Annual DSM Report summarizes
overall savings goals versus achievements, program-level achievements and expenditures, as
well as key initiatives undertaken by CPAU. The Annual DSM Report for FY 2015 was provided
to Council on April 18, 2016 and UAC in May 2016 (Staff Report 6715).
2016 Summer Demand Response Program
The Demand Response Pilot Program (Program) is designed to encourage participating
customers to reduce their electrical loads during summer peak days when electrical demand is
high, helping to reduce Palo Alto’s annual peak electricity demand. Incentive payments are
given to participating customers who are able to reduce their electrical loads when called upon
by CPAU during high peak load periods. As of May 2, 2016, there are five participating
customers at six locations. If participants took part in a Demand Response event, the aggregate
load reduction would be about 500 kW.
Home Efficiency Genie Program
Staff launched a new residential energy audit program called the Home Efficiency Genie where
residents pay a small co-payment for a comprehensive building performance audit. Since initial
participation was slow, in December 2015 staff launched a co-marketing campaign with the
PaloAltoGreen Gas program to increase participation in both programs. A program video was
produced and the logo and website were redesigned to launch the extensive marketing
campaign in January 2016. Two bill inserts, a Palo Alto Weekly ad, online ads, envelope ads and
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an email blast later, participation picked up from 26 assessments in the second quarter to 35
assessments in the third quarter. As of the end of March 2016, a total of 95 assessments have
been completed since the launch of the program in July 2015.
Georgetown University Energy Prize Competition
The competition attempts to reduce energy use in 2015 and 2016. The winner will receive a $5
million prize to be used for energy efficiency programs. After data from January through
September 2015 was released, Palo Alto ranked 15th (out of 50) in the competition, as
determined by energy usage reduction of their residential, school, and municipal customers.
In February 2016, the City released a new Utility Portal where customers can learn about their
commodity use, CPAU’s efficiency programs, tips to reduce usage, and CPAU’s new energy
savings lottery program (a key part of our Georgetown strategy) that will be unveiled in
Summer 2016. While 25% of the competition’s scoring is based on energy usage, the remaining
75% includes factors such as whether energy saving programs are innovative, replicable, lasting,
and related to education. Thus, to strengthen its position CPAU is engaging with schools and
community organizations to promote Utility energy efficiency programs such as the lottery and
the Portal. CPAU’s high school internship program engages customers through students and
their families, and we are coordinating with the Cool City Challenge program to ensure that
their block leaders are well-informed about Utility programs and can promote the programs
amongst their neighbors. On May 9, the City Council approved dedicating $1 million of the $5
million prize, should the City win, to the Palo Alto Unified School District. The district is excited
to help the City win the prize and has plans for how it could use the $1 million for efficiency
improvements.
On March 17th, Palo Alto hosted the second of five regional Georgetown University Energy
Prize workshops at the Mitchell Park Community Center. The workshop was designed for
elected officials and other community leaders to discuss strategies of how to engage people in
energy efficiency measures. The other workshop host cities include Bellevue WA, Cambridge
MA, Chattanooga TN and Madison WI. At the Palo Alto workshop, Mayor Burt delivered the
welcoming address and Chief Sustainability Officer Gil Friend was the keynote speaker. A video
of the event can be viewed at: https://www.facebook.com/guenergyprize/
PaloAltoGreen Gas
The voluntary PaloAltoGreen Gas (PAGG) program provides the opportunity for residential and
commercial customers to reduce or eliminate the impact of GHG emissions associated with
their gas usage, through the purchase of certified environmental offsets. The program’s goal for
2020 is to achieve subscription of 20% of natural gas customers, representing approximately
10% of gas load and 16,000 metric tons of GHG emission reduction. As shown in
Figure 14 below, as of end of April 2016, 909 customers have signed up for PAGG, representing
5.37% of March’s total city gas load. Although the bulk of the participants are residential
customers, the majority of the gas load enrolled in the program is for City facilities since all City
facilities enrolled in the program for 100% of their gas usage starting in July 2015. Staff
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anticipates that program participation will grow following the marketing push with Home
Efficiency Genie that started in January 2016 with co-marketing to continue into the 4th quarter
of 2016.
Figure 14: PaloAltoGreen Gas Program Performance
Water Conservation
CPAU partners with the Santa Clara Valley Water District (SCVWD) to provide residential and
commercial water conservation programs which include free water audits to residential
customers, landscape surveys, rebates for landscape conversions, irrigation hardware, clothes
washers, High-Efficiency Toilets (HETs) and urinals. Despite a vastly increased budget during the
drought, SCVWD’s funding for the Landscape Rebate Program was depleted for FY 2016.
Net Energy Metering Cap
On October 26, 2015 City Council approved a formal definition of the Net Energy Metering
(NEM) cap of 9.5 MW (Staff Report 6139). As of April 30, 2016 Palo Alto has 7.6 MW of local
solar photovoltaic (PV) capacity, representing 79% of the NEM cap.
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PV Partners
All remaining rebate funds for the PV Partners program were reserved on April 21, 2016. CPAU
has opened a wait list for customers installing a PV system on a small commercial site (served
by electric rate schedule E-2 or E-4). CPAU’s share of the SB1 mandated goal was to pay $13M
in rebates for 6.5 MW of PV system capacity by 2017. Palo Alto’s SB1 funded PV installations
are expected to total 7.3 MW by 2018 and the final performance-based incentive payments are
expected to end in fiscal year 2023.
Education, Workshops and Community Outreach Activities
March was the beginning of the spring series of workshops and events, reaching out to
approximately 1,000 individuals. For the first event of the season, Palo Alto hosted a
Georgetown University Energy Prize Conference for neighboring cities and community leaders
to discuss strategies for engaging customers in energy efficiency measures. For the first
workshop of the season, CPAU teamed with BAWSCA (Bay Area Water Supply and Conservation
Agency) and coordinated a rain barrel installation workshop. Attendance was boosted to 65
residents with the use of the Utilities email blast and Nextdoor. For Earth Day related events
staff hosted a Native Garden workshop along with tabling Earth Day events at Wilson Sonsini,
Tesla, Addison Elementary School, Nest and the Great Race for Water. At the May Fete Parade,
the Utilities table was the most popular booth where children and parents were lining up to
scratch and sniff natural gas and play a game to answer questions about energy and water
conservation.
Table 3: Spring 2016 Events and Workshops
Event Date Attendance
Georgetown University Energy Prize Conference 3/17/2016 35
Rainwater Harvesting/Rain Barrel Workshop (BAWSCA) 3/26/2016 65
Design It Yourself Native Garden (BAWSCA) 4/13/2016 93
WSGR Wilson Sonsini Goodrich Rosati - Earth Day Event 4/19/2016 100+
Tesla - Earth Day Event 4/21/2016 100+
Addison Elementary School Earth Day Event 4/21/2016 50
Nest Bring Your Kids to Work Day 4/28/2016 40
Great Race For Water/Run the Earth 5k - Climate Change 4/30/2016 200
May Fete Parade 5/7/2016 200+
Graywater to Green Garden (BAWSCA) 5/21/2016 Tbd
Communications Update
This section summarizes communications highlights, updates on major campaigns and
noteworthy events.
SEPA Top 10 Award for Solar Watts per Customer
CPAU earned a spot on the national Top 10 utility solar list compiled by the Smart Electric
Power Alliance (SEPA - formerly the Solar Electric Power Association). SEPA ranked CPAU third
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for the number of “Watts per Customer” in 2015. As of the time SEPA conducted its survey for
2015, Palo Alto integrated a total of 1,846 solar electric watts per customer and 861
photovoltaic (PV) systems onto the grid. SEPA’s ninth annual survey of solar activities includes
figures from more than 300 utilities across the country. This is the third time CPAU has made
SEPA’s Top 10 list. Awards were announced April 12 at SEPA’s flagship Utility Solar Conference
in Denver.
SEPA also awarded Palo Alto with Public Power Utility of the Year in 2014, and every year dating
back from 2013 to 2009, as well as 2007, the PV Partners Program earned Palo Alto with a spot
on the top 10 list of all municipal utilities nationally for cumulative installed solar capacity or
annual installed capacity. Additionally, in 2002, SEPA awarded the City with the Solar Business
Achievement Award for Development of a Solar Community.
The Great Race for Saving Water
The City teamed up with the Tuolumne River Trust, Palo Alto Weekly, Project Enybody,
KEEN, non-profits and environmental organizations to host a 5K fun run/walk and Earth Day
festival at the Baylands on April 30. Mayor Burt, Council Member Berman, City Manager Keene,
and other representatives from the City Manager’s Office, Community Services, Fire, Office of
Emergency Services, Police, Public Works Utilities, and local youth and community
organizations who came out to join the approximately 200 race participants. Attendees enjoyed
a fun-filled day with raffle prizes, music, goodies, and a chance to catch the “running
toilet!” Photos are available on the City’s SmugMug account and Facebook. Information at
www.cityofpaloalto.org/GreatRace.
Annual Walking & Mobile Gas Leak Survey
CPAU began its annual safety check of gas utility services on April 25. This annual, routine safety
check is conducted every year as required by Department of Transportation Pipeline Safety
Regulations, and is carried out to ensure the safety of all who live and work in Palo Alto.
Approximately one-half of the city is covered every year so that the City’s entire gas service
system can be reviewed in a two year period. The 2016 survey begins on April 25 and should be
finished by September.
A City contractor, Manesco Corporation, will walk residential areas to check for gas leaks along
pipes, gas meters and covers. The business districts will be surveyed with a moving vehicle
canvassing natural gas service points, mains and meters. The mobile survey includes
atmospheric tests near gas mains, in utility manholes, at pavement and sidewalk cracks, and
other locations in which it is possible to identify gas leaks. In the end, over 200 miles of gas
main pipeline will be checked through this thorough review. If any gas leaks are found, they are
documented and repaired according to CPAU’s policies. Read more on our CPAU news page.
Mayor’s Green Business Leader Awards
The City’s "Mayor Green Business Leader” Awards program recognizes and promotes Palo Alto
companies who have made major strides in improving building energy efficiency. In Palo Alto,
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businesses that benchmark their energy use and receive ENERGY STAR certification are
considered a Green Business Leader. On April 4, Mayor Burt honored eight companies for their
leadership in energy efficient building management in 2015. Thirty buildings totaling over 2.3
million square feet of office space qualified for this 4th annual award. CPAU’s news webpage
(cityofpaloalto.org/utilities) provides more information about the companies honored.
National Mayor’s Challenge for Water Conservation
Mayor Burt joined the Mayor’s Challenge for Water Conservation in April. This is a national
competition in which city mayors encourage their residents to save water and sign the “My
Water Pledge” on behalf of their city. The city with the most pledges at the end of the month
wins, and residents are then entered into a chance to win prizes such as a new Toyota Prius!
The water pledge is at mywaterpledge.com
CPAU Celebrated April as National Safe Digging Month
April is National Safe Digging Month, a campaign to educate people to "Know What's Below and
Call 811 Before You Dig." The City promotes this important safety reminder to our community
throughout the year, but places additional emphasis on the message in the month of April.
Excavation damage remains one of the leading causes of gas and other utility pipeline
accidents. Our message informs people that these accidents are preventable by first calling 811
prior to digging. The Underground Service Alert (USA) is a free service that will come out and
mark all underground utilities. Visit Call811.com for more information.
Palo Alto Recognized with Tree Line USA Utility Award
For the second year in a row, CPAU has been recognized with the Tree Line USA Utility award by
the National Arbor Day Foundation. CPAU has demonstrated how trees and utilities can co-exist
for community and citizen benefits by exceeding the five core standards criteria:
1. Quality Tree Care ensures that industry standards for pruning, planting, removals,
trenching, and tunneling near trees are consistently followed.
2. Annual Worker Training for Utility employees and contract workers.
3. Tree Planting and Public Education programs are available to the public and paying
customers, demonstrating proper tree planting, placement, and pruning, while
expanding the tree canopy in the community.
4. A Tree-Based Energy Conservation Program places special consideration on the value of
trees in conserving energy.
5. Arbor Day Celebration events are sponsored or participated in annually, including
collaboration with community groups.
Read more on the CPAU news page.
Automated Phone Surveys for Gas Safety Awareness
In March, CPAU participated in the federally mandated Gas Overall Awareness Level (GOAL)
survey, a nationwide program to assess the public’s gas safety knowledge. This telephone
survey is administered by the American Public Gas Association, and conducted every year to
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insure that people living along a gas pipeline have adequate gas safety information. Both
residential and non-residential customers are selected randomly for polling through this
automated phone survey. Over 96% of the respondents believed they had adequate safety
information in regards to gas safety measures.
Communication about Rate Adjustments for Fiscal Year 2017
The City is proposing rate increases for electric, gas, water, wastewater, refuse and storm drain
services effective July 1, 2016. CPAU Communications staff has developed a communications
plan to explain the reasons behind the rate increases, including talking points, the City’s
webpage (www.cityofpaloalto.org/RatesOverview), information in utility bills, frequently asked
questions, and through direct communication with internal and external stakeholders, such as
City Council, City staff, media and customers.
One cost driver for the rate increases is the ongoing drought. The drought has reduced
hydroelectric supplies, requiring the City to purchase replacement electricity supplies. Gas
revenues declined as the year was unusually warm and customers used less hot water while
saving water. Water savings have also reduced revenues and increased the cost of water from
San Francisco. The City has drawn down reserves over the past few years in order to offset rate
increases to the electric and gas utilities. Now, facing vastly lowered reserves and higher
commodity costs, the City must raise rates to cover all costs—many of which are fixed—to
operate and maintain safe and reliable utility services. The City Council will consider the rates
on June 13 as part of the FY 2017 budget review and approval process.
Drought Outreach
The City continued its outreach efforts in response to California’s drought conditions, including
educating the community about the need to irrigate trees to preserve their lasting legacy
through the severely dry conditions. CPAU’s webpage dedicated to drought response
(www.cityofpaloalto.org/water) provides links to a variety of resources related to water
management. Staff will update outreach materials to reflect new regulations by the State
Water Resource Control Board and communicate any changes to customers via standard
marketing and communication channels: utility bill inserts, website, social media, newspaper
and online advertisements, television commercials, email newsletters, outreach to
neighborhood, business, school and community groups through email and in-person meetings.
VI. Research and Development and Innovation
Program for Emerging Technologies
CPAU’s Program for Emerging Technologies, or PET, (www.cityofpaloalto.org/UTLInnovation)
provides the opportunity for local businesses and organizations to submit proposals for
innovative and impactful products to CPAU for review as a prospective partner. The goal is to
find and nurture creative products and services that will manage and better use electricity, gas,
water and fiber optic services. From the program’s inception in June 2012 through the third
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quarter of FY 2016, the program received a total of 46 applications. Table 4 below summarizes
the status of all applications through the third quarter of FY 2016.
Table 4: Status to date of all applications to the Program for Emerging Technologies
Deadline Total Received Under Review Declined/Closed Active Completed
July 2012 2 0 2 0 0
Oct 2012 5 0 5 0 0
Jan 2013 1 0 1 0 0
April 2013 5 0 3 0 2
July 2013 3 0 2 0 1
Oct 2013 5 0 3 1 1
Jan 2014 3 0 3 0 0
April 2014 4 0 1 2 1
July 2014 2 0 2 0 0
Oct 2014 5 0 2 2 1
Jan 2015 2 0 1 1 0
April 2015 6 2 3 0 1
July 2015 2 0 1 0 1
Oct 2015 1 0 0 0 1
Jan 2016 9 3 3 0 3
TOTAL 55 2 32 6 12
PET Project Highlight from the third quarter of FY 2016:
Enabling High Penetrations of Renewables on the Electric Distribution System – A research
team from the SLAC National Accelerator Laboratory and Stanford University held a kick-off
workshop on March 30, 2016, for their U.S. Department of Energy funded “VADER:
Visualization and Analytics of Distributed Energy Resources” research program. Two CPAU
staff working on distributed energy resources and emerging technologies participated in the
workshop. The proposed VADER program is to develop an open-source unified data
analytics platform that will enable the integration of high penetrations of renewables on the
electric distribution system. CPAU staff provided feedback to help maximize the value of the
results of the 3-year research program to Palo Alto’s service territory and other similar small
municipal utilities. Outcomes will facilitate the City reaching multiple strategic sustainability
goals, including meeting 4% of the City’s energy needs from local solar by 2023.
Customer Connect Pilot Program
This program provided advanced meters (AMI) for up to 300 homes, giving participants the
ability to monitor and control their electricity, natural gas and water consumption. This
program also gave CPAU the opportunity to test different meter technologies, database
management and network systems. The pilot program is currently in its fourth year. All 119
customers who signed up to be a part of the associated time-of-use (TOU) residential electric
rate pilot have now been enrolled.
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The current AMI system is able to detect potential water leaks from participants. In 2015, 24%
of pilot participants (69 of the 300 participants) had at least one water leak incident detected
from the AMI system. The leaks were estimated at 4,128 gallons per day and without the AMI
system these leaks would have persisted for far longer.
Ancillary programs based on the AMI system were also developed and implemented; these
include conservation voltage reduction, outage notification, customer load profile analysis, and
a pilot program for seniors with Palo Alto Medical Foundation. An evaluation of this program is
being planned for early 2017. The pilot program is currently slated to end in December 2017.
VII. Legislative and Regulatory Issues
Summary
CPAU staff has been very active on many legislative and regulatory issues during the first part of
the year. Staff met with federal and state elected and appointed officials, testified in a state
legislative committee hearing, and worked directly with political offices to help craft legislative
language. Staff traveled to Sacramento and Washington, D.C. to share Palo Alto’s
environmental goals and programs, and to discuss policies that most benefit residents and
businesses. Staff continues to work with the Northern California Power Agency (NCPA) and the
California Municipal Utilities Association (CMUA), and interacts more frequently with the City’s
state and federal legislative consultants. Staff also monitors activity by the California Public
Utilities Commission (CPUC), the California Air Resources Control Board (CARB), the California
Energy Commission (CEC), and the California Independent System Operator (CAISO).
State Legislative Issues
2016 is the second year of California’s two-year (2015-2016) legislative session. Most bills new
in 2016 and carried over from 2015 are moving through their respective policy and fiscal
committees. The legislative focus thus far includes a successor to the net energy metering
program, deterring residential excessive water users, renewable resources, and climate
pollutants. While CPAU staff tracks many bills, those noted below are ones of heightened
monitoring:
Energy Legislation
AB 2339 (Irwin) – Net energy metering (NEM): This bill defines a specific way for most
Publically Owned Utilities (POUs) across the state to calculate a NEM program cap. As currently
written, this bill would (1) extend the current NEM program, (2) cause Palo Alto to expend
resources simply to comply with this bill, and (3) jeopardize the implementation of our
successor program already undergoing citywide review. CPAU staff has been very active in
communicating our concerns, which includes testifying at a policy committee hearing. Staff is
working closely with NCPA in opposition to the bill, and engaging with CMUA.
Status: Referred to Appropriations
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AB 2699 (Gonzales) – Department of Consumer Affairs: Contractor's State License Board: Solar
energy systems companies: Regulations. Otherwise known as the solar customer consumer
protection bill, AB 2699 would require that the Contractor’s Board develop and make available
on its Web site a “solar energy system disclosure document.” This document must be provided
by the solar companies to the consumer prior to completion of a sale, financing, or lease of a
solar system. The bill would require the Board to establish, through regulation requirements for
a contractor, a blanket performance and payment bond for the purpose of solar installation.
Introduced in response to complaints about some “bad actors” in the solar industry and to
provide consumer protections, it is supported by NCPA and CMUA.
Status: Referred to Appropriations
AB 1800 (Hadley) – Utility outage compensation claims: annual posting. This bill would require
electric utilities to annually post on its Web site specified information relating to utility outage
compensation claims for the previous year. The posting requirement is applicable only to those
outages that the CAISO, the CUC, or the utility has determined are the fault of the utility or
those claims relating to outages that the utility has determined to pay. It prohibits information
relating to utility outage compensation claims from being admitted as evidence in any action
for damages against a local publicly owned electric utility arising out of an outage.
Status: Referred to Appropriations
SB 32 (Pavley) – California Global Warming Solutions Act of 2006: This bill would require CARB
to approve statewide GHG emissions limits equivalent to 40% below the 1990 level by 2030 and
80% below the 1990 level by 2050, with an interim goal by 2040. Prohibits CARB from
implementing the next update of the California Global Warming Solutions Act of 2006 Scoping
Plan until it has taken specified actions, including waiting at least one year before adopting the
Plan. While CARB is moving forward with a scoping plan for meeting the post-2020 targets, this
bill would formalize CARB’s role.
Status: Stalled in the Assembly in 2015
Water Legislation
SB 814 (Hill) – Drought: excessive water use: urban retail water suppliers: This bill, which
would be enforceable only during a declared emergency based on drought conditions, states
that excessive water use by a residential customer is prohibited and requires each urban retail
water supplier to establish a method to identify and restrict excessive water use. CPAU and
CMUA staff actively engaged with Senator Hill’s office before the bill was introduced to express
concerns with language related to public records requests of water users. That language was
amended out.
Status: Referred to Appropriations
AB 2594 (Gordon) – Stormwater resources: use of captured water. Currently, the Stormwater
Resource Planning Act authorizes public agencies to develop a stormwater resource plan that
meets specified standards to address the capture of stormwater. This bill would authorize a
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public entity that captures stormwater, before the water reaches a natural channel, to use the
captured water.
Status: Referred to Appropriations
Natural Gas Legislation
AB 2460 (Irwin) – Solar Thermal Systems. This bill would revise the current Solar Water Heating
and Efficiency program to promote the installation of solar water systems; set the funding cap
between January 1, 2017, and July 31, 2027, at $1 billion; reserve 50% of the total program
budget for low-income residential housing or in buildings in disadvantaged communities; and
extend the operation of the program through July 31, 2027. It would also extend the current
requirement that the governing body of each POU providing gas service, until August 1, 2027,
adopt, implement, and finance a solar water heating system incentive program.
Status: Referred to Appropriations
Federal Legislative Issues
After much external discussion, Senator Feinstein introduced S. 2533, The California Long-Term
Provisions for Water Supply and Short-Term Provisions for Emergency Drought Relief Act. The
bill allows for competitive funding of recycled water projects, long-term water supply projects
and short-term, temporary solutions to make the water-delivery system more efficient during
the current drought. This bill has not yet been heard in committee.
Staff also follows Representative Tonko’s H.R. 4653, which would amend the Safe Drinking
Water Act to increase assistance for States, water systems, and disadvantaged communities
among other provisions. Thus far, the bill has not moved to its first committee.
Meanwhile, Senator Murkowski’s S.2012, the Energy Policy Modernization Act of 2015, passed
the Senate and will head to the House for conference. NCPA is very active on S.2012 through its
federal lobbyist; this bill was also discussed recently with congressional staff when CPAU, NCPA,
and other POU representatives traveled to Washington, D.C. for NCPA’s Federal Policy
Conference.
This April conference also provided an opportunity to support further action on other Palo Alto
and NCPA priorities.
Hydropower licensing reforms: modernizing the regulatory review for hydropower
projects and removing unnecessary barriers to relicensing;
Workforce development amendments to S.2012: allowing participation of local
governments and adding continuing education (retraining opportunities) as an eligible
program activity under the workforce development title;
Protection of tax-exempt financing: maintaining existing rules on the deductibility of
interest earned on municipal tax-exempt bonds; and
Combating wildfires: NCPA is advocating for adequate federal funding for fire
suppression. This is important to Palo Alto because of wild fire impacts to the City’s
hydro resources and the environmental impact of wild fires.
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State Regulatory Proceedings
California Air Resources Board
CARB continues to hold public workshops regarding a proposed regulation to create POU
compliance penalties supporting enforcement of the Renewable Portfolio Standard (RPS)
Program. Following NCPA comments and a workshop, CARB agreed to include specific language
articulating how they will actually process penalty recommendations. CMUA is also active on
this issue, and has submitted comments.
A major focus for CARB this year is the agency’s coordinated updates to the state’s climate
Scoping Plan, updates to the cap-and-trade regulations (both to address the post 2020 GHG
reduction goals), and implementation of the federal Clean Power Plan, which California is
moving ahead in implementing despite the Supreme Court’s current stay on enforcement. Cap-
and-trade workshops continued through April; the final update of the Scoping Plan is planned
for the end of the year, with final plan approval anticipated in 2017.
California Energy Commission
The CEC began working on implementing the building energy use data access and public
disclosure provisions of AB 802. Specifically, the CEC will establish a new statewide building
energy use benchmarking and public disclosure program. The prior program ended in 2015; this
new program will be implemented in 2017. Thus far, the CEC has held a public workshop and
received comments from stakeholders, including NCPA and CMUA.
The CEC is also working on updating the power source disclosure (power content label)
regulations to effectuate changes consistent with CMUA and other utility stakeholder’s
suggestions.
Another major focus this year for CEC is SB 350 implementation. In April CPAU staff attended
CEC’s first workshop on Integrated Resource Plans (IRP). SB 350 requires larger electric POUs
(including Palo Alto) to prepare IRPs every 5 years and submit them to the CEC for review. At
April’s workshop, CPAU staff described Palo Alto’s existing long term planning activities and
how those efforts already meet the requirements of SB 350.
VIII. Utility Financial Summary
This section describes the unaudited actual financial results for FY 2016 for all Utilities funds.
The Council-adopted long-term Financial Plans for the Electric, Gas, Wastewater Collection, and
Water Funds will be updated for FY 2017 during the budget review and approval process.
Electric Utility Overview
Sales through the third quarter of FY 2016 were 1.0% lower than expected. Sales revenues have
been lower by 0.5%, but due to the ongoing drought, deliveries from Western and Calaveras
hydroelectric resources have been lower than average. While this has necessitated additional
electricity market purchases, market prices have been lower than projected. Transmission costs
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have continued to be higher than budget. Offsetting this, but also increasing market purchases,
are lower renewables costs stemming from a delayed start to the Kettleman and Hayworth
solar projects. Current projections indicate higher net energy costs of $1.48 million for FY 2016.
This combination of higher costs and lower revenues would result in a decrease in the level of
the Electric Supply Operations Reserve to $6.4 million and take the Distribution Operations
Reserve below zero. Because of this, several transfers were recommended in the FY 2016 and
FY 2017 Financial Forecasts: $9 million will be transferred from the Supply Rate Stabilization
Reserve, and $5.6 million each from the Hydro Rate Stabilization and CIP Reserves to help bring
the Supply and Distribution Operations Reserves to near minimum levels. After these transfers,
the Electric Rate Stabilization Reserve has $5.4 million which could be used for contingencies.
As shown in Table 7, the Electric Utility CIP Reappropriation and Commitment Reserves totaled
$14.2 million at the end of Q3 FY 2016, of which $3.5 million was under contract.
Gas Utility Overview
Gas Utility sales through the third quarter of FY 2016 were lower than the adopted budget by
7.1%. FY 2015 sales were 13.2% lower than budget, mainly due to warm weather and also to
lower (hot) water usage because of the drought. Decreased consumption has resulted in $1.3
million lower distribution sales revenue through the third quarter, and this has been reflected
in midyear adjustments to reserves. Gas supply revenues to date have also been lower than
budget by $2.3 million, or around 28%, although costs are reduced as well since as gas prices
are passed through directly to customers through the market-based monthly-varying
commodity rate. The Gas Operations Reserve is projected to be between the minimum and
maximum reserve guideline range for FY 2016.
As shown in Table 8, preliminary levels for the Gas Utility CIP Reappropriation and Commitment
Reserves totaled $8.3 million at the end of Q3 FY 2016, of which $284,000 was committed to
projects under contract.
Wastewater Collection Utility Overview
Sales revenues are projected to be slightly lower than forecast, mainly due to lower commercial
wastewater revenues, which are based on winter water usage. The Wastewater Collection
Operations Reserve is projected to be at the minimum reserve guideline level for FY 2016.
Should it be needed, the CIP reserve has an additional $2.6 million that could be utilized in case
of emergency.
As shown in Table 9, the Wastewater Collection Utility CIP Reappropriation and Commitment
Reserves totaled $12.2 million at the end of Q3 FY 2016, of which $10.4 million was committed
to projects under contract.
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Water Utility Overview
Due to the ongoing drought, the Water Fund continues to be volatile with respect to sales and
revenue. Because of the reductions in water use mandated by the SWRCB after the preparation
of the FY 2016 Financial Plan, sales revenues and purchase costs were revised downward and
Council activated the drought surcharge effective September 1, 2015.
The FY 2016 Financial Plan estimated water purchases of 4.77 million hundred cubic feet (CCF)
for FY 2016, but this was revised to 4.27 million CCF after the SWRCB mandate. Customers in
Palo Alto have exceeded these savings targets, and as such, sales and revenues are projected to
be even lower than what was presented in the most recent financial plan updates by around
$800,000. Corresponding purchase cost savings to date are around $1.1 million. The Water
Operations Reserve is projected to be within the guideline range, but should it be needed, the
CIP Reserve has an additional $13.3 million that could be utilized.
As shown in Table 10, the Water Utility CIP Reappropriation and Commitment Reserves totaled
$17.2 million at the end of Q3 FY 2016, of which $6.2 million was for projects under contract.
Fiber Optic Utility Overview
Fiber revenues and expenses through the third quarter of 2016 are $3.8 million and $1.7 million
respectively. Revenues are in alignment with the FY 2016 budget. Total expenses are projected
to be $1.0 million below budget, $2.8 million instead of $3.8 million. The Fiber Fund budgeted
$1.2M for the Fiber Optic System Rebuild CIP project. Since the fiber optic network audit is still
in progress, the findings will not be available until the fourth quarter. $1.0 million of the CIP
rebuild project was set aside for construction and repairs of the dark fiber network. This phase
of the project will not begin until FY 2017. As shown in Table 6, the Fiber Optics Rate
Stabilization Reserve is projected to be $23.4 million as of the end of FY 2016.
Financial Projections and Operations Reserve Balances
Table 5 is a summary of financial projections for all funds as of the third quarter of FY 2016.
Table 6 provides a summary of the projected reserve balance for the Operating Reserves for all
funds as of the end of FY 2016.
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Table 5: Financial Projections, FY 2016
Sales Volumes
Revenue
($000)
Expense
($000)
Net Reserve Change
($000)
Electric Utility
Financial Plan 717,427,173 kWh 129,249 (139,587) (10,338)
Current Forecast 710,104,903 kWh 123,121 (142,155) (19,034)
Change from
Financial Plan
-7,322,270 kWh (6,128) (2,568) (8,696)
-1.0% (4.7%) 1.8%
Gas Utility
Financial Plan 22,537,907 therms 35,993 (40,683) (4,690)
Current Forecast 20,931,666 therms 30,665 (35,886) (5,221)
Change from
Financial Plan
-1,606,241 therms (5,328) 4,797 ( 531)
-7.1% (14.8%) (11.8%)
Water Utility
Financial Plan 3,313,185 ccf 41,517 (46,454) (4,937)
Current Forecast 2,825,909 ccf 38,764 (44,999) (6,235)
Change from
Financial Plan
-487,276 CCF (2,753) 1,455 (1,298)
-14.7% (6.6%) (3.1%)
Wastewater Collection Utility
Financial Plan 18,319 (20,164) (1,845)
Current Forecast 18,106 (20,041) (1,935)
Change from
Financial Plan
(213) 123 ( 90)
0.1% (0.6%)
Fiber Optic Utility
Financial Plan 4,842 (3,785) 1,057
Current Forecast 4,842 (2,785) 2,057
Change from
Financial Plan
0
0.0%
1,000
(26%)
1,000
Table 6: FY 2016 Operations Reserves ($000)
Electric
Supply
Electric
Distribution
Gas Water
Wastewater
Collection
Fiber
Optic *
Beginning 16,012 6,486 10,847 11,664 2,431 21,361
Projected Change (9,589) (9,445) (5,221) (6,235) (1,935) 2,057
Transfers 11,217 9,340 1,531 4,700 3,950 -
FY 2016 Ending 17,460 6,381 7,157 10,129 4,446 23,418
Reserve Minimum 14,596 8,937 4,772 6,208 2,541 895
Reserve Maximum 29,193 13,426 9,543 12,415 6,352 2,238
* For Fiber Optics, the Reserve is the Rate Stabilization (not the Operations) Reserve
Utilities Quarterly Update for Third Quarter of FY 2016
June 2016
33
CIP Reserves (Reappropriations and Commitments) Summary
Table 7: Electric CIP Reappropriations and Commitments
Table 8: Gas CIP Reappropriations and Commitments
Table 9: Wastewater Collection Utility CIP Reappropriations and Commitments
.
Table 10: Water Utility CIP Reappropriations and Commitments
Includes unspent funds from previous years carried forward or reappropriated into the current fiscal year
**Equal to Reserve for Reappropriations + Reserve for Commitments (CIP Reserves).
Utilities Quarterly Update for Third Quarter of FY 2016
June 2016
34
Table 11: FY 2016 Q3 Reserve Report from the City’s Financial System
Utilities Quarterly Update for Third Quarter of FY 2016
June 2016
35
Residential Bill Comparisons (based on 30 day bills)
Table 12: Residential Electric Bill Comparison ($/month)
As of May 1, 2016
Season Usage (KWh/mo) Palo Alto PG&E Santa Clara Roseville
Summer
(May -Oct)
300 28.57 54.64 34.16 53.70
365 (Median) 37.04 69.12 41.83 60.57
650 76.33 152.24 75.47 98.42
1200 172.03 352.38 140.38 184.87
Table 13: Residential Natural Gas Bill Comparison ($/month)
As of May 1, 2016
Season Usage (therms) Palo Alto
Menlo Park, Redwood City,
Mountain View, Los Altos, and
Santa Clara (PG&E Zone X)
Roseville
(PG&E Zone S)
Summer
(Apr-Oct)
15 19.93 17.77 18.35
18 (Median) 21.94 21.46 23.37
30 35.13 41.55 43.46
45 52.91 66.66 68.57
Table 14: Residential Water Bill Comparison ($/month)
As of May 1, 2016
Usage CCF/month Palo Alto
Menlo
Park
Redwood
City
Mountain
View
Los
Altos
Santa
Clara Hayward
4 41.31 44.60 43.69 31.46 33.48 16.64 28.68
(Winter median) 7 63.47 63.24 57.13 48.77 45.34 29.12 48.42
(Annual median) 9 82.51 75.67 66.77 60.31 53.26 37.44 61.58
(Summer median) 14 130.11 108.30 95.46 89.16 74.04 58.24 96.24
25 234.83 180.91 182.14 187.23 120.30 104.00 181.49
Based on the FY 2013 BAWSCA survey, the fraction of SFPUC as the source of potable water supply
was 100% for Palo Alto, 95% for Menlo Park, 100% for Redwood City, 87% for Mountain View, 10%
for Santa Clara and 100% for Hayward.
Table 15: Residential Wastewater Collection (Sewer) Bill Comparison ($/month)
As of May 1, 2016
Palo Alto Menlo Park Redwood City Mountain View Los Altos Santa Clara Hayward
31.95 81.08 74.95 28.80 32.01 37.94 28.93
Utilities Quarterly Update for Third Quarter of FY 2016
June 2016
36
Table 16: Median Residential Overall Bill Comparison ($/month)
As of May 1, 2016
Utility and Usage Palo Alto
Menlo
Park
Redwood
City
Mountain
View Los Altos
Santa
Clara Hayward
Electricity (365 kWh/mo) $ 37.04 $ 69.12 $ 69.12 $ 69.12 $ 69.12 $ 41.83 $ 69.12
Gas (18 th/mo) 21.94 21.46 21.46 21.46 21.46 21.46 21.46
Wastewater 31.95 81.08 74.95 28.80 32.01 37.94 28.93
Water (9 CCF/mo) 82.51 75.67 66.77 60.31 53.26 37.44 61.58
TOTAL $173.44 $247.33 $232.30 $179.69 $175.85 $138.67 $181.09
Non-Residential Bill Comparisons
Table 17: Non-Residential Electric Bill Comparison ($/month)
As of May 1, 2016
Usage (KWh/mo) Palo Alto PG&E Santa Clara Roseville
1,000 140 263 176 140
160,000 21,290 32,856 19,965 20,034
500,000 61,395 78,536 61,124 49,731
2,000,000 213,070 373,383 236,304 188,897
Table 18: Non-Residential Natural Gas Bill Comparison ($/month)
As of May 1, 2016
Usage (therms/mo) Palo Alto PG&E
500 497 437
5,000 4,298 3,642
10,000 8,808 6,507
50,000 42,596 27,429
CIP Project Detail
Tables showing the details regarding the Capital Improvement Program projects are shown in:
1. Table 19 for the Electric Utility;
2. Table 20 for the Gas Utility;
3. Table 21 for the Wastewater Collection Utility; and
4. Table 22 for the Water Utility
Utilities Quarterly Update for Third Quarter of FY 2016
June 2016
37
Table 19: Electric Utility CIP Project Detail (pg 1/2)
Utilities Quarterly Update for Third Quarter of FY 2016
June 2016
38
Table 19: Electric Utility CIP Project Detail (pg 2/2)
Utilities Quarterly Update for Third Quarter of FY 2016
June 2016
39
Table 20: Gas Utility CIP Project Detail (pg 1/2)
Utilities Quarterly Update for Third Quarter of FY 2016
June 2016
40
Table 20: Gas Utility CIP Project Detail (pg 2/2)
Utilities Quarterly Update for Third Quarter of FY 2016
June 2016
41
Table 21: Water Utility CIP Project Detail
Utilities Quarterly Update for Third Quarter of FY 2016
June 2016
42
Table 22: Wastewater Collection Utility CIP Projects