HomeMy WebLinkAboutStaff Report 3362 (2) City of Palo Alto (ID # 3362)
City Council Informational Report
Report Type: Informational Report Meeting Date: 12/17/2012
December 17, 2012 Page 1 of 1
(ID # 3362)
Title: Quarterly Utilities Update
Subject: City of Palo Alto Utilities Quarterly Update - 1st Quarter of Fiscal Year
2013
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 the City of Palo Alto’s water, gas, electric, wastewater collection and fiber
utilities, efficiency programs, legislative and regulatory issues, and a utility financial summary, is
for the Council’s information. This update has been prepared to keep the Utilities Advisory
Commission 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 Utilities Report for First Quarter of FY 2013 (PDF)
ATTACHMENT A
i
Utilities Update for First Quarter of FY 2013
December 2012
Table of Contents
I. Electricity ...............................................................................................................................1
Western Area Power Administration Issues ................................................................................................. 1
Calaveras Hydroelectric Project Issues ......................................................................................................... 1
Electric Load and Resource Balance ............................................................................................................. 2
Electric Market Price History and Projections .............................................................................................. 3
Electric Budget and Portfolio Performance Measures ................................................................................. 4
II. Natural Gas ............................................................................................................................9
Gas Supply Portfolio ...................................................................................................................................... 9
Gas Market Price History and Projections .................................................................................................... 9
Gas Pool Portfolio Average Cost vs. Market ............................................................................................... 11
Gas Budget and Portfolio Performance Measures ..................................................................................... 12
III. Water .................................................................................................................................. 16
Water Availability ........................................................................................................................................ 16
Regional Water Usage Trends ..................................................................................................................... 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 ....................................................... 18
Renewable Energy Programs ...................................................................................................................... 18
Efficiency Programs ..................................................................................................................................... 19
Key and Major Accounts ............................................................................................................................. 19
Measurement & Evaluation Results of Energy Efficiency Programs........................................................... 20
VI. Research and Development and Innovation .......................................................................... 20
Energy Efficient Research & Development ................................................................................................. 20
Emerging Technologies Program ................................................................................................................ 20
VII. Legislative and Regulatory Issues .......................................................................................... 21
State Legislative Issues ................................................................................................................................ 21
Federal Legislative Issues ............................................................................................................................ 23
State Electric Regulatory Proceedings ........................................................................................................ 24
Gas Regulatory Proceedings ....................................................................................................................... 25
VIII. Utility Financial Summary ..................................................................................................... 25
Electric Utility .............................................................................................................................................. 25
Gas Utility .................................................................................................................................................... 29
Water Utility ................................................................................................................................................ 32
Wastewater Collection Utility ..................................................................................................................... 34
Fiber Utility .................................................................................................................................................. 36
Utility Reserves Summary ........................................................................................................................... 37
ATTACHMENT A
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List of Figures
Figure 1: Electric Supply Resources, 2012 to 2014 – as of November 6, 2012 ............................................ 2
Figure 2: Northern California Peak Electric Prices – as of November 6, 2012 ............................................. 3
Figure 3: Actual vs. Budgeted Electric Consumption ................................................................................... 4
Figure 4: Electric Supply Cost – Budget vs. Actual ....................................................................................... 4
Figure 5: FY 2013 (Jul-Sep) Electric Supply Costs by Category – Budget vs. Actual ..................................... 5
Figure 6: FY 2013 Electric Load and Resource Balance ................................................................................ 6
Figure 7: FY 2013 (Jul-Sep) Electric Supply Resources – Budget vs. Actual ................................................. 6
Figure 8: FY 2013 Electric Market Prices – Budget vs. Actual ...................................................................... 7
Figure 9: FY 2013 Electric Forward Market Purchase Cost vs. Spot Market ................................................ 8
Figure 10: Gas Supply Laddering Strategy.................................................................................................... 9
Figure 11: Natural Gas Prices – Historical and Projected ........................................................................... 10
Figure 12: Projected Drawdown from Gas Supply Reserve in FY 2013 and FY 2014 ................................. 11
Figure 13: Natural Gas Cost – Actual vs. Market Benchmarks ................................................................... 12
Figure 14: Redwood Pipeline Cost vs. Market Benchmarks ...................................................................... 13
Figure 15: Natural Gas Consumption – Budget vs. Actual ......................................................................... 14
Figure 16: Natural Gas Cost – Budget vs. Actual ........................................................................................ 15
Figure 17: FY 2013 Natural Gas Costs ($/MMBtu) – Expected vs. Actual .................................................. 15
Figure 18: Water Consumption – Budget vs. Actual .................................................................................. 17
Figure 19: Water Cost – Budget vs. Actual ................................................................................................. 17
List of Tables
Table 1: Electric Retail Sales and Rate ........................................................................................................ 25
Table 2: Electric Operating Activity ............................................................................................................. 26
Table 3: Electric Supply Rate Stabilization Reserve .................................................................................... 27
Table 4: Electric Distribution Rate Stabilization Reserve ............................................................................ 27
Table 5: Residential Electric Bill Comparison .............................................................................................. 28
Table 6: Commercial Electric Bill Comparison ............................................................................................ 28
Table 7: Gas Retail Sales and Rate .............................................................................................................. 29
Table 8: Gas Operating Activity ................................................................................................................... 29
Table 9: Gas Supply Rate Stabilization Reserve .......................................................................................... 30
Table 10: Gas Distribution Rate Stabilization Reserve ................................................................................ 31
Table 11: Residential Natural Gas Bill Comparison ..................................................................................... 31
Table 12: Commercial Natural Gas Bill Comparison ................................................................................... 32
Table 13: Water Retail Sales and Rate ........................................................................................................ 32
Table 14: Water Operating Activity ............................................................................................................ 33
Table 15: Water Rate Stabilization Reserve ................................................................................................ 33
Table 16: Residential Water Bill Comparison .............................................................................................. 34
Table 17: Wastewater Operating Activity ................................................................................................... 34
Table 18: Wastewater Collection Rate Stabilization Reserve ..................................................................... 35
Table 19: Residential Wastewater Collection (Sewer) Bill Comparison ..................................................... 35
Table 20: Fiber Operating Activity .............................................................................................................. 36
Table 21: Fiber Rate Stabilization Reserve .................................................................................................. 36
Table 22: Utilities Reserves Summary ........................................................................................................ 37
Utilities Update for First Quarter of FY 2013
December 2012
1
I. Electricity
Western Area Power Administration Issues
Western Operations
For Fiscal Year (FY) 2012, the 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 363 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 78 GWh in FY 2013 (40% below long-term average levels), and 101 GWh in FY 2014 (23%
below long-term average levels).
Utilities Update for First Quarter of FY 2013
December 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 1 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 late 2014 at the full project size that was originally planned at the
time of the execution of the agreement. And, it incorporates the output of the newly approved
Brannon Solar 20 MW project starting in August 2014.
For CYs 2012 through 2014, committed fixed-price forward purchases currently account for
approximately 641 GWh, which represents 21% of the City’s total load for that three-year
period. Planned market purchases represent 14% of the City’s total load for this period. Long-
term resources (everything but forward and planned market purchases) currently account for
65% of the City’s total load over this three-year period – a 1% increase from the last quarterly
report.
Figure 1: Electric Supply Resources, 2012 to 2014 – as of November 6, 2012
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200
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600
800
1,000
1,200
2012 2013 2014
An
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Calendar Year
Planned Market
Purchases
Committed Market
Purchases
Geothermal
Solar
Wind
Landfill Gas
Calaveras
Western
15% Deficit 20% Deficit11% Deficit
Utilities Update for First Quarter of FY 2013
December 2012
3
Electric Market Price History and Projections
As of November 6, 2012, the price for on-peak energy for the prompt month (December 2012)
in Northern California was $39 per megawatt-hour (MWh), while the prices for January and
February were $42/MWh and $41/MWh, respectively. These values are approximately $5-
6/MWh higher than they were at the time of the last quarterly report.1 On-peak prices for
calendar year strips range from $43/MWh for 2013 up to $53/MWh for 2017. Prices for these
outer years have increased as well, but only by about $1-2/MWh since the time of the last
quarterly report. Figure 2 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 2: Northern California Peak Electric Prices – as of November 6, 2012
0
20
40
60
80
100
120
140
160
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Pe
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ProjectedHistorical
1 Market prices for the previous quarterly report were from September 10, 2012.
Utilities Update for First Quarter of FY 2013
December 2012
4
Electric Budget and Portfolio Performance Measures
Figure 3, Figure 4, and Figure 5 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 the first quarter
of FY 2013 was $15.5 million, approximately $1.8 million less than the adopted budget of $17.4
million. The lower costs were because there were fewer market purchases due to expected
increases in load that have not yet materialized (see Figure 3), as well as bill adjustments from
the prior fiscal years recognized in the current fiscal year.
Figure 3: Actual vs. Budgeted Electric Consumption
200
400
600
800
1,000
1,200
Lo
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Actual Budget
Figure 4: Electric Supply Cost – Budget vs. Actual
$0
$10
$20
$30
$40
$50
$60
$70
$80
Co
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(
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Actual Budget
Utilities Update for First Quarter of FY 2013
December 2012
5
Figure 5: FY 2013 (Jul-Sep) Electric Supply Costs by Category – Budget vs. Actual
4.37 3.15
0.53
0.26
0.74
0.87
3.53
3.40
3.02
3.04
4.01
3.98
1.16
0.84
$0
$2
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$8
$10
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$14
$16
$18
$20
Adjusted Budget Actual
Co
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$
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Jul-Sep FY2013 Electric Supply Costs by Category
Budget vs Actual
Net Market +
Net Surplus
Energy
Renewables
Calaveras Debt
and O&M
Western
NCPA Services
Local Capacity
Transmission
Adopted Budget
Utilities Update for First Quarter of FY 2013
December 2012
6
Figure 6 and Figure 7 below summarize the City’s electric supply sources for FY 2013.
Hydroelectric power deliveries from the City’s Calaveras hydroelectric project have been
substantially lower than budgeted, as have wind resources, but other resources have delivered
roughly what they were projected to deliver.
Figure 6: FY 2013 Electric Load and Resource Balance
0
10
20
30
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GW
h
Spot Market
Purchases
Forward
Market
Purchases
Wind
Landfill
Calaveras
Western
Load
FY 2013 Electric Portfolio Load and Resource Balance
Figure 7: FY 2013 (Jul-Sep) Electric Supply Resources – Budget vs. Actual
134.1 138.4
33.1 11.3
16.0
17.5
49.8
41.7
0.0 40.1
38.8
-3.2
-50
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Adopted Budget Actual
GW
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Jul-Sep FY 2013 Electric Supply Resources
Adopted Budget vs Actual
Uncommitted/
Spot Market
Forward MarketPurchases
Wind
Landfill
Calaveras
Western
Utilities Update for First Quarter of FY 2013
December 2012
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Figure 8, below, shows that market electricity prices are fairly close to the prices projected in
the budget.
Figure 8: FY 2013 Electric Market Prices – Budget vs. Actual
$-
$5
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$20
$25
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$35
$40
$45
Av
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Market Prices, Budget Projections vs. Actual
FY 2013
Prices Used for Budget Actual Price (CAISO Load Aggregation Point)
Utilities Update for First Quarter of FY 2013
December 2012
8
Figure 9 compares the current strategy of making laddered fixed-price forward purchases to a
strategy of buying all market power in the spot market. For Q1 FY 2013 the cost of energy
purchased through the City’s Electric Master Agreements was roughly $260,000 (19%) lower
than they would have been at spot market prices. This was due to increases in the price of
power since the time the purchases were made.
Figure 9: FY 2013 Electric Forward Market Purchase Cost vs. Spot Market
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0.8
1.0
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1.4
1.6
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Electric Forward Market Purchase Cost vs Spot Market, FY 2013
Cost of Forward Market Purchases
Cost at Spot Market Prices (CAISO Load Aggregation Point)
Utilities Update for First Quarter of FY 2013
December 2012
9
II. Natural Gas
Gas Supply Portfolio
Figure 10 shows the completed fixed-price purchases compared to the customer load as of
October 30, 2012. While fixed-price gas purchases have been suspended, the Pool load is
partially hedged with fixed-price gas through October 2013. Currently, fixed-price purchases
make up 23% and 5% of the expected Pool load in FY 2013 and FY 2014, respectively.
Figure 10: Gas Supply Laddering Strategy
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
MM
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Gas Supply Procurement Program for Pool Customers
October 30, 2012
Expected
Pool
Customer
Load
Completed
Purchases
23% fixed-price purchases
for remaining FY13
5% fixed-price purchases
for FY14
Gas Market Price History and Projections
Forward gas prices for delivery at PG&E Citygate between November 2012 and March 2013
have climbed 15% in the past two months and currently average $4.07 per Million British
Thermal Units (MMBtu). The November bidweek gas index price at PG&E Citygate settled at
$3.89/MMBtu, which is $1 higher than the October bidweek price. The average 12-month
forward strip price is currently $4.23/MMBtu for 2013 and $4.52/MMBtu for 2014. Gas prices
at PG&E Citygate are expected to remain under $6/MMBtu through 2020.
Figure 11 below shows historical monthly bidweek index prices and forward natural gas prices
at PG&E Citygate as of October 30, 2012. Also shown in Figure 11 are high and low ranges for
Utilities Update for First Quarter of FY 2013
December 2012
10
the projected future prices. The high and low prices are derived using current call option
premiums to estimate the market’s perception of future price volatility.
Figure 11: Natural Gas Prices – Historical and Projected
$0
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Pri
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Natural Gas Wholesale Prices at PG&E Citygate
as of October 30, 2012
Actual
Projected
High
Low
* High and low prices in the 75th and 25th
percentile projected using Black Scholes model
Utilities Update for First Quarter of FY 2013
December 2012
11
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
$4.46/MMBtu for FY 2013, or approximately 14% higher than the projected market cost
weighted by monthly load. As expected, since pool customers are now charged a market-based
gas commodity rate, there will be an under-collection of gas commodity revenue through
October 2013. Figure 12 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. See Table 9 on page 30 for a discussion of the Gas Supply
Rate Stabilization Reserve balances and long-term guidelines.
Figure 12: Projected Drawdown from Gas Supply Reserve in FY 2013 and FY 2014
$(1.0)
$(0.1)
$(1.5)
$(0.1)
$(1.3)
$0.0
$(1.8)
$(0.2)
$(3.0)
$(2.5)
$(2.0)
$(1.5)
$(1.0)
$(0.5)
$-
$0.5
$1.0
Mil
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Portfolio Mark-to-Market for FY 2013 and FY 2014
October 30, 2012
FY13 Budget prices Expected High Prices Low Prices
FY 2013 FY 2014
Utilities Update for First Quarter of FY 2013
December 2012
12
Gas Budget and Portfolio Performance Measures
Gas Commodity Cost
The monthly average natural gas purchase cost is compared to different market benchmarks in
Figure 13. The figure compares the commodity purchase cost under the City’s former gas
purchasing strategy, the gas laddering strategy, to the current strategy of purchasing gas
indexed to monthly or daily PG&E Citygate prices. The cumulative actual cost of gas for the
fiscal-year-to-date is $175,000 (13%) higher than if the gas were purchased at monthly index
prices and $327,000 (27%) higher than if CPAU had purchased gas at the daily index prices. The
last delivery month for which forward purchases were made under the former strategy is
October 2013, after which the CPAU cost of gas will closely track the monthly index price.
Figure 13: Natural Gas Cost – Actual vs. Market Benchmarks
$0.0
$0.2
$0.4
$0.6
$0.8
$1.0
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$1.4
$1.6
$1.8
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Actual Cost Value at Monthly Bidweek Index Value at Daily Index Price
Utilities Update for First Quarter of FY 2013
December 2012
13
Value of CPAU’s Share of Redwood Pipeline Capacity
The City’s share of the Redwood pipeline provided a net savings of approximately $43,000 in Q1
FY 2013. This is calculated as the difference between the value of Redwood capacity of
$162,000 (found from the difference of monthly bidweek prices at both ends of the Redwood
pipeline in Malin Oregon and PG&E Citygate) and the $119,000 transportation costs of using
the Redwood pipeline. Figure 14 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 14: Redwood Pipeline Cost vs. Market Benchmarks
Utilities Update for First Quarter of FY 2013
December 2012
14
Natural Gas Consumption and Costs: Budget vs. Actual
Figure 15 and Figure 16 below demonstrate natural gas use and costs in comparison with the FY
2013 budget. Natural gas use was roughly equal to the budget forecast. Costs were $474,000
(21%) lower than budgeted amounts. The lower costs were primarily due to gas prices that
were lower than in the budget forecast (see Figure 17) combined with a larger percentage of
the City’s gas purchases being made in the month-ahead or day-ahead market.
Figure 15: Natural Gas Consumption – Budget vs. Actual
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FY 12-13 Natural Gas Consumption
Budget vs. Actual
Actual Consumption
Budget Consumption
Utilities Update for First Quarter of FY 2013
December 2012
15
Figure 16: Natural Gas Cost – Budget vs. Actual
$0
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FY 12-13 Total Cost -Budget vs. Actual
Actual Cost
Budget Cost
Figure 17: FY 2013 Natural Gas Costs ($/MMBtu) – Expected vs. Actual
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
City Gate Budget vs. Actual Prices
CG
Budget
CG
Actual
Utilities Update for First Quarter of FY 2013
December 2012
16
III. Water
Water Availability
Despite the low precipitation levels over the prior water year, system storage is in good shape
at 82% of maximum capacity. This end-of-year storage is largely due to the excellent
precipitation from the previous year and the continued low demands.
Regional Water Usage Trends
The latest SFPUC Regional Water Consumption Report details the current level of water usage
relative to the index period (5-year average from 2007 to 2011). Consumption for the January 1
to September 22 time period is approximately 2.86 % below the index year. Palo Alto’s
consumption is 1.72 % above the index period.
Bay Area Water Supply and Conservation Agency (BAWSCA) Activities
A major Water System Improvement Program (WSIP) project, the Calaveras Dam Replacement,
is experiencing challenges that will further delay the project and that could increase its cost
substantially. The primary issue involves the discovery of unstable soils in the slope on the
south side of the new dam location. It is possible project completion could be delayed until
2017. Considering it may take up to 4 years to fill the reservoir once construction is complete,
this could mean the loss of a critical dry year reservoir until 2019-2021. BAWSCA is evaluating
the potential impact on dry year level of service goals.
The SFPUC has been working on a dry year water transfer with the Modesto Irrigation District
(MID) to benefit all users on the SFPUC system. MID proposed including a right to cancel at any
time, which was not acceptable to SFPUC. The MID Board voted to discontinue negotiations
with the SFPUC on the transfer. BAWSCA is evaluating the impact on level of service goals.
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. If the prepay proceeds,
the annual savings to Palo Alto could be as high as $125,000 per year. The current schedule
includes conceptual approval by City Council in December and bond issuance/closing in
January.
Utilities Update for First Quarter of FY 2013
December 2012
17
Water Budget Performance Measures
Water Consumption and Supply Costs: Budget vs. Actual
Figure 18 and Figure 19 below compare actual water consumption and water supply cost to the
budget projections. Actual water use in Q1 of FY 2013 was 2% lower than budgeted and actual
supply costs were roughly equivalent to the budget.
Figure 18: Water Consumption – Budget vs. Actual
0
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6,000
CC
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SFPUC Invoiced
Budget Purchases
Figure 19: Water Cost – Budget vs. Actual
0
2,000
4,000
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8,000
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SFPUC Invoiced
Budget Purchases
Utilities Update for First Quarter of FY 2013
December 2012
18
IV. Fiber Utility
Commercial Dark Fiber Service
In the first quarter of FY 2013, marketing and project management efforts, combined with in-
house engineering and operational work, increased the number of commercial dark fiber
customers from 80 to 81. The total number of dark fiber service connections serving
commercial customers and the City is 203. Seventy-six percent (76%) of dark fiber license
revenues are generated by commercial customers. From July 1, 2012 through September 30,
2012, six new projects extending service to existing and new customers were completed. Five
dark fiber service connections were disconnected. The fiber network also serves six City
accounts.
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, 56% of the
commercial dark fiber customers are on the EDF-1 rate and 44% are on the EDF-3 rate schedule.
Palo Alto Unified School District
In March 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 proposed
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 has been completed and a final proposal and contract amendment has
been prepared for consideration by the school district.
V. Public Benefit and Demand Side Management Programs
Renewable Energy Programs
PaloAltoGreen
As of October 2012, the program has a participation rate of about 19%. The participation rate
has slipped slightly in the past year, as new signups have not kept up with the rather high
move-out rate. Assuming 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. These options will be brought to
the UAC in December and to City Council at a study session in January or February to receive
feedback on which options to further review.
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
these systems. The program incentive is an up-front rebate applied towards the installed cost
Utilities Update for First Quarter of FY 2013
December 2012
19
of a new system. Under this program, 41 solar water heating systems have been installed. All
but one was residential. Marketing was greatly enhanced last fiscal 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. The program for both IOU and Palo
Alto programs was modified slightly this year, allowing higher rebates for replacement of
natural gas water heaters ($2,719) than for electric or propane ($1,834).
Solar Photovoltaic (PV Partners) Program
As of October 2012, there have been 511 solar PV systems installed, representing over 3,520
kW of electric generation on rooftops in Palo Alto.
Efficiency Programs
Home Energy Reports
The Home Energy Reports (HERs) are being sent to about 19,000 customers every other month,
through May 2013. At that point in time, a Request for Proposals is being undertaken to bring
additional behavior based programs for staff to review and recommend a program to City
Council. Behavior based programs are expected to continue to provide a significant portion of
the residential savings for the next 10 years.
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.
Residential Refrigerator Recycling Program
A total of 15 operational refrigerators and freezers were picked up and recycled through the
contractor JACO in the first quarter of FY 2013. In addition, there were 3 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. Beginning with FY 2013, the highest energy users
among the low income group have been targeted first, in an effort to get the most value for
customers and the utility. In the first three months of the fiscal year, 10 residents have been
assisted with this program. All have received education, weatherization and lighting upgrades.
Also, four furnaces and three refrigerators were replaced.
Key and Major Accounts
Key Account Representatives continue to work with large customers on efficiency,
conservation, rate and fiber installation issues. At the October 1 Council meeting, 7 customers
(with 15 buildings) received the Green Business Leader award for completing building-level
Utilities Update for First Quarter of FY 2013
December 2012
20
benchmarking through the EPA’s Portfolio Manager and receiving scores of at least 75. These
businesses were then honored on the website and with paid advertising. Staff is working to
assist additional businesses in getting this award for the next year, focusing on training in
Portfolio Manager and on new technologies at January and February Facility Manager
meetings.
A recently completed inventory of the equipment of more than 100 small businesses in Palo
Alto has yielded contact information and data for the companies that will be useful to staff in
promoting additional services and programs at these locations.
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.
The EM&V effort is currently underway for programs ended FY 2012. This year, Enovity’s
Commercial and Industrial Energy Efficiency Program (CIEEP), Ecology Action’s Right Lights+
program and the newly implemented Hospital Program are being reviewed for impacts.
Additionally, the Commercial Advantage Program (CAP) with its many complex and custom
rebates measures was included for impact evaluation. Results are expected after February
2013.
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 completed. Staff was able to give a webinar on the program to
other DEED members on December 13. Some of the tools can be viewed at www.zilowatt.org.
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. Staff is reviewing the five applications received in the second application period.
Utilities Update for First Quarter of FY 2013
December 2012
21
Staff is working on a variety of emerging technology projects as described in the last quarterly
report and listed below:
1. AMR meter based pilot with Stanford University and Bidgely in a few homes at Stanford
West apartments.
2. 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.
3. Collaborate 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.
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 verdict is in from the Governor, who had until the end of
September 2012 to sign or veto bills passed by the legislature. The following is a summary of
the energy and water bills that were signed into law by the Governor and could impact CPAU’s
programs and operations.
AB 2227 (Bradford) – Sponsored by NCPA, this bill has been approved by the governor (Chapter
606, Statutes of 2012).
AB 2227 moves the current triennial energy efficiency target-setting schedule to a quadrennial
one. The new law also consolidates all publicly owned utilities’ (POUs such as Palo Alto)
reporting requirements into a minimum number of code sections. It contains a provision that
narrowly limits the scope of data requests from the California Energy Commission (CEC) to only
those matters directly related to the Integrated Energy Policy Report, and also outlines the
Legislature’s intent that all data requests to POUs be obtained in the “cost-effective and
efficient manner…” and that the CEC “gives full consideration to the potential burdens these
data requests impose on the resources of the stakeholders whose information is being
requested.”
The law takes effect on January 1, 2013. NCPA is working with the CEC on implementation of
the new reporting schedule, as well as on further reducing duplicative reporting through
administrative means.
Bills Related to AB 32 (Global Warming Solutions Act):
SB 1018 (Budget Trailer Bill) – This bill has been enacted and inserted language in the Public
Utilities Code requiring the IOUs (such as PG&E) to send at least 85% of the revenues derived
from their free allocation of GHG allowances directly to customers via credits. This does not
apply to POUs such as Palo Alto for now, but could create a precedent for future legislation.
Utilities Update for First Quarter of FY 2013
December 2012
22
Bills Related to the Renewable Portfolio Standard (RPS):
AB 1900 (Gatto) – Approved by the governor (Chapter 602, Statutes of 2012).
This law addresses the barriers to allowing biomethane to be injected into common carrier
pipelines and break down barriers to using in-state biomethane. It requires the Office of
Environmental Health Hazard Assessment to determine the maximum concentration of
constituents of concern (COCs) in landfill gas and requires the CPUC to develop testing
protocols for those COCs. The law also requires California Public Utilities Commission (CPUC) to
adopt nondiscriminatory pipeline access rules and requires the CEC to identify impediments, to
biomethane electricity procurement, and prohibits a gas producer from knowingly selling,
transporting, or supplying gas from a hazardous waste landfill.
AB 2196 (Chesbro) – Approved by the governor (Chapter 605, Statutes of 2012).
This new law: (1) overturns the CEC certification ban on biomethane/biogas contracts; (2)
allows biomethane/biogas to count toward RPS, and; (3) grandfathers existing out-of-state
biomethane/biogas contracts that were entered into prior to March 29, 2012. This is not
directly applicable to Palo Alto at this time, but has allowed a new supply of renewable
resources.
SB 594 (Wolk) – Approved by the governor (Chapter 610, Statutes of 2012).
This law expands the Net-Energy Metering program by allowing customers with multiple meters
on adjacent or contiguous property to aggregate their electric loads. This new law allows a
utility to retain any surplus generation by a customer-generator, and count that generation
towards its RPS. It also ensures 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.
Bills Related to Solar Permit Fees
SB 1222 (Leno) – Approved by the governor (Chapter 614, Statutes of 2012).
This law places a cap on the amount of permit fees charged by a city or county for both
residential and commercial rooftop solar energy systems, unless a city or county makes written
findings and adopts a resolution or ordinance providing substantial evidence of the reasonable
cost to issue the permit and why the cost exceeds the specified caps.
AB 1801 (Campos) – Approved by the governor (Chapter 538, Statutes of 2012).
This law prohibits cities and counties from basing the calculation of the fee charged for a solar
energy system on the valuation of the solar energy system, or any other factor not directly
associated with the cost to issue the permit, or from basing the calculation of the fee on the
valuation of the property or the improvement, materials, or labor costs associated with the
improvement. The law also requires a local government to separately identify each fee assessed
on the applicant for the installation of a solar energy system on the invoice provided to the
applicant.
Utilities Update for First Quarter of FY 2013
December 2012
23
Bills Related to Energy Efficiency Policy:
AB 2249 (Buchanan) – Approved by the governor (Chapter 607, Statutes of 2012).
The Solar Water Heating and Efficiency Act of 2007 excludes solar pool heating systems from
the definition of a solar water heating system. AB 2249 qualifies that this exclusion is limited to
a single-family residential solar pool heating system. The new law clarifies the statement of
legislative intent to include schools in the act.
Bills Related to Natural Gas Pipeline Safety:
AB 1511 (Bradford) – 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) – Approved by the governor (Chapter 486, Statutes of 2012).
This law provides the state's gas utilities with expedited ministerial permitting for pipeline
inspection, remediation, removal and replacement work undertaken pursuant to pipeline
integrity management. It requires a city, county, or city and county to act on an application by
a gas corporation that is a public utility for a ministerial pipeline project permit within a public
street or highway or any other public right-of-way within 10 business days of determining that
an application for the pipeline project, as defined, is complete, except as specified.
Water Related Bills
AB 685 (Eng) – Approved by the governor (Chapter 524, Statutes of 2012).
This law 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. The law does not contain a definition for “affordable.”
AB 2167 (Hill) – Approved by the governor (Chapter 251, Statutes of 2012).
This bill, sponsored by the Bay Area Water Supply and Conservation Agency (BAWSCA), allows
BAWSCA to issue bonds to repay the costs of capital facilities. Although BAWSCA already has
the authority to issue bonds for capital facilities, this law clarified that it could issue bonds to
pre-pay capital debt its members owe San Francisco.
Federal Legislative Issues
Deficit reduction remained the primary focus in Washington. NCPA has focused attention with
the Bureau of Reclamation and the Western Area Power Administration to urge further
progress in resolving the Central Valley Project power customers paying a disproportionately
higher assessment of the Restoration Fund than intended in the Central Valley Project
Improvement Act, to raise concerns with the initiatives in the Department of Energy Secretary
Steven Chu’s March 16th Memo that would require the Power Marketing Administrations to
operate beyond their statutory mission, and to discuss the impacts to hydro generation if the
State Water Resources Control Board were to implement a new flow criteria for the
Sacramento-San Joaquin Delta.
Utilities Update for First Quarter of FY 2013
December 2012
24
Cyber Security – Possible legislation is still on the table and, depending on the results of the
election, could still see some activity this 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 was on November 14, 2012. CPAU designated its 2013 allocation
of cap-and-trade allowances to be deposited in the holding account for future consignment to
the CARB auctions, and consigned one third of these allowances to the November 2012 auction
as required by the CARB regulations. Staff has developed a draft policy for the use of the
auction proceeds for Council consideration.
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. It is expected that the current CEC proceeding will not address the EPS
standard, but that there will be a joint CEC/CPUC proceeding to look into whether the standard
should be lowered.
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
Utilities Update for First Quarter of FY 2013
December 2012
25
recreation. The studies show that current environmental operation conditions including river
flows and river temperatures cannot be met if the Delta Flow Criteria are implemented. Also,
water supply would suffer severely and power supply and cost would be heavily impacted. The
consortium continues to produce and share its studies and feels more study of the goals and
impacts of the Delta Flow Criteria is needed before a prudent science-based decision can be
made. The SWRCB has scheduled workshops to look at various issues including the water,
power and environmental impacts.
Gas Regulatory Proceedings
In its Gas Pipeline Safety Enhancement Plan submitted by PG&E to the CPUC in August 2011,
PG&E proposed an increase of the local transmission rate, which for Palo Alto, would double
the existing rate from $0.025 per therm to $0.050 per therm. This proposed rate is included in
the transportation component of the FY 2013 gas supply rate. However, due to the contentious
nature of the CPUC proceeding, a decision on the requested rate increase has not yet been
made and could be delayed for at least another 12 months. Staff now proposes lowering the
Transportation Charge by $0.025 per therm because the increase in PG&E’s local transportation
rate did not occur as expected.
VIII. Utility Financial Summary
Electric Utility
Retail Sales Volume and System Average Retail Rate
Table 1 below shows the Electric Fund’s retail sales volumes and resulting system average retail
rate for FY 2012 and FY 2013. For the period ending September 30, 2012, sales volumes were
8.2% lower than budget estimates, and the system average retail rate was 0.8% lower. Demand
has been lower across all customer groups, but the main driver of the decrease is a delay in the
schedule of a significant load addition for a large customer.
Table 1: Electric Retail Sales and Rate
Electric - Retail FY 2012
Unaudited
Actuals
FY 2013
Adopted
Budget
FY 2013
Unaudited
Actuals
Difference
of Adopted
Budget and
Actuals
%
Variance
to
Budget
Jul 11-Jun 12 Jul 12-Sep 12 Jul 12-Sep 12
Sales Units (kWh)
System Average Retail Rate
($/kWh)
942,561,974
0.11558
262,443,737
0.12835
241,052,557
0.12284
(21,391,180)
(0.00101)
-8.2%
-0.8%
Utilities Update for First Quarter of FY 2013
December 2012
26
Operating Activity
Table 2 below contains a summary of the Electric Fund’s overall activity for FY 2013.
Table 2: Electric Operating Activity
Electric - Operating
Activity
All figures in thousands (000’s)
Adopted
Budget
FY 2013
Unaudited
Actuals
Jul 12-Sep12
Projected
Activity
Oct 12-Jul 13
Projected
FY 2013
Activity
Variance
to
Budget
Electric Supply Fund
Net Sales * $ 70,800 $ 17,471 $ 51,655 $ 69,126 $ (1,674)
Other revenues 12,551 1,483 10,324 11,806 (745)
Purchase cost to serve retail load (71,476) (15,019) (52,630) (67,648) 3,828
Other expenses ** (15,067) (4,396) (10,593) (14,989) 78
Surplus Energy costs (1,577) (681) (1,133) (1,813) (236)
Surplus Energy revenues 1,627 125 1,133 1,258 (369)
Total $ (3,142) $ (1,017) $ (1,243) $ (2,260) $ 882
Electric Distribution Fund
Net Sales * $ 47,341 $ 12,155 $ 34,037 $ 46,192 $ (1,149)
Other revenues 2,930 941 1,989 2,930 -
Other expenses ** (50,509) (17,269) (33,240) (50,509) -
Total $ (238) $ (4,173) $ 2,786 $ (1,387) $ (1,149)
* Includes misc. sales, adjustments, discounts, and bad debt
** Includes debt service, reserve transfers, salaries, allocated charges, other misc. expenses and
encumbrances
As of September 2012, the cost of purchases to serve retail load was $3.8 million lower than the
adopted budget, primarily due to decreased load, but also due to lower renewables costs
related to the delay in start of three landfill gas projects. Net sales have been reduced by $1.7
million to reflect lower sales to date figures. Revenues related to carbon allowances are
projected to be lower by $553,000, and Central Valley Project Operations and Maintenance
(CVP O&M) repayments are also projected to decrease by $192,000, which is offset by an equal
decrease in CVP O&M costs that is factored into the purchase costs2. Surplus energy sales are
projected to decrease, with revenues decreasing by $369,000 and corresponding surplus
energy costs increasing by $236,000. The net effect of these changes is a projected $882,000
decrease in the budgeted drawdown of $3.1 million from the Electric Supply Rate Stabilization
Reserve (E-SRSR).
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 First Quarter of FY 2013
December 2012
27
For the Electric Distribution Fund, the FY 2013 variance to budget reflects decreased sales of
$1.1 million to date. This results in an estimated $1.1 million drawdown of the Electric
Distribution Rate Stabilization Reserve (E-DRSR), as opposed to a $238,000 drawdown in the
adopted 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 $63.7 million, which is slightly above the long-term maximum E-SRSR reserve
guideline level as shown in Table 3 below.
Table 3: Electric Supply Rate Stabilization Reserve
Estimated Electric Supply Rate Stabilization Reserve
All figures in thousands (000’s)
FY 2013 Adopted Budget Beginning Balance $ 60,702
Changes to FY 2013 Beginning Balance per FY 2012 Accounting $ 5,227
FY 2013 Beginning Balance after accounting changes $ 65,929
Net sum of FY 2013 Unaudited Actuals to date * $ (1,017)
Current Projected Reserve Balance as of End of FY 2013 $ 64,912
Net sum of Projected Activity through Year End $ (1,243)
Estimated FY 2013 Ending Balance $ 63,669
Adopted Budget E-SRSR Minimum Guideline $ 31,721
Adopted Budget E-SRSR Maximum Guideline $ 63,442
* 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 $7.3 million, which is within the E-DRSR long-term minimum and maximum reserve guideline
levels as shown in Table 4 below.
Table 4: Electric Distribution Rate Stabilization Reserve
Estimated Electric Distribution Rate Stabilization Reserve
All Figures in thousands (000’s)
FY 2013 Adopted Budget Beginning Balance $ 10,995
Changes to FY 2013 Beginning Balance per FY 2012 Accounting $ (2,275)
FY 2013 Beginning Balance after accounting changes $ 8,680
Net sum of FY 2013 Unaudited Actuals to date * $ (4,173)
Current Projected Reserve Balance as of End of FY 2013 $ 4,507
Net sum of Projected Activity through Year End $ 2,786
Estimated FY 2013 Ending Balance $ 7,293
Adopted Budget E-SRSR Minimum Guideline $ 6,747
Adopted Budget E-SRSR Maximum Guideline $ 13,494
* Includes Encumbrances for CIP & Operations
Utilities Update for First Quarter of FY 2013
December 2012
28
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
amount of the ESP Reserve. The estimated balance of the ESP Reserve is $50.32 million as of
the end of FY 2013 (the same as the balance at the end of FY 2012).
Bill Comparison
The last electric rate adjustment was a 10% increase effective July 1, 2009. Table 5 presents
residential monthly bills for Palo Alto and surrounding cities for a several usage levels for the
winter (November through April) billing period based on published rates as of November 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 second lowest for winter 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 22% more than Palo Alto’s
customers in the summer.
Table 5: Residential Electric Bill Comparison
Residential Monthly Electric Bill
As of November 1, 2012
Season Usage (KWh/mo) Palo Alto PG&E Santa Clara Roseville
Winter
(Nov-Apr)
300 $ 28.57 $ 38.54 $ 30.37 $ 43.99
(Median) 453 $ 48.49 $ 59.98 $ 46.43 $ 61.32
650 $ 76.33 $ 117.72 $ 67.11 $ 90.52
1200 $ 172.03 $ 300.23 $ 124.84 $ 182.32
Table 6 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 6: Commercial Electric Bill Comparison
Commercial Monthly Electric Bill
As of November 1, 2012
Usage (KWh/mo) Palo Alto PG&E Santa Clara Roseville
1,000 $ 127 $ 163 $ 156 $ 138
160,000 $ 17,245 $ 18,801 $ 18,002 $ 20,569
500,000 $ 50,430 $ 54,285 $ 54,352 $ 48,707
2,000,000 $ 178,800 $ 222,168 $ 210,129 $ 185,581
Utilities Update for First Quarter of FY 2013
December 2012
29
Gas Utility
Retail Sales Volume and System Average Retail Rate
Table 7 below shows the Gas Fund’s retail sales volume and system average retail rate for FY
2012 and FY 2013. For FY 2013 as of the end of September 2012, sales have been lower than
budgeted by 2.2%. Note that the system average rate for the gas utility reflects market rates
for the commodity portion for all natural gas customers, which have been lower than budgeted.
Table 7: Gas Retail Sales and Rate
Gas – Retail FY 2012
Unaudited
Actuals
FY 2013
Adopted
Budget
FY 2013
Unaudited
Actuals
Difference
of Adopted
Budget and
Actuals
%
Variance
to
Budget
Jul 11-Jun 12 Jul 12-Sep 12 Jul 12-Sep 12
Sales Units (Therms)
System Average
Rate ($/Therm)
29,983,129
1.389
4,604,043
1.320
4,503,287
1.226
(100,756)
(0.093)
-2.2%
-7.1%
Operating Activity
Table 8 below contains a summary of the Gas Fund’s overall activity for FY 2013.
Table 8: Gas Operating Activity
Gas - Operating Activity All figures in thousands $ (000’s)
Adopted
Budget
FY 2013
Unaudited
Actuals
Jul 12-Sep12
Projected
Activity
Oct 12-Jul 13
Projected
FY 2012
Activity
Variance to
Budget
Gas Supply Fund
Net Sales * 16,053 2,116 11,729 13,845 (2,208)
Other revenues 237 44 193 237 -
Purchase costs (16,334) (1,786) (12,833) (14,619) 1,715
Other expenses ** (860) (4,847) 3,987 (860) -
Total (904) (4,473) 3,076 (1,397) (493)
Gas Distribution Fund
Net Sales * 21,824 3,364 18,460 21,824 -
Other revenues 1,419 420 999 1,419 -
Other expenses ** (25,723) (10,971) (14,752) (25,723) -
Total (2,480) (7,187) 4,707 (2,480) -
* 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 $2.2 million in net sales is due to the lower than
expected market rates for gas. This is also reflected in lower purchase costs of $1.7 million.
Utilities Update for First Quarter of FY 2013
December 2012
30
PG&E’s transportation rates to Palo Alto were budgeted to increase this year. However, this did
not happen and does not look likely during the rest of the fiscal year. Staff recommended a
reduction to the commodity transportation rates charged to customers which is expected to be
effective as of January 2013. Staff will also propose a corresponding downward revision to the
purchase cost budget as a midyear budget adjustment.
Gas Supply Rate Stabilization Reserve
As shown in Table 9 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 $6.2
million, which is within the long-term minimum and maximum G-SRSR guideline levels.
Table 9: Gas Supply Rate Stabilization Reserve
Estimated Gas Supply Rate Stabilization Reserve
All Figures in thousands (000’s)
FY 2013 Adopted Budget Beginning Balance $ 6,630
Changes to FY 2013 Beginning Balance per FY 2012 Accounting $ 988
FY 2013 Beginning Balance after accounting changes $ 7,618
Net sum of FY 2013 Unaudited Actuals to date * $ (4,473)
Current Projected Reserve Balance as of End of FY 2013 $ 3,145
Net sum of Projected Activity through Year End $ 3,076
Estimated FY 2013 Ending Balance $ 6,221
Adopted Budget G-SRSR Minimum Guideline $ 4,072
Adopted Budget G-SRSR Maximum Guideline $ 8,144
* Includes Encumbrances for CIP & Operations
Utilities Update for First Quarter of FY 2013
December 2012
31
Gas Distribution Rate Stabilization Reserve
As shown in Table 10 below, the Gas Distribution Rate Stabilization Reserve (G-DRSR) is
expected to have an ending balance of $5.9 million, which is within the long-term minimum and
maximum G-DRSR guideline levels.
Table 10: Gas Distribution Rate Stabilization Reserve
Estimated Gas Distribution Rate Stabilization Reserve
All Figures in thousands (000’s)
FY 2013 Adopted Budget Beginning Balance $ 7,299
Changes to FY 2013 Beginning Balance per FY 2012 Accounting $ 1,075
FY 2013 Beginning Balance after accounting changes $ 8,374
Net sum of FY 2013 Unaudited Actuals to date * $ (7,187)
Current Projected Reserve Balance as of End of FY 2013 $ 1,187
Net sum of Projected Activity through Year End $ 4,707
Estimated FY 2013 Ending Balance $ 5,894
Adopted Budget G-DRSR Minimum Guideline $ 3,339
Adopted Budget G-DRSR Maximum Guideline $ 6,678
* Includes Encumbrances for CIP & Operations
Bill Comparison
Table 11 presents residential monthly bills for Palo Alto and surrounding cities for several usage
levels for the winter (November through March) billing period based on published rates as of
November 1, 2012. As Palo Alto’s gas commodity rates now fluctuate monthly with short-term
market prices, bills have decreased and are comparable to PG&E’s for all usage levels. For the
median usage level, PG&E customer bills are 4% higher than Palo Alto customer’s bills.
Table 11: Residential Natural Gas Bill Comparison
Residential Monthly Natural Gas Bill
As of November 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 $ $ $
Winter
(Nov-Mar)
30 35.83 32.69 32.69
(Median) 54 56.59 58.84 58.84
80 89.39 92.92 93.81
150 186.02 189.95 190.84
Utilities Update for First Quarter of FY 2013
December 2012
32
Table 12 below presents monthly gas 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 12: Commercial Natural Gas Bill Comparison
Commercial Monthly Natural Gas Bill
As of November 1, 2012
Usage Palo Alto PG&E
Therms/mo $ $
500 595 498
5,000 5,277 4,532
10,000 10,480 8,078
50,000 52,006 36,581
Water Utility
Retail Sales Volume and System Average Retail Rates
Table 13 below shows the Water Fund’s retail sales volume and the system average retail rate
for FY 2012 and FY 2013. For the period ending September 30, 2012, sales have been slightly
higher by 3.2% from the adopted budget for the same period.
Table 13: Water Retail Sales and Rate
Water – Retail FY 2012
Unaudited
Actuals
FY 2013
Adopted
Budget
FY 2013
Unaudited
Actuals
Difference
of Adopted
Budget and
Actuals
%
Variance
to
Budget
Jul 11-Jun 12 Jul 12-Sep 12 Jul 12-Sep 12
Sales Units (CCF)
System Average Rate ($/CCF)
5,062,873
5.859
1,679,208
6.894
1,733,629
6.899
54,421
0.005
3.2%
0.0%
Utilities Update for First Quarter of FY 2013
December 2012
33
Operating Activity
Table 14 below contains a summary of the Water Fund’s overall activity for FY 2013. While
water sales and revenues have been higher by 3.2% for the first three months (amounting to
$383,000), due to the variable nature of sales this is not projected as a net change in expected
sales for the fiscal year as a whole. There are no known changes to budgeted costs or revenues
for the Water Fund at this point.
Table 14: Water Operating Activity
Water - Operating
Activity
All figures in thousands (000’s)
Adopted
Budget
FY 2013
Unaudited
Actuals
Jul 12-Sep 12
Projected
Activity
Oct 12-Jul 13
Projected
FY 2013
Activity
Variance to
Budget
Net Sales to date * $ 35,963 $ 12,106 $ 23,857 $ 35,963 $ -
Other revenues to date 2,624 1,082 1,543 2,624 -
Purchase costs to date (15,940) (5,489) (10,451) (15,940) -
Other expenses to date ** (24,302) (18,203) (6,099) (24,302) -
Total $ (1,655) $ (10,504) $ 8,849 $ (1,655) $ -
* 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 15, no variance to the budgeted drawdown of $1.7 million to the Water Rate
Stabilization Reserve (W-RSR) is expected at this time, resulting in a projected W-RSR ending
balance of $6.3 million. This is within the long-term minimum and maximum guideline levels
for the W-RSR. The balance in the W-RSR appears negative at this point due to the
encumbrance of all Capital Improvement Program funds in advance of sales revenue.
Table 15: Water Rate Stabilization Reserve
Estimated Water Rate Stabilization Reserve
All Figures in thousands (000’s)
FY 2013 Adopted Budget Beginning Balance $ 9,488
Changes to FY 2013 Beginning Balance per FY 2012 Accounting $ (1,492)
FY 2013 Beginning Balance after accounting changes $ 7,996
Net sum of FY 2013 Unaudited Actuals to date * $ (10,504)
Current Projected Reserve Balance as of End of FY 2013 $ (2,508)
Net sum of Projected Activity through Year End $ 8,849
Estimated FY 2013 Ending Balance $ 6,341
Adopted Budget W-RSR Minimum Guideline $ 5,427
Adopted Budget W-RSR Maximum Guideline $ 10,854
* Includes Encumbrances for CIP & Operations, bond related debt removed
Utilities Update for First Quarter of FY 2013
December 2012
34
Bill Comparison
Palo Alto’s overall water rates increased on July 1, 2012 by 15%. Table 16 presents average
monthly residential bills for Palo Alto and surrounding cities for various usage levels based on
published rates as of November 1, 2012.
Table 16: Residential Water Bill Comparison
Residential Monthly Water Bill ($/month)
As of November 1, 2012
Usage CCF/mo Palo Alto
Menlo
Park
Redwood
City
Mountain
View
Los
Altos
Santa
Clara Hayward
4 31.90 34.47 33.72 17.59 25.95 12.68 22.20
(Winter median) 7 48.04 50.37 44.09 30.85 35.89 22.19 37.35
(Annual median) 9 62.16 60.98 51.53 39.69 42.50 28.53 47.45
(Summer median) 14 97.46 88.71 73.67 61.79 59.88 44.38 74.50
25 175.12 150.35 140.55 110.41 98.50 79.25 143.25
*Based on the FY 2011 BAWSCA survey, the fraction of SFPUC as source of potable water supply was
100% for Palo Alto, 90% for Menlo Park, 100% for Redwood City, 86% for Mountain View, 12% for Santa
Clara and 100% for Hayward.
Wastewater Collection Utility
Operating Activity
Table 17 contains a summary of the Wastewater Collection Fund’s overall activity for FY 2013.
There are no known changes to budgeted costs or revenues for the Wastewater Collection
Fund at this point.
Table 17: Wastewater Operating Activity
Wastewater
Collection - Operating
Activity
All figures in thousands (000’s)
Adopted
Budget
FY 2013
Unaudited
Actuals
Jul 12-Sep 12
Projected
Activity
Oct 12-Jul 13
Projected
FY 2013
Activity
Variance to
Budget
Net Sales to date * $ 14,980 $ 3,684 $ 11,296 $ 14,980 $ -
Other revenues to date 1,449 567 882 1.449 -
Treatment costs to date (8,556) (2,139) (6,417) (8,556) -
Other expenses to date ** (9,553) (5,280) (4,273) (9,553) -
Total $ (1,680) $ (3,168) $ 1,488 $ (1,680) $ -
* Includes misc. sales, adjustments, discounts, and bad debt
** Includes reserve transfers, salaries, allocated charges, other misc. expenses, and
encumbrances
Utilities Update for First Quarter of FY 2013
December 2012
35
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. At this time there are no significant projected changes to budgeted projections.
The adopted budget reserve drawdown is projected to be $1.68 million, resulting in a
Wastewater Collection Rate Stabilization Reserve (WC-RSR) ending balance of $3.1 million. This
is within the long-term minimum and maximum reserve guideline levels.
Table 18: Wastewater Collection Rate Stabilization Reserve
Estimated Wastewater Collection Rate Stabilization Reserve
All Figures in thousands (000’s)
FY 2013 Adopted Budget Beginning Balance $ 6,579
Changes to FY 2013 Beginning Balance per FY 2012 Accounting $ (1,828)
FY 2013 Beginning Balance after accounting changes $ 4,751
Net sum of FY 2013 Unaudited Actuals to date * $ (3,168)
Current Projected Reserve Balance as of End of FY 2013 $ 1,583
Net sum of Projected Activity through Year End $ 1,488
Estimated FY 2013 Ending Balance $ 3,071
Adopted Budget WC-RSR Minimum Guideline $ 2,253
Adopted Budget WC-RSR Maximum Guideline $ 4,506
* 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 a
5% increase in overall revenues. Table 19 presents typical monthly residential bills for Palo Alto
and surrounding cities based on published rates as of November 1, 2012. Note that, even after
the residential rate increase, the bill for a Palo Alto customer is just 76% of the average of the
bills for the six comparator cities.
Table 19: Residential Wastewater Collection (Sewer) Bill Comparison
Residential Monthly Wastewater Collection Bill
As of November 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 27.27
Utilities Update for First Quarter of FY 2013
December 2012
36
Fiber Utility
Operating Activity
Table 20 contains a summary of the Fiber Fund’s overall activity for FY 2013.
Table 20: Fiber Operating Activity
Fiber – Operating
Activity
All figures in thousands $ (000’s)
Adjusted
Budget
FY 2013
Unaudited
Actuals
July 12-Sept 12
FY 2013
Projected
Activity
Oct 12-June 13
FY 2013
Projected
FY 2013
Activity
Variance
to Budget
Net Sales to date * 3,574 789 2,785 3,574 0
Other revenues to date 303 83 220 303 0
Other expenses to date ** (1,789) (342) (1,447) (1,789) 0
Total 2,088 530 1,558 2,088 0
* Includes misc. sales, adjustments, discounts, and bad debt
** Includes reserve transfers, salaries, allocated charges, other misc. expenses, and encumbrances
Fiber Rate Stabilization Reserve
Actual sales data and actual expenses for dark fiber service connections in the first quarter
indicate no variance as compared to the budget for FY 2013. 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 21, the Fiber Optics Rate Stabilization Reserve (F-RSR) is projected to be
$14.6 million as of the end of FY 2013. This is above the F-RSR long-term maximum guideline
level of $1.8 million for FY 2013. The latest projection is $741,000 higher than projected due to
a FY 2012 year-end accounting adjustment.
Table 21: Fiber Rate Stabilization Reserve
Estimated Fiber Rate Stabilization Reserve
All Figures in thousands (000’s)
FY 2013 Adopted Budget Beginning Balance $ 11,729
Changes to FY 2013 Beginning Balance per FY 2012 Accounting $741
FY 2013 Beginning Balance after accounting changes $12,470
Net sum of FY 2013 Unaudited Actuals to date * $530
Current Projected Reserve Balance as of End of FY 2013 $13,000
Net sum of Projected Activity through Year End $ 1,558
Estimated FY 2013 Ending Balance $14,558
Adopted Budget F-RSR Maximum Guideline $1,788
* Includes Encumbrances for CIP and Operations
Utilities Update for First Quarter of FY 2013
December 2012
37
Utility Reserves Summary
A summary of fiscal year beginning and expected ending reserve balances along with minimum
and maximum guidelines is provided for each Utility reserve in Table 22.
Table 22: Utilities Reserves Summary
Beginning
Reserve
Balance as
of 6/30/12
FY 2012
(ASD)
Current
Projected
Reserve
Balance as
of 09/30/12
FY 2013
(ASD)
Current
Projected
Reserve
Balance for
06/30/13
FY 2013
(Util)
Projected
Reserve
Balance
(based on
Budget) for
FY 2013
Minimum Maximum
Electricity
Supply/Commodity 65,930$ 64,913$ 63,669$ 31,721$ 63,442$ 57,560$
Distribution 8,680 4,507 7,293 6,747 13,494 10,717
CIP 14,545 23,400 N/A
Public Benefit 1,149 1,149 1,261 1,261
ESP 50,320 50,320 50,320 50,320
All Others 6,681 8,492 N/A
Sub total Cash Reserves 147,305 152,781 N/A
Net Capital Investment 166,085 164,042 N/A
Total 313,390$ 316,823$ N/A
Gas
Supply/Commodity 7,618 3,145$ 6,221$ 4,072$ 8,142$ 5,726$
Distribution 8,374 1,187 5,894 3,339 6,678 4,819
CIP 16,015 23,281 N/A
All Others 4,999 9,989 1,000 1,000
Sub total Cash Reserves 37,006 37,602 N/A
Net Capital Investment 76,606 76,123 N/A
Total 113,612$ 113,725$ N/A
Water
Distribution 7,996$ (2,508)$ 6,341$ 5,427$ 10,854$ 7,833$
CIP 13,382$ 19,241 N/A
All Others 4,940$ 16,331 1,000 1,000
Sub total Cash Reserves 26,318 33,064 N/A
Net Capital Investment 70,454$ 68,092 N/A
Total 96,772$ 101,156$ N/A
Fiber Optic
Distribution 12,470$ 12,630$ 14,558$ 715$ 1,788$ 13,818$
CIP 697 1,074 N/A
All Others 1,085 1,101 1,000 1,000
Sub total Cash Reserves 14,252 14,805 N/A
Net Capital Investment 7,226 7,155 N/A
Total 21,478$ 21,960$ N/A
Wastewater Collection
Distribution 4,751$ 1,583$ 3,071$ 2,253$ 4,506$ 4,899$
CIP 10,944 15,068 N/A
All Others 1,100 1,284 1,000 1,000$
Sub total Cash Reserves 16,795 17,935 N/A
Net Capital Investment 67,677 67,209 N/A
Total 84,472$ 85,144$ 4,071$
Budgeted Reserve
Guideline Range for
FY 2013
City Of Palo Alto
Utility Fund Reserve
Quarterly Projections - Unaudited
As of 09/30/2012 - UNAUDITED
(in thousands)