HomeMy WebLinkAboutStaff Report 7533
City of Palo Alto (ID # 7533)
City Council Staff Report
Report Type: Action Items Meeting Date: 12/5/2016
City of Palo Alto Page 1
Summary Title: Carbon Neutral Gas Portfolio
Title: Finance Committee Recommends That the Council: (1) Adopts a
Resolution Approving a Carbon Neutral Natural Gas Plan to Achieve a Carbon
Neutral Gas Portfolio by Fiscal Year 2018 With no Greater Than 10¢/Therm
Rate Impact; and Terminating the Palo Alto Green Gas Program; and (2)
Provide Direction to Staff Concerning Aspects of Plan Implementation
From: City Manager
Lead Department: Utilities
Recommendation
Staff and the Finance Committee recommend that Council:
1. Adopt a Resolution that:
a. Approves the Carbon Neutral Gas Plan, enabling the City to achieve a carbon-
neutral gas supply portfolio starting in Fiscal Year (FY) 2018 with a rate impact
not to exceed ten cents per therm (10 ¢/therm); and
b. Terminates the PaloAltoGreen Gas program established by Resolution 9405; and
2. Direct Staff to:
a. Develop an implementation plan for the Carbon Neutral Gas Plan;
b. Provide an option for Council to consider prioritizing local offsets; and
c. Prioritize maximizing carbon reduction within the 10 ¢/therm rate impact cap.
Executive Summary
The proposed Carbon Neutral Natural Gas Plan is designed to achieve carbon neutrality for the
gas supply portfolio by FY 2018 using high-quality environmental offsets at a cost not to exceed
a maximum rate impact of 10 ₵/therm. At current rates, this equates to about a 10% gas rate
increase. The additional cost of a 10 ₵/therm gas rate increase will cost about $43 per year for
the median residential customer usage.
At current costs for environmental offsets and biogas, staff estimates that a 100% carbon
neutral gas portfolio can be achieved for 4 ₵/therm if offsets are used to cover 100% of the gas
use of Palo Alto customers. Alternately, a 100% carbon neutral gas portfolio can be achieved for
10 ₵/therm if offsets are used for 95% of the gas needs and biogas is purchased for 5% of the
gas needs.
City of Palo Alto Page 2
In August 2016, the Utilities Advisory Commission (UAC) recommended that Council approve a
plan to maximize the use of biogas while still achieving 100% carbon neutrality. In October, the
Finance Committee recommended that Council maximize carbon reduction within the 10
¢/therm rate impact cap, which argues for purchasing only environmental offsets, and no
biogas, to achieve the maximum carbon reductions per dollar spent.
Background
The PaloAltoGreen Gas (PAG Gas) program was launched in December 2014. PAG Gas is a
voluntary program providing customers with the option to negate the impact of greenhouse
gas (GHG) emissions associated with their natural gas usage by purchasing environmental
offsets. Engagement by some community members interested in accelerating the reduction of
the City’s natural gas carbon footprint led to a proposal to make the gas portfolio carbon
neutral.
The plan presented to and recommended by the UAC included a portfolio of both physical
biogas and environmental offsets. However, the Finance Committee preferred maximizing the
carbon reduction for the money spent, or using only the less expensive offsets and no biogas as
a mechanism for achieving carbon neutrality in the natural gas portfolio.
Discussion
Staff Report 7284 for the October 18 Finance Committee meeting provides detail on the
proposed Carbon Neutral Gas Plan (Attachment B).
To design and implement a carbon-neutral gas portfolio plan, several inter-related variables
must be considered, including:
1. Rate impact.
2. Supply source (environmental offsets or biogas).
3. Timeframe over which carbon neutrality is achieved
4. Percentage of the portfolio to be made carbon-neutral.
With respect to each of the variables above, the Finance Committee recommends:
1. Rate impact: No greater than 10¢/therm annually
2. Supply source: Environmental offsets.
3. Timeframe over which carbon neutrality is achieved: By FY 2018
4. Percentage of portfolio made carbon neutral: 100% or greater
Rate Impact
Staff recommends that Council make a clear determination of maximum acceptable rate impact
for a carbon-neutral gas portfolio. A rate impact of 10 ₵/therm is equal to approximately a 10%
rate increase based on current gas rates and assuming a commodity rate, which fluctuates
monthly with market prices, of 30 ₵/therm.
City of Palo Alto Page 3
Supply Source
An environmental offset is a reduction in emissions of greenhouse gases (GHGs) made in order
to compensate for or to offset an emission made elsewhere. For example, installation of
manure management systems on dairy farms reduces methane emissions thus generating
offsets. The California Air Resources Board protocols provide robust methods to quantify and
report the GHG reductions.
Biogas, on the other hand, is methane produced from the decay of organic matter. A dairy farm
that generates offsets by preventing methane from entering the atmosphere can also sell the
biogas as a renewable fuel. The price of biogas is currently driven by the federal renewable
transportation fuel program and is at least 28 times more costly than offsets on a dollar per
carbon dioxide equivalent ($/CO2e) basis.
The current cost of offsets is about $8/ton of CO2e, which is equivalent to 4 ₵/therm. If
environmental offsets were purchased today for 100% of the City’s gas usage, all customers
would experience a rate increase of approximately 4%. A median residential customer’s winter
bill would increase by about $2 per month (about $0.75 in the summer).
Summary of Proposal
The Finance Committee recommended a plan using high-quality environmental offsets to
achieve a carbon-neutral gas portfolio by FY 2018. Rates are anticipated to increase by 4
₵/therm and will increase by no more than 10 ₵/therm.
Cost-effectiveness of a Carbon-neutral Gas Portfolio Compared to Electrification
Staff completed a cost effectiveness study for abating GHG emissions by electrifying building
appliances and passenger vehicles. The report was provided to Council in August 2015 (Staff
Report 5971). Figure 1 shows the societal costs of carbon from that study compared to the
carbon cost of environmental offsets and biogas. Environmental offsets currently cost $8/ton of
CO2e compared to the cost of carbon of $226/ton of CO2e for biogas1.
1 Biogas is estimated to cost $1.50/therm, or $1.20/therm more than fossil fuel-based natural gas, resulting in an
incremental cost of carbon of $226/ton of CO2e.
City of Palo Alto Page 4
Figure 1: Incremental Societal Abatement Cost
As shown in Figure 1, environmental offsets are a much less expensive way to achieve carbon
reductions compared to most electrification options2. When the Finance Committee reviewed
these data, its members questioned the use of biogas since it is so much more costly per ton of
CO2e reduced.
Proposed Offset Criteria for Carbon-neutral Gas Supply
For the PAG Gas program, Council approved the use of high-quality environmental offsets from
protocols approved by the California Air Resources Board (Staff Report 4596, Resolution 9405).
The approved protocols currently include forestry, livestock, landfill, coal mine methane, urban
forestry, ozone depleting substance and rice cultivation projects. Offsets used for PAG Gas do
not need to be certified by CARB as it is an extra expense and only necessary if offsets are to be
used for a regulatory compliance obligation. Staff proposes to apply the same standards to
offsets used for the Carbon Neutral Gas Plan including a preference for California and local
projects. One possible local offsets source may be an urban forestry project in Palo Alto.
In addition to researching the use of local offsets, staff will also continue to review the extent to
which fugitive methane emissions from natural gas production, transportation, and distribution
can be attributable to provision of service to Palo Alto customers. There is currently no
definitive answer on this point, but should the amounts attributable to individual customers
become more concrete and clearly associated with the cost of providing service to Palo Alto
customers, staff will consider whether such fugitive emissions would also fall under the
auspices of the plan.
2 The study concluded that (after federal and state incentives) it is cheaper to own and operate a compact electric
car (Nissan Leaf) than a similarly sized gasoline vehicle (Honda Civic) resulting in a negative incremental abatement
cost.
City of Palo Alto Page 5
Committee Review and Recommendation
At its October 18, 2016 meeting, the Finance Committee reviewed the recommendation from
staff and the UAC that Council approve a Carbon Neutral Gas Plan that would use a
combination of physical biogas and high-quality environmental offsets to achieve a carbon-
neutral gas supply portfolio starting in FY 2018 such that the amount of biogas included in the
portfolio would be maximized with a rate impact not to exceed 10 ¢/therm.
The Finance Committee, however, voted to maximize carbon reduction within the 10 ₵/therm
rate impact cap, rather than include the more expensive biogas as part of the portfolio.
Purchasing enough offsets to cover the volume of natural gas burned in the City (30 million
therm or 159,000 tons CO2e per year) results in a rate increase of about 4 ₵/therm.
The Finance Committee also discussed the proper venue for the discussion of the policy
elements of the plan versus the financial impacts of the plan with the Chair of the Finance
Committee opining that the Finance Committee’s charge is limited to review of the financial
impacts. One Finance Committee member advocated for using local projects such as
gasification projects that could convert local waste to biogas.
After discussion of the differences between—and relative values of—biogas and offsets, the
Finance Committee voted to support the staff recommendation, but to maximize the carbon
reduction with the money spent. Staff interprets this, under current economics and until other
options are available, as a preference for offsets over biogas. As the market changes, the plan
provides flexibility for staff to change that prioritization as well, provided staff adheres to the
goal of maximizing carbon reduction. In addition, the Finance Committee recommended that
Council direct staff to provide Council with an option to “prioritize” local offsets. Staff noted
that local offsets would need to go through the proper certification protocols so that the
carbon neutral claims for the gas portfolio could be verified by an independent party. The
Finance Committee’s vote was 2-1 with Chair Filseth and Wolbach voting yes, Vice Mayor
Schmid voting no and Holman absent. The minutes for the October 18, 2016 Finance
Committee meeting are provided as Attachment C.
Resource Impact
If only offsets are purchased to cover gas burned in the City, rates are expected to increase by
about 4 ₵/therm or approximately 4%. With an additional cost of 4 ₵/therm, the median
residential customer’s bill will increase about $17/year.
At the maximum amount under the rate cap of 10₵/therm, implementation of a carbon-neutral
gas portfolio will increase retail rates (and revenues) and the gas commodity budget. At the
rate impact limit of 10 ₵/therm, commodity costs will increase by about $3 million, from $9
million to $12 million, per year. The retail rate revenue will likewise increase by about $3
City of Palo Alto Page 6
million. If the program is approved, the increased cost and revenues will be reflected in the FY
2018 budget request.
For the median residential customer using 18 therms per month in the summer and 54 therms
per month in the winter, the bill impact will be $1.80/month in the summer and $5.40/month
in the winter, or about $43 per year with the additional 10 ₵/therm rate impact
Policy Implications
The Council-approved Utilities Strategic Plan includes an objective to offer programs to meet
the needs of customers and the community.
Strategy 4 in the Council-approved Gas Utility Long-term Plan (GULP) states:
Reduce the carbon intensity of the gas portfolio in accordance with the Climate
Protection Plan by:
a. Designing and implementing a voluntary retail program using reasonably
priced non‐fossil fuel gas resources; and
b. Purchasing non‐fossil fuel gas for the portfolio as long as it can be done with
no rate impact.
Implementation of a carbon-neutral gas portfolio represents a departure from GULP Strategy 4
because the voluntary program will be eliminated and there will be a rate impact resulting from
non-fossil fuel gas resources being purchased for the portfolio. GULP will need to be revised
accordingly should Council approve a carbon-neutral gas portfolio.
A carbon-neutral gas portfolio would, however, be an important part of meeting Council’s
aggressive sustainability goal to reduce the City’s GHG emissions by 80% by 2030.
Next Steps
If Council approves the Carbon Neutral Gas Plan, staff will execute enabling agreements with
qualified counterparties for purchasing environmental offsets. In addition, new rate schedules
will be developed and brought to the UAC and Finance Committee for recommendations and to
the Council for approval. Staff anticipates that this can be achieved such that the gas portfolio
can be implemented in FY 2018.
Because implementation of a carbon-neutral gas portfolio represents a departure from the
Council-approved GULP strategies, GULP will need to be revised before the program is put into
place.
Cancelling PAG Gas will require communication with the customers, repeal of the rate schedule
via resolution, and removal of the charge on participating customers’ bills by the carbon-neutral
implementation date.
City of Palo Alto Page 7
Environmental Review
The Council’s adoption of this Resolution, which approves a Carbon Neutral Natural Gas Plan
and terminates the PAG Gas program does not meet the definition of a project, pursuant to
section 21065 of the California Environmental Quality Act (CEQA). Offset, biogas and other
potential project developers will be responsible for acquiring necessary environmental reviews
and permits as those projects are developed.
Attachments:
Attachemnt A: Resolution Carbon Neutral Gas Portfolio (PDF)
Attachment B: Finance Committee Staff Report Regarding the Carbon Neutral Natural
Gas Portfolio Plan (PDF)
Attachment C: Excerpted Draft Minutes of October 18, 2016 Finance Committee
Meeting (PDF)
161102 jb JM/Staff Reports
Attachment A
NOT YET APPROVED
Resolution No. _____
Resolution of the Council of the City of Palo Alto Approving a
Carbon Neutral Natural Gas Plan to Achieve a Carbon Neutral
Gas Supply Portfolio by Fiscal Year 2018 with No Greater than
10¢/Therm Rate Impact; and Related Termination of the Palo
Alto Green Gas Program
R E C I T A L S
A. In December 2007, Council adopted the City’s Climate Protection Plan which set
aggressive greenhouse gas (GHG) emission reduction goals to be achieved by the year 2020.
B. In March 2013, this Council approved Resolution 9322 directing staff to achieve
carbon neutrality for the electric supply portfolio by 2013 through the use of a combination of
hydroelectric resources, long-term renewable resources and short-term renewable energy
resources and/or renewable energy certificates (“RECs”).
C. On September 9, 2013, this Council approved Resolution 9372 modifying and
suspending portions of the PaloAltoGreen Program, and directing staff to develop a
PaloAltoGreen Gas (PAG Gas Program) Program.
D. On April 21, 2014, this Council approved Resolution 9405 establishing the voluntary
PAG Gas Program to provide the opportunity for residential and commercial customers to
economically reduce or eliminate the impact of GHG emissions associated with their gas usage
through the purchase of certified environmental offsets.
E. In April 2016, this Council adopted a GHG reduction goal of 80% by the year 2030.
GHG emissions associated with natural gas use were 135,000 metric tons of carbon dioxide
equivalent, or 27% of the City’s GHG emissions, in 2015.
F. Staff initially proposed a Carbon Neutral Natural Gas Plan that would use a
combination of physical biogas and high-quality environmental offsets to achieve a carbon-
neutral gas portfolio by fiscal year 2018 by maximizing the amount of biogas in the portfolio
while holding the rate impact at a maximum limit of ten cents per therm (10 ₵/therm).
G. On August 31, 2016, the Utilities Advisory Commission voted 6-1 to recommend
Council approve a Carbon Neutral Gas Plan using a combination of physical biogas and high-
quality environmental offsets to achieve a carbon-neutral gas portfolio and terminate the PAG
Gas Program.
H. On October 18, 2016, the Finance Committee voted 2-1 to instead recommend that
Council:
(i) Adopt a resolution that (a) approves a Carbon Neutral Natural Gas Plan that would
enable the City to achieve a carbon-neutral gas supply portfolio starting in Fiscal Year (FY) 2018
with a rate impact not to exceed ten cents per therm (10 ¢/therm); and (b) terminate the PAG
Gas Program established by Resolution 9405; and
161102 jb JM/Staff Reports
Attachment A
NOT YET APPROVED
(ii) Direct staff to: (a) develop an implementation plan for the Carbon Neutral Natural
Gas Plan; (b) provide an option for Council to consider prioritizing local offsets; and (c) prioritize
maximizing carbon reduction within the 10 ₵/therm rate impact cap.
The Council of the City of Palo Alto RESOLVES as follows:
SECTION 1. The Council hereby adopts a resolution:
1. Approving a Carbon Neutral Natural Gas Plan, enabling the City to achieve a
carbon-neutral gas supply portfolio starting in fiscal year 2018 with a rate impact not to
exceed ten cents per therm (10 ₵/therm); and
2. Terminating the PAG Gas program established by Resolution 9405.
SECTION 2. The Council’s adoption of this Resolution, which approves a Carbon
Neutral Natural Gas Plan and terminates the PAG Gas program does not meet the definition of a
project, pursuant to section 21065 of the California Environmental Quality Act (CEQA). Offset,
biogas and other potential project developers will be responsible for acquiring necessary
environmental reviews and permits as those projects are developed.
INTRODUCED AND PASSED:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
Senior Deputy City Attorney City Manager
Director of Utilities
Director of Administrative Services
City of Palo Alto (ID # 7284)
Finance Committee Staff Report
Report Type: Action Items Meeting Date: 10/18/2016
City of Palo Alto Page 1
Summary Title: Carbon Neutral Natural Gas Portfolio Plan
Title: Utilities Advisory Commission Recommendation that Council Adopt a
Resolution Approving a Carbon Neutral Natural Gas Portfolio Plan to Achieve
Maximum Carbon Neutrality Using a Combination of Offsets and Biogas in
the Gas Supply Portfolio by Fiscal Year 2018 with No Greater than 10¢/Therm
Rate Impact; and Related Termination of the Palo Alto Green Gas Program
From: City Manager
Lead Department: Utilities
Recommendation
Staff and the Utilities Advisory Commission (UAC) recommend that the Finance Committee
recommend Council:
1.Adopt a resolution (Attachment A) that:
a.Approves the Carbon Neutral Gas Plan, enabling the City to achieve a carbon-neutral
gas supply portfolio starting in fiscal year (FY) 2018 with a rate impact not to exceed
ten cents per therm (10 ₵/therm); and
b.Terminates the PaloAltoGreen Gas program established by Resolution 9405; and
2.Direct staff to develop an implementation plan for the Carbon Neutral Gas Plan.
Executive Summary
The proposed Carbon Neutral Gas Plan will achieve carbon neutrality for the gas supply
portfolio by FY 2018 with a combination of high-quality environmental offsets and physical
“biogas” or “biomethane”. The proposed cost cap to implement the plan is 10 ₵/therm. Based
on current rates, this equates to about a 10% gas rate increase. For the median residential
customer usage, the additional cost of a 10 ₵/therm gas rate increase is about $43 per year.
The PaloAltoGreen Gas (PAG Gas) program was launched in December 2014. PAG Gas is a
voluntary program providing customers with the option to negate the impact of greenhouse
gas (GHG) emissions associated with their natural gas usage by purchasing environmental
offsets. Implementation of a carbon-neutral gas portfolio renders the voluntary program
redundant, therefore, termination of PAG Gas is recommended when implementing the Carbon
Neutral Gas Plan.
ATTACHMENT B
City of Palo Alto Page 2
The UAC reviewed the proposed Carbon Neutral Gas Plan on August 31, 2016 and voted to
recommend that Council approve the proposed plan.
Background
City’s GHG Emissions from Natural Gas
Table 1 below, based on data from the 2016 Earth Day report (Staff Report 6754), shows the
estimate for City and community GHG emissions for 1990, 2005, 2012, and 2015.
Table 1
Palo Alto Community and City Greenhouse Gas Emissions (in 000’s of Metric Tons of CO2e)
Emissions Category 1990 2005 2012 2015
Natural Gas Use 194 166 160 135
Electricity Use 186 160 75 0
Mobile Combustion * 332 372 320 330
Other ** 68 54 36 36
Total 780 752 591 501
* Consultant estimate based on population, employment, vehicle miles travelled and
vehicular emission profiles
** Includes landfill, refuse and Regional Water Quality Control Plant emissions
As shown in Table 1, GHG emissions from natural gas use in 2015 were reduced by 4,406 tons
due to the PAG Gas program. The bulk of the reduction in emissions associated with natural gas
use is associated with reduced natural gas use (from 37.2 million therms in 1990 to 30.1 million
therms in 2012 to 25.5 million therms in 2015).
Gas Utility Long-term Plan (GULP) and Early Evaluations of Alternative Gas Supplies
In November 2009, the UAC reviewed an analysis of physical biogas as a resource for the gas
supply portfolio.1 At that time, staff determined that physical biogas cost about 50 ₵/therm
more than natural gas, or about $100 per ton of carbon dioxide equivalent (CO2e)2 and would
increase a residential customer’s gas bill by 35%.
GULP includes a strategy to evaluate a voluntary green gas program and evaluate purchasing
non-fossil fuel gas for the gas portfolio. The City Council last approved updates to GULP in April
2012 (Staff Report 2522, Resolution 9244), including GULP Strategy 4:
Reduce the carbon intensity of the gas portfolio in accordance with the Climate
Protection Plan by:
a. Designing and implementing a voluntary retail program using reasonably
priced non‐fossil fuel gas resources; and
b. Purchasing non‐fossil fuel gas for the portfolio as long as it can be done with
no rate impact.
1 http://www.cityofpaloalto.org/civicax/filebank/documents/17514
2 1 ton/2204.16 lbs * 116 lbs CO2e/1 MMBtu CH4 *1 MMBtu/10 therms = .0053 tons/therm
City of Palo Alto Page 3
In response to the GULP strategies, in April 2013, staff presented alternatives for a PAG Gas
program to the UAC3 including the use of physical biogas for the program, but found that it
would cost about $1 per therm more than natural gas based on responses to a request for
proposal issued by the Northern California Power Agency. In addition, the long-term contracts
required for biogas project developers to secure financing were, and are still, not conducive to
the potentially volatile demand associated with a voluntary green gas program.
PAG Gas
The PAG Gas program was modeled after the highly successful, voluntary PaloAltoGreen (PAG)
program, which allowed participants to receive 100% renewable energy and eliminate the GHG
emissions associated with their electricity use. Participation rates in PAG were the highest
among similar programs throughout the nation earning recognition for the City and creating a
sense of community pride around sustainability efforts. In 2012, approximately 20% of CPAU’s
customers participated in PAG, representing 8% of the City’s total electric usage.
By 2013, the City’s aggressive Renewable Portfolio Standard (RPS) goal combined with its
carbon-free hydroelectric resources rendered the electric supply portfolio largely carbon
neutral. In March 2013, City Council approved the Carbon Neutral Plan committing CPAU to
pursue only carbon neutral electric resources beginning in calendar year 2013 (Staff Report
3550, Resolution 9322). In September 2013, City Council suspended PAG and directed staff to
develop a new voluntary PAG Gas program to afford participants the opportunity to eliminate
the GHG emissions associated with their natural gas use (Staff Report 4041, Resolution 9372).4
In April 2014, City Council approved the establishment of a voluntary PAG Gas program (Staff
Report 4596, Resolution 9405) using high quality offsets to back the program. All offsets
purchased to date have been from a livestock methane capture project. The PAG Gas rate is
12₵/therm, which equates to an avoided GHG emissions cost of approximately $22 per ton of
CO2e.
The PAG Gas program goal is a 20% participation rate by 2020 with a corresponding GHG
reduction of 16,000 tons of CO2e per year. The 2020 goal represents a 10% reduction in the
City’s total GHG emissions associated with natural gas consumption. The reductions are
achieved by purchasing high quality environmental offsets, with a preference for California
projects, on behalf of participants in order to reduce or eliminate the impact of GHG emissions
associated with each participating customer’s gas usage. All customers can sign up for PAG Gas
3 https://www.cityofpaloalto.org/civicax/filebank/documents/33744
4 In June 2014, since the PAG (electric) program is redundant with the Carbon Neutral Plan, Council eliminated the
PAG program for residential customers (Staff Report 4718, Resolution 9422). At the same time, Council also
reactivated the program for commercial customers since some customers (including City facilities) desire to
participate in a voluntary green electric program to achieve environmental recognition and certifications in line
with their own corporate sustainability goals including participation in the U.S. Green Building Council Leadership
in Energy and Environmental Design (USGBC LEED) Program and the U.S. EPA Green Power Partnership Program.
City of Palo Alto Page 4
for their entire gas usage; commercial customers also have the option of participating in the
program for part of their natural gas usage.
Since the program launch in December 2014, roughly 4% of the City’s residential natural gas
customers have participated in PAG Gas accounting for approximately 3,200 tons of GHG
emissions per year. City facilities began participating in PAG Gas in July 2015 and account for
GHG emissions reductions of approximately 6,000 tons per year. For a typical residential
customer participating in PAG Gas, the cost is approximately $5 per month for an average use
of 42 therms per month. After the June 1, 2016 UAC meeting, staff began to evaluate carbon
neutral gas supply options and suspended active marketing of the program, resulting in
decreased participation in the program.
Figure 1 below shows the trajectory of PAG Gas participation for January 2015 through July
2016.
Figure 1: PAG Gas Program Participation
Figure 2 below shows the number of PAG Gas participants by customer type. Figure 3 shows the
percentage of total gas usage by customer type. As shown, the vast majority of participants are
residential customers—as was the case with the PAG (electric) program. The bulk of the
City of Palo Alto Page 5
participation in terms of gas usage is for City facilities. Very few commercial customers have
participated in the program to date.
Approximately 4.1% of the City’s residential natural gas customers have signed up for PAG Gas
as of the end of June 2016. In July 2015 all City facilities began participating in the program for
100% of their gas usage.
Figure 2: Number of Customers Participating in PAG Gas
City of Palo Alto Page 6
Figure 3: Percentage of the City’s Total Gas Load Participating in PAG Gas
Utilities Advisory Commission Discussions
At its October 7, 2015 meeting the UAC heard public comment on, and discussed the merits
and drawbacks of, an opt-in versus an opt-out structure for the voluntary PAG Gas program.
The minutes from that meeting are provided as Attachment B. At its June 1, 2016, meeting the
UAC was presented with an overview and high-level analysis of several options for reducing the
carbon impact of natural gas use in the City including converting the voluntary program to an
opt-out model (meaning all customers would be automatically enrolled in the program, but
could voluntarily leave the program at any time) and adopting a carbon neutral portfolio for all
customers using either environmental offsets or physical biogas. The four main options
discussed by the UAC at its June 1, 2016 meeting are summarized in Table 2 below.
Table 2: Alternatives for Gas Portfolio GHG Reduction
Pros Cons
Opt-in
Program
Consistent with CPAU’s past practices
of providing program and service
options for those who want them.
Allows participants to feel proud that
they are doing more to help the
environment
Requires significant and continuing
outreach effort to maximize
participation—and minimize
administrative costs—by capturing all
customers who would participate in the
program if they knew about and
understood it
City of Palo Alto Page 7
Pros Cons
Opt-out
Program
Much greater reductions in GHG
emissions associated with natural gas
usage could be achieved sooner and
at a lower cost
After start up, easy and low cost to
administer
Risk of harming CPAU’s reputation as the
program can be viewed by customers as
“slamming” or even taking advantage of
customers who are not paying attention
even after being notified of right to opt-
out
Requires ongoing outreach to notify
customers of their ability to opt-out at any
time
Requires development of detailed
program rules and processes to allow for
opting out/in, securing refunds and
identifying potential sources of funds for
such refunds.
Gas
Portfolio
Backed by
Offsets
Maximum reductions in GHG
emissions associated with natural gas
usage
Minimal administrative costs
No need for complicated program
terms and conditions
Could be perceived as an overreaching
mandate
Small rate increase for all customers
Cost varies with the cost of environmental
offsets
Gas
Portfolio
Backed by
Green
Gas
Maximum reductions in GHG
emissions associated with natural gas
usage if for 100% of the gas portfolio
Minimal administrative costs
No need for complicated program
terms and conditions
Could be perceived as overreaching
Large rate increase for all customers,
especially if for 100% of the gas portfolio
Cost varies with the cost of green gas
Opt-In versus Opt-Out Alternative
Staff provided further analysis for the June 1, 2016 UAC discussion comparing opt-in and opt-
out designs including the cost comparison between the two approaches as shown in Table 3.
City of Palo Alto Page 8
Table 3: Opt-in versus Opt-out Program Cost Estimates
Opt-in Program Opt-out Program
Units Current Post-
2020
First Year Subsequent
Years
Participation % of gas
usage
6% 10% 90% 80%
GHG emissions reduced tons1 9,000 15,000 135,000 120,000
Offset Cost $/ton2 9.25 9.25 9.25 9.25
₵/therm 4.4 4.4 4.4 4.4
Administrative cost $/year
$/ton
$120,000
13.16
$85,000
5.66
$400,0003
2.96
$40,000
0.33
₵/therm 7.0 3.0 1.6 0.5
Total Cost
Retail Rate
$/ton 22.46 14.91 12.21 9.58
₵/therm 12 8 6 5
Residential Bill Impact4 $/month 4.32 2.88 2.16 1.80
Notes:
1. GHG emissions based on projected gas usage of 28.5 million therms per year (150K tons CO2e)
2. Offset costs will adjust with market conditions
3. Communication activities and billing system changes
4. Median residential customer gas use: 54 therms in winter month and 18 therms in summer
A comparison of anticipated customer reactions to the two approaches was also presented and
is shown in Table 4.
Table 4: Anticipated Customer Reactions to Opt-in and Opt-out Programs
Customer Opt-In Program Opt-Out Program
Active
Supporter
Participates in PAG Gas Supports, would not opt out
Passive
Supporter
Intend to opt in, but have
not prioritized signing up
Supports, would not opt out
Unaware
Supporter
Would opt-in, but have
not heard about it
Would not opt out
Ambivalent Don’t pay attention, or
care either way
Unlikely to opt out
Unaware
Opponent
Would not opt in Prefers to opt out, but not paying attention to the City’s
messaging or the resulting changes to their utility bills
Passive
Opponent
Would not opt in Doesn’t support the program, but unlikely to prioritize
opting out
Aware
Opponent
Would not opt in Really don’t want to participate but feel guilty or
embarrassed about opting out, especially if the program
is characterized as being environmentally friendly
Active
Opponent
Would not opt in Would opt-out of the program
City of Palo Alto Page 9
UAC Action on June 1, 2016
On June 1, 2016, the UAC discussed the alternatives to continuing PAG Gas as a voluntary opt-in
program and generally agreed that the current opt-in model was the least desired option.
The UAC discussed the incremental cost of biogas and the availability of environmental offsets
and said that, if the long-term goal was to have a carbon neutral gas portfolio, it would not be
advisable to first convert the program to an opt-out program and then move to a carbon
neutral portfolio since it would look like there was an opt-out option, but then that option
would be taken away. One suggestion was to start with a portfolio that is not 100% carbon
neutral and transition to 100% carbon neutral over time. Another suggestion was to start with
offsets first and move to add more biogas over time. However, at the June 1, 2016 meeting,
the UAC was not presented detailed costs for the different alternatives.
One commissioner expressed support for converting to an opt-out program and advised against
introducing a new program that costs more when gas rates are increasing as shown in the long-
term Gas Financial Plan.
At its June 1, 2016 meeting, the UAC voted 6-1 (with Chair Cook, Vice Chair Danaher, and
Commissioners Ballantine, Forssell, Johnston and Trumbull voting yes and Commissioner
Schwartz opposed) to recommend that Council adopt a carbon neutral gas portfolio and direct
staff to develop an implementation plan. The minutes from the UAC’s June 2016 meeting are
provided as Attachment C.
Discussion
To design and implement a carbon-neutral gas portfolio plan, several inter-related variables
must be considered, including:
1. Rate impact.
2. Supply source (environmental offsets or biogas).
3. Timeframe over which carbon neutrality is achieved
4. Percentage of the portfolio to be made carbon-neutral.
With respect to each of the variables above, staff makes the following recommendations:
1. Rate impact: No greater than 10¢/therm annually
2. Supply source: Combination of environmental offsets and biogas, with exact mix
designed to maximize carbon neutrality within established rate impact limit. Staff
estimates approximate ratio of offsets (95%) to biogas (5%) at the outset of the
program.
3. Timeframe over which carbon neutrality is achieved: By FY 2018
4. Percentage of portfolio made carbon neutral: 100%
City of Palo Alto Page 10
Rate Impact
Staff recommends that Council make a clear determination of acceptable rate impact for a
carbon-neutral gas portfolio. Council took such a step with respect to Carbon Neutral Plan for
electricity where rate impacts, for a variety of reasons, were expected to be less significant than
those potential impacts from a carbon free gas portfolio. The rate impact of achieving carbon
neutrality for the electric portfolio is quite small (on the order of 1-2%) because the
incremental cost to get to carbon-neutrality is diminished by the significant RPS requirement
and the fact that carbon-free hydroelectric supplies provide about half of the City’s energy
requirements in a normal year. The rate cap for the carbon neutral electric portfolio established
by Council is 0.15 cents per kWh (Staff Report 3550, Resolution 9322).
By contrast, the costs associated with a carbon neutral gas supply and associated rate impacts
are not likely to be as low. The gas portfolio is currently supplied 100% by a fossil fuel source,
whereas the electric supply portfolio includes a large fraction of carbon-free hydroelectric
supplies and is subject to the State requirement for renewable supplies to meet a minimum of
33% (now 50% by 2030) of the City’s needs. A rate impact of 10 ₵/therm is equal to
approximately a 10% rate increase based on current gas rates and assuming a commodity rate,
which fluctuates monthly with market prices, of 30 ₵/therm.
Supply Source
Offsets as Supply Source
Using environmental offsets to neutralize the GHG emissions of the gas portfolio is significantly
less expensive than buying biogas. If environmental offsets were purchased today for 100% of
the City’s gas usage, all customers would experience a rate increase of approximately 4%. A
residential customer’s winter bill would increase by about $2 per month (about $0.75 in the
summer). A range of potential offset costs were analyzed and are presented in Figure 4 below.
The current cost of offsets is about $8 per ton of CO2e, which is equivalent to 4 ₵/therm.
City of Palo Alto Page 11
Figure 4: Rate and Bill Impact of Using 100% Offsets to Achieve Carbon-Neutrality
Biogas as a Supply Source
Alternatively, the City’s gas needs could be met with renewable physical biogas, a much more
expensive option.
Biogas is a product of organic conversion (from cow manure at a dairy farm or from a landfill,
for example). Most biogas produced in the United States is used as either a transportation fuel
or to generate electricity. Biogas is most valuable as a transportation fuel due to the Federal
Renewable Fuel Standard program and the state regulations like California’s Low Carbon Fuel
Standard (LCFS) and Renewable Portfolio Standard (RPS). Biogas converted to electricity may be
used to meet California’s RPS compliance obligations for electric utilities. State regulation and
pipeline interconnection costs have largely kept biomethane projects out of California, but out-
of-state supply sources are available.
The short-term price for biogas is in the $2-$3 per therm range due to the transportation fuel-
driven demand mentioned above. For a longer-term fixed-price commitment (5-7 years), prices
are discounted to around $1.50 per therm. Two things eliminated the consideration of biogas
for the City’s voluntary PAG Gas program: (1) the cost and the incompatibility between a
voluntary program with uncertain demand; and (2) the biogas project developers’ need long-
term commitments. While cost is still an issue, if it decided to pursue a carbon-neutral portfolio
for the long term, the City would be in a position to make a long-term commitment for biogas.
At a biogas price of $1.50/therm (or $1.20/therm over the projected $0.30/therm cost for
natural gas), supplying 100% of the portfolio with biogas results in about a 120% rate increase
City of Palo Alto Page 12
or about $65 more per month on an average residential customer’s monthly winter bill (or
about $22 per month more in the summer when average residential use is 18 therms/month).
Figure 5 shows both the rate and bill impacts at various biogas prices.
Figure 5: Rate and Bill Impact of Using 100% Biogas to Achieve Carbon-Neutrality
The two supply sources, environmental offsets and biogas, could be combined to achieve
carbon-neutrality. However, even a ratio of 5% biogas and 95% environmental offsets results in
a rate impact greater than 10%. Figure 6 shows the rate and bill impacts for different
percentages of the two supply resources using biogas costing $1.50/therm and environmental
offsets costing $8 per ton.
City of Palo Alto Page 13
Figure 6: Rate and Bill Impact of Using a Combination of Biogas and Offsets to Achieve
Carbon-Neutrality (Assumes $1.5/therm Biogas & $8/ton Offsets)
Carbon Neutrality: Portfolio Percentage & Timeframe
Two other variables may be adjusted when designing a carbon neutral plan. To reduce the cost
impact of buying green gas for the gas portfolio and the GHG emissions reductions only a
portion of the portfolio could be made carbon neutral. Alternately, or in addition, a green gas
portfolio standard could increase over time (e.g. start at 10% in FY 2018 increasing to 100% by
FY 2021).
Figure 7 shows the rate and bill impacts of various biogas to offset ratios if less than 100% of
the portfolio is carbon-neutral. Again, a $1.50/therm biogas price and an $8 per ton
environmental offset price are assumed.
City of Palo Alto Page 14
Figure 7: Rate and Bill Impact of Using a Combination of Biogas and Offsets to Achieve Partial
Carbon-Neutrality (Assumes $1.5/therm Biogas & $8/ton Offsets)
Summary of Proposal
The proposed plan will use a combination of physical biogas and high-quality environmental
offsets to achieve a carbon-neutral gas portfolio by FY 2018. The amount of biogas included in
the portfolio will be maximized while causing rates to increase by no more than 10 ₵/therm.
Given the 10 ₵/therm rate impact cap and current market prices, approximately 5% of the City’s
portfolio can be met with biogas with the remaining 95% neutralized with environmental
offsets.
If the price of offsets increases, the portfolio may need to comprise up to 100% offsets, or the
portfolio may be less than 100% carbon neutral. On the other hand, if the price of offsets
decreases, the proportion of biogas will increase. Purchasing biogas for less than 5% of the total
portfolio demand may be too small for a transaction. In that case, the portfolio will be
comprised of 100% offsets, and the rate impact with be significantly less than 10 ₵/therm.
Cost-effectiveness of a Carbon-neutral Gas Portfolio Compared to Electrification
In May 2015, the UAC reviewed a cost effectiveness study for abating GHG emissions by
electrifying building appliances and passenger vehicles. The report was provided to Council in
August 2015 (Staff Report 5971). Figure 8 shows the societal costs of carbon from that study
compared to the carbon cost of environmental offsets and biogas. The estimated cost of
$1.50/therm for biogas, or an incremental cost of $1.20/therm relative to brown gas, results in
an incremental cost of carbon of $226 per ton of CO2e. Environmental offsets are assumed to
cost $8/ton of CO2e.
City of Palo Alto Page 15
Figure 8: Incremental Societal Abatement Cost
As shown in Figure 8, environmental offsets are a much less expensive way to achieve carbon
reductions compared to most electrification options5. Biogas, however, results in higher
abatement costs than converting from natural gas-fired water and space heaters to electric
heat pump water and space heaters and converting from a gas stovetop to an electric stovetop.
Proposed Biogas and Offset Criteria for Carbon-neutral Gas Supply
Offset Criteria – Same as Approved for PAG Gas
For the PAG Gas program, Council approved the use of high-quality environmental offsets from
protocols approved by the California Air Resources Board. The approved protocols currently
include forestry, livestock, landfill, coal mine methane, urban forestry, ozone depleting
substance and rice cultivation projects. Offsets used for PAG Gas do not need to be certified by
CARB as it is an extra expense and only necessary if offsets are to be used for a regulatory
compliance obligation. Staff proposes to apply the same standards to offsets used for the
Carbon Neutral Gas Plan including a preference for California and local projects (Staff Report
4596, Resolution 9405).
Biogas Criteria – “Displacement” Concept Allowed
Biogas is generated from an organic source such a waste from a dairy farm, other agricultural
waste or from a landfill. Very little biogas is produced in California, but the Environmental
Protection Agency’s (EPA) Renewable Fuel Standard Program is driving the development of
projects in other states. The EPA recognizes two things: (1) molecules of biogas go into the
pipeline and rarely end up being burned by the purchaser of that gas and (2) gas transportation
5 The study concluded that (after federal and state incentives) it is cheaper to own and operate a compact electric
car (Nissan Leaf) than a similarly sized gasoline vehicle (Honda Civic) resulting in a negative incremental abatement
cost.
City of Palo Alto Page 16
can add significant costs if a biogas purchaser is forced to move gas long distances. The EPA,
therefore, allows for “displacement” whereby biogas is purchased at a point near the project
site and the environmental attributes of that gas are attached to brown gas delivered at a
different location. California’s RPS program, on the other hand, requires entities to contract for
gas transportation from the biogas source to the end use, adding significant cost to the gas.
Because the City is seeking ways to reduce its GHG emissions and is not using offsets or biogas
to meet a compliance obligation, the City has latitude to establish its own criteria for biogas use
and eligibility under the City’s carbon-neutral gas supply program. Staff recommends utilization
of the EPA’s approach, which allows for displacement of biogas in one location for brown gas in
another location under the City’s carbon-neutral gas program.
Alternatives
There are many alternatives to the proposed program, which can be described by varying the
key determinants. The following examples are ways in which the plan can be modified.
1. Rate impact: A rate impact higher than 10 ₵/therm would result in more biogas versus
offsets being part of the portfolio. If the rate impact limit was reduced, the portfolio may
not be able to be 100% carbon neutral. As another alternative, the rate impact could
increase over time—for example, starting out at 5 ₵/therm and increasing to 10 ₵/therm in
five years.
2. Supply: The proposed plan includes a combination of biogas and offsets such that the
amount of biogas is maximized while limiting the rate impact to a set amount (10 ₵/therm).
Instead of a rate impact measure, the program could be developed with a prescribed ratio
of biogas to offsets. In this case, the rate impact would depend on the cost of the offsets
and the biogas and could change year to year.
3. Carbon-neutral coverage of the portfolio: The proposed plan uses the full 10 ₵/therm to get
up to 100% carbon neutrality with the expectation that most (95%) of the supply will be
environmental offsets with the balance being biogas. However, the goal could be less than
100% carbon neutral supplies—for example, the goal could be to achieve 50% carbon
neutral supplies while under the 10 ₵/therm rate impact, which would allow for purchases
of biogas for about 8% of the gas needs and offsets for about 43% of the gas needs given
current prices for offsets and biogas supplies.
4. Timing: The most aggressive implementation schedule, by FY 2018, is recommended.
Carbon-neutrality could be staged over any number of years with changing rate impact or
changing proportion of offsets to biogas.
These program attributes could be combined in any number of ways to develop a program as
shown in Table 5 below.
City of Palo Alto Page 17
Table 5: Proposed Carbon Neutral Gas Plan and Alternatives
Rate Impact
Limit (₵/therm)
Expected Supply 1,2 Carbon Neutral
Portfolio Offsets Biogas
Proposed Program 10 95% 5% 100%
Lower Rate Impact 5 100% 0% 100%
Higher Rate Impact 15 90% 10% 100%
No Offsets
5 0% 4% 4%
10 0% 8% 8%
15 0% 13% 13%
25% Carbon Neutral Portfolio
5 21.5% 3.5%
25% 10 17.5% 7.5%
15 13% 12%
50% Carbon Neutral Portfolio
5 47.5% 2.5%
50% 10 43.25% 6.75%
15 39% 11%
75% Carbon Neutral Portfolio
5 73.5% 1.5%
75% 10 69% 6%
15 65% 10%
Notes: 1 Assumes current prices for environmental offsets and biogas
2 Biogas volumes of less than 5% of the portfolio are likely too small to transact
Commission Review and Recommendation
Staff presented the proposed Carbon Neutral Gas Plan to the UAC at its August 31, 2016
meeting. Commissioners asked if the gas that would be neutralized by buying offsets or
replaced with biogas accounts for all the gas the City uses in addition to whatever is leaked
from source to transportation to the distribution system. Staff explained that the gas needs
were determined by what the City buys at the Citygate and it includes any gas leaked in the
City’s gas distribution system, but not any leaks in the gas transportation system or at the gas
source. The greenhouse gas emission calculation is based on accounting for the gas at the
Citygate as if it was 100% burned and not leaked as methane.
Commissioners generally indicated they liked the flexibility of the proposed program since it
provides for a higher amount of biogas as the cost comes down and it supports the
development of a biogas marketplace. Commissioners also discussed whether carbon neutral
gas would dampen the enthusiasm for electrification and asked if carbon neutral electricity has
dampened the penetration of rooftop solar.
After discussion and hearing public comment, the UAC voted to recommend Council approve
the plan (6-1 with Chair Cook, Vice Chair Danaher, and Commissioners Ballantine, Forssell,
Johnston, and voting yes and Commissioner Schwartz voting no). The minutes from the UAC’s
August 31, 2016 meeting are provided as Attachment D.
City of Palo Alto Page 18
Resource Impact
Implementation of a carbon-neutral gas portfolio will increase retail rates (and revenues) and
the gas commodity budget. The recommendation is to cap the rate impact at 10 ₵/therm. At
that level, commodity costs will increase by about $3 million, from $9 million to $12 million, per
year. The retail rate revenue will likewise increase by $3 million. If the program is approved, the
increased cost and revenues will be reflected in the FY 2018 budget request.
A rate increase of 10 ₵/therm will increase rates by approximately 10%. For the median
residential customer using 18 therms per month in the summer and 54 therms per month in the
winter, the bill impact will be $1.80/month in the summer and $5.40/month in the winter, or
about $43 per year.
Policy Implications
The Council-approved Utilities Strategic Plan includes an objective to offer programs to meet
the needs of customers and the community.
Strategy 4 in the Council-approved GULP states:
Reduce the carbon intensity of the gas portfolio in accordance with the Climate
Protection Plan by:
a. Designing and implementing a voluntary retail program using reasonably
priced non‐fossil fuel gas resources; and
b. Purchasing non‐fossil fuel gas for the portfolio as long as it can be done with
no rate impact.
Implementation of a carbon-neutral gas portfolio represents a departure from GULP Strategy 4
because the voluntary program will be eliminated and there will be a rate impact resulting from
non-fossil fuel gas resources being purchased for the portfolio. GULP will need to be revised
accordingly should Council approve a carbon-neutral gas portfolio.
A carbon-neutral gas portfolio would, however, be an important part of meeting Council’s
aggressive goal to reduce the City’s GHG emissions by 80% by 2030.
Next Steps
Several tasks must be completed before implementing the proposed Carbon Neutral Gas Plan.
For example, existing gas purchasing agreements may be used to procure biogas with details
about the biogas added to the transaction confirmations. Environmental offsets for the current
PAG Gas program are included in the City’s agreement with the program administrator, so new
contracts may need to be developed to purchase offsets for the carbon-neutral portfolio. If the
Carbon Neutral Gas Plan is approved by Council, staff will execute enabling agreements with
qualified counterparties for purchasing environmental offsets.
City of Palo Alto Page 19
In addition, new rate schedules will be developed and brought to the UAC and Finance
Committee for recommendations and to the Council for approval. Staff anticipates that this can
be achieved such that the gas portfolio can be implemented in FY 2018.
Because implementation of a carbon-neutral gas portfolio represents a departure from the
Council-approved GULP strategies, GULP will need to be revised before the program is put into
place.
Cancelling PAG Gas will require communication with the customers, repeal of the rate schedule
via resolution, and removal of the charge on participating customers’ bills by the carbon-neutral
implementation date.
Environmental Review
The Council’s adoption of a resolution implementing a carbon-neutral gas portfolio and
terminating the PaloAltoGreen Gas Program does not meet the definition of a project, pursuant
to section 21065 of the California Environmental Quality Act (CEQA). Offset and biogas project
developers will be responsible for performing necessary environmental reviews and acquiring
permits as offset and biogas projects are developed.
Attachments:
Attachment A: Resolution Approving Carbon Neutral Gas Portfolio (PDF)
Attachment B: Excerpted Final Minutes of October 7, 2015 UAC Meeting (PDF)
Attachment C: Excerpted Final Minutes of June 1, 2016 UAC Meeting (PDF)
Attachment D: Excerpted Draft Minutes of August 31, 2016 UAC Special Meeting (PDF)
NOT YET APPROVED
160921 jb JM/Staff Reports
Resolution No.
Resolution of the Council of the City of Palo Alto Approving a
Carbon Neutral Natural Gas Portfolio Plan to Achieve Maximum
Carbon Neutrality Using a Combination of Offsets and Biogas in
the Gas Supply Portfolio by Fiscal Year 2018 with No Greater than
10¢/Therm Rate Impact; and Related Termination of the Palo Alto
Green Gas Program
R E C I T A L S
A. In December 2007, Council adopted the City’s Climate Protection Plan which set
aggressive greenhouse gas (GHG) emission reduction goals to be achieved by the year 2020.
B. In March 2013, this Council approved Resolution 9322 directing staff to achieve
carbon neutrality for the electric supply portfolio by 2013 through the use of a combination of
hydroelectric resources, long-term renewable resources and short-term renewable energy
resources and/or renewable energy certificates (“RECs”).
C. On September 9, 2013, this Council approved Resolution 9372 modifying and
suspending portions of the PaloAltoGreen Program, and directing staff to develop a
PaloAltoGreen Gas (PAG Gas Program) Program.
D. On April 21, 2014, this Council approved Resolution 9405 establishing the voluntary
PAG Gas Program to provide the opportunity for residential and commercial customers to
economically reduce or eliminate the impact of GHG emissions associated with their gas usage
through the purchase of certified environmental offsets.
E. In April 2016, this Council adopted a GHG reduction goal of 80% by the year 2030.
GHG emissions associated with natural gas use were 135,000 metric tons of carbon dioxide
equivalent, or 27% of the City’s GHG emissions, in 2015.
F. The Carbon Neutral Gas Plan uses a combination of physical biogas and high-quality
environmental offsets to achieve a carbon-neutral gas portfolio by fiscal year 2018 by
maximizing the amount of biogas in the portfolio while holding the rate impact to ten cents per
therm (10 ₵/therm).
G. On August 31, 2016, the Utilities Advisory Commission voted 6-1 to recommend
Council approve the proposed Carbon Neutral Gas Plan and terminate the PAG Gas Program.
The Council of the City of Palo Alto RESOLVES as follows:
SECTION 1. The Council hereby adopts the resolution:
Attachment A
NOT YET APPROVED
160921 jb JM/Staff Reports
1.Approving a Carbon Neutral Gas Plan, enabling the City to achieve a carbon-
neutral gas supply portfolio starting in fiscal year 2018 with a rate impact not to exceed ten
cents per therm (10 ₵/therm); and
2.Terminating the PaloAltoGreen Gas program established by Resolution 9405.
SECTION 2. The Council’s adoption of this Resolution, which implements a carbon
neutral gas portfolio and terminates the Palo Alto Green Gas program does not meet the
definition of a project, pursuant to section 21065 of the California Environmental Quality Act
(CEQA). Offset and biogas project developers will be responsible for acquiring necessary
environmental reviews and permits as those projects are developed.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
Senior Deputy City Attorney City Manager
Director of Utilities
Director of Administrative Services
ATTACHMENT B
EXCERPTED FINAL MINUTES OF THE OCTOBER 7, 2015
UTILITIES ADVISORY COMMISSION MEETING
ITEM 2. DISCUSSION: Conversion of the PaloAltoGreen Gas Program From an Opt-In to an
Opt-Out Program
Chair Foster noted that this item is on the agenda due to support for the idea expressed from
members of the community.
Public Comment
Sandra Slater commended the commission for keeping sustainability on the agenda. She said
that it's time to move the needle now. She noted that research shows that participation will be
much higher if the program was converted to an opt-out program. She said that the program
could be changed to make the program supportable by all income levels. Converting the
program to an opt-out program is something the City could do that would have an immediate,
positive impact.
Lisa Van Dusen said that the program is not perfect since it is backed by offsets, but we
shouldn't let the perfect be the enemy of the good. We could pay even more by purchasing
more aggressive offsets. There could be mechanisms to get out of the program during an
"amnesty period" and low income customers on the Rate Assistance Program could be retained
as opt-in customers. She said that there was so much staff effort for the PaloAltoGreen
(electric) program just to achieve 24% participation and that there would be savings from lower
marketing and administration costs in an opt-out program.
Chair Foster said that the money paid by PaloAltoGreen Gas (PAGG) program participants fund
offsets that pay to convert waste into methane that is burned to produce renewable electricity
at a dairy farm in Wisconsin and that this wouldn't be done without the revenue from the
offsets. Assistant Director Jane Ratchye indicated that this is correct. She said that the offsets
that back this program are very high quality as they are selected only from those protocols that
have been certified for use in the state’s cap-and-trade auction by the California Air Resources
Board. One of the requirements of those protocols is that the offset be “additive”, or from a
project that would not have been done without the monetary support from the sale of the
offsets. Chair Foster said that he supports an opt-out program and that the additional cost is
only $5 to $6 per month for the average resident.
Commissioner Ballantine noted that there are ongoing costs to maintain an anaerobic digester.
He said that people who opt-in are causing something real to happen. The greenhouse gas
emissions reductions from those sources would not otherwise happen without programs like
PAGG.
Vice Chair Cook noted that the PaloAltoGreen (PAG) Electric program was effectively converted
to cover everyone via the carbon neutral program and was a great way to transfer the new
goal. He asked why PAGG was not made an opt-out program originally. Vice Chair Cook added
that Community Choice Aggregation (CCA) programs were successful because they were opt-
out programs. Ratchye replied that the carbon neutral electric supply is not the same as PAG
and that it was not developed as a transition from PAG. She noted that PAG purchased
Renewable Energy Certificates (RECs) for 100% of a residential customer’s load at a cost of 1.5
cents/kWh, or about 12% more than the normal electric rate. On the other hand, the carbon
neutral electric supplies consist of about half carbon-free hydroelectric supplies, renewable
supplies that are eligible under the state’s Renewable Portfolio Standard (RPS) and that RECs
are purchased for the balance of the needs. It is expected that by the end of 2016, the City’s
RPS will be 57% and with hydro supplies (given a normal hydro year), no RECs will be needed
for carbon neutral electric supplies. She said that the state’s new goal for an RPS of 50% would
result in carbon neutrality anyway at no additional cost in a normal hydro year. However, the
increased cost of PAGG for participants is 12 cents per therm, or about 12% more than the
normal gas rate of about $1 per therm. She said that the additional cost for PAGG was a
consideration for making the program an opt-in program like PAG when the program was
originally conceived. In addition, the program was just launched in January 2015 (and has yet
to roll out a comprehensive marketing campaign for the program) and staff was hoping to
determine the community’s appetite for the program. Ratchye agreed that CCAs are successful
opt-out programs, but that they are generally no more costly than the alternative from the local
utility so participants are not paying any extra to be “slammed” into a CCA.
Vice Chair Cook said that our rates are allowed to go up with the carbon neutral electric
supplies and asked what the threshold is for an opt-out versus an opt-in program.
Chair Foster replied that the comparison of PAGG to the carbon neutral plan is different—like
apples and oranges—since the carbon neutral electric supplies is not an opt-out, or opt-in,
program, but is the electric supply for all customers. The percentage increase in cost to electric
rate payers by going carbon neutral is small compared to the percentage increase to a customer
by paying for participation in PAGG. He said that PAGG should be compared to the PAG electric
program.
Chair Foster asked if there is any legal reason that City Council could not adopt an opt-out
program. Senior Deputy Assistant City Attorney Jessica Mullan said that a legal analysis would
have to be completed and the answer may depend on the program design.
Commissioner Schwartz asked if the point of the program was to reduce gas use or raise
revenue. Chair Foster responded that neither of those options is the point, but that the
objective is to reduce greenhouse gas (GHG) emissions associated with customers’ gas use.
Commissioner Schwartz said that she agreed that more people will do an opt-out program, but
that we need to make sure that participants truly want to participate. We need to provide a
very easy way for people to opt-out and not be penalized for any of the months they were
enrolled if they don’t want to be. A good outreach campaign could be a good way to increase
awareness of the issue and it could have an impact of increasing customers’ awareness. She
said that the program could be a bridge for people to become more conscious of using energy
and would not just be a way to buy ourselves out of the problem.
Commissioner Hall suggested that we not act too hastily, but develop a program like this over
time, similar to the carbon neutral portfolio adoption. He said that he suspects that there
would be a percentage of consumers that would find out later that they were enrolled in a
“voluntary” program and feel cheated. A way forward could be to develop a carbon negative
plan and start with a surcharge that would fund a solution to global warming. He said it could
be a program that would be broadly advertised to ensure that everyone would be aware of the
program.
Commissioner Schwartz noted that she had seen an effective “cow power” video, which is an
example of how the communication can be done in a playful way that would let people
understand that we are in this together, which is a compelling message for many people. She
added that it would be a good messaging experiment.
Commissioner Eglash thanked the public commenters. He also complimented the UAC for
placing the item on the agenda and allowing this discussion to take place. Commissioner Eglash
said that when he weighs the advantages and disadvantages of opt-in versus opt-out, he would
like to avoid disgruntled customers and any worry about customer satisfaction. The greatest
danger of an opt-out plan is potential customer dissatisfaction. We devote a lot of time to
customer satisfaction with the utility. He said it is more risky in this respect and as the price
becomes significant, the danger becomes worse. He said that, with a full marketing campaign,
is it still plausible that people would not be in the program that wouldn't want to be. He added
that perhaps a very successful campaign would result in the same participation of an opt-out
and an opt-in program. Commissioner Eglash indicated that he is leaning towards maintaining
PAGG as an opt-in program. He added that there should be no action on the item at this time
since there is no staff analysis, no fiscal analysis or legal analysis completed at this time. The
discussion is conceptual at this point; there is no proposed design for an opt-out program.
Chair Foster indicated that he disagrees that the participation rates for opt-in versus opt-out
will converge with a great marketing campaign. He added that this is a discussion item on the
agenda tonight so no action can be done.
Commissioner Schwartz said that customer satisfaction depends on transparency. The fact that
CPAU cares about being green will show that an opt-out program is consistent with the brand.
She added that safeguards to allow folks to opt-out will be consistent with transparency.
Commissioner Eglash said that many people in Palo Alto take pride in the City’s environmental
efforts. He stated that safety, reliability, and low cost are primary considerations and to impose
a greener solution that costs extra money is hazardous and must be done carefully.
Commissioner Ballantine noted that offset resources are finite and that pressures from supply
and demand will eventually bite us as the price for offsets will increase as demand increases.
He added that an opt-out program would require sufficient offsets to be supplied.
Commissioner Danaher said that the PAGG program has an environmental benefit, a
psychological benefit, and a moral benefit. He said that the best idea is to make the program
neither opt-in or opt-out, but our gas supply for everyone. He added that an opt-out program
still allows people to opt-out easily since it could be very easy to go to the website and opt out.
Commissioner Hall said that we could conduct a poll to see what the customers’ response
would be to an opt-out program. He said that we should want to have this information before
making a decision.
Commissioner Schwartz advised against a poll as it would defeat the purpose of communicating
the benefits of an opt-out program. Commissioner Danaher added that the poll would only be
answered by the small number of people who read and respond to email.
Commissioner Foster said that the program could be designed so that anyone who failed to
opt-out early enough could still get their money back. He asked if the UAC could make a
motion to recommend that the Council direct staff to develop an opt-out program. Director
Fong stated that it can be added to the rolling calendar. Mullan added that the item is
agendized as a discussion item and that the Commission can add it as a future item to be
agendized under Item 4 on this meeting’s agenda.
Vice Chair Cook thanked the public commenters. Commissioner Hall added his appreciation of
the input from the public commenters, even if some commissioners disagree.
ATTACHMENT C
EXCERPTED FINAL MINUTES OF THE JUNE 1, 2016
UTILITIES ADVISORY COMMISSION MEETING
ITEM 2. ACTION: Utilities Advisory Commission Discussion on Alternatives to the Existing
Voluntary Opt-In PaloAltoGreen Gas Program Including an Opt-Out Mechanism and a Carbon-
Neutral Natural Gas Portfolio
Senior Resource Planner Karla Dailey summarized the written report.
Commissioner Schwartz asked why is was so expensive just to convert from opt-in to opt-out
since the rate is not being changed. Dailey explained that changes to the billing system made up
the bulk of costs. Dailey pointed out that, after the initial investment, administrative costs drop
significantly for the opt-out program. Commissioner Schwartz stated that the cost estimate
seemed very high and questioned the advisability of making changes to the billing system,
which is planned for replacement.
Interim Director Shikada said the timing of an opt-out program should take into account the
legacy billing system.
Commissioner Trumbull asked about the bill impact. Dailey confirmed the bill impact is only for
those customers in the voluntary program.
Commissioner Ballantine asked about the customer breakdown. Dailey said 50% is residential,
30% is small commercial and 20% is large commercial.
Commissioner Forssell asked about the variability for a typical residential customer. Dailey said
some residential customers probably have much higher bills.
Dailey described the types of customers with respect to an opt-out program structure: active
supporters, passive supporters, unaware supporters, ambivalent customers, unaware
opponents, passive opponents, aware opponents and active opponents. Dailey said staff is
concerned about the customers who would be opposed to an opt-out structure, but do not opt-
out right away for whatever reason leading to resentment and poor customer relations at a
later date as well as issues around refunding the PAG Gas fee should a customer demand that.
Commissioner Schwartz said that bill impact was so small that it shouldn’t cause harm to most
customers and, if it was easy to opt-out, an opt-out program shouldn’t be a problem for
anyone. If there were customers that found out later and were mad, the program could be
designed to allow for refunding those customers. Dailey said that this is problematic.
Commissioner Schwartz said that the risk to consumer attitude seems not to be a large issue.
Continuing with the presentation, Dailey said that another option is to convert all, or a portion
of, the natural gas portfolio to carbon neutral supplies.
Commissioner Johnston asked if there would be any mechanical issues with running biogas
through the pipeline. Dailey said that there would be no problem since biogas must meet the
pipeline quality standards. Commissioner Ballantine added that the quality requirements
depend on whether the gas is used for generation directly, or put in the pipeline—and the
biogas can be mixed with natural gas to meet the pipeline quality standards.
Chair Cook asked how the $1/therm incremental cost of biogas compared to the cost of natural
gas. Dailey said that the current commodity cost of natural gas is about 20 cents per therm.
Commissioner Johnston asked if there were limits to the number of offsets available. Dailey
said that there would be sufficient offsets for our portfolio.
Chair Cook asked staff to describe the offsets. Dailey said that the protocols for the offsets are
all California Air Resources Board approved although the offsets themselves are not CARB
certified. She explained the extra CARB certification would be needed for offsets used for
compliance purposes rather than a voluntary program.
Public Comments
Sandra Slater stated that she and Lisa Van Dusen have prepared a letter with comments on the
issue. She said that she supports the opt-out program, but her favorite is to have the gas
portfolio carbon neutral. She said that climate change is a huge problem and time is getting
short. She said that offset purchases can be a bridge in a plan to purchase biogas. She said that
the success of the PaloAltoGreen program proves that there is large support for such a
program. She also referenced the 80% GHG reduction goal by 2030 Council directive. She
advised that we need to wean ourselves off of fossil fuels and move to electrification. She said
there will be a few people, maybe as many as a hundred, who will be opposed, but a small
number of people should not dictate the direction of the utility. She said that it would be nice
to have local offsets, but supporting methane capture projects outside of Palo Alto is valuable
since we have a global problem.
Lisa Van Dusen said that the main point is that there is fundamental responsibility to take
control of the impact caused. She advised that the City should take a bold action, noting that
nothing is perfect. The goal is to maximize carbon reductions, minimize the potential for
grumbling customers, minimize the impact to ratepayers, and allowing customers to have a
choice. She said that higher gas prices also acts to encourage additional gas use efficiency.
Commissioner Johnston said that the City should move away from the opt-in program design
and advised that it should be easy for customers to opt out of the program.
Commissioner Ballantine supported the option of moving to a carbon neutral gas portfolio,
rather than transitioning to an opt-out program. He said that during the rate adjustment
process, the larger users had a smaller percentage impact than the lower using customers,
which is due to the fixed costs to operate the system. He said that it is not free to have a carbon
neutral electric portfolio. He said that the move to electrification may be problematic if the
electric portfolio is carbon free, but the gas portfolio isn’t.
Commissioner Forssell asked if he program would only apply to residential customers only. She
asked if we first go to an opt-out program and allow customers to opt out, then transition to a
portfolio could be a problem since you first allow them out, then force them in. She said that
we could start with carbon neutral portfolio that is not 100%, but could transition there over
time.
Commissioner Schwartz said that all points of view are represented in Palo Alto. She said that
she is in favor of an opt-out program since this is an opportunity to practice how to do that. If
there is no way to opt out, this could be a problem for some customers who will create a large
issue in the community as it has been elsewhere with respect to having smart meters.
Commissioner Trumbull said he did not opt-in to the current program. He was also concerned
about opt-out as a transition to carbon-neutrality.
Vice Chair Danaher said he stated at the prior UAC meeting on the subject that he was
supportive of a carbon neutral gas portfolio and, after seeing the analysis, he is even more
supportive of that option. Danaher asked if there was any negative feedback for the carbon
neutral electric portfolio. Assistant Director Jane Ratchye said that there was no negative
feedback that she knew of regarding the carbon neutral electric portfolio. Vice Chair Danaher
said that there could be a cost for morality and that he supports moving to a carbon neutral
portfolio rather than moving to an opt-out program.
Chair Cook asked Chief Sustainability Officer Gil Friend whether the choices would support the
City’s carbon goals. Friend noted that natural gas represents 25% of the City’s GHG emissions.
Interim Utilities Director Ed Shikada noted that there was no staff recommendation for this
item and views this discussion as one of values. He said that a survey of the community could
be done to determine the community’s view on the issue.
Chair Cook noted that staff did not provide a recommendation as it usually does and said he
thought that this was appropriate in this case. He stated that we are talking about this at a time
when gas rates are very low and also at a time when rates across the board are rising
significantly this year. He said that he had not heard any protest regarding carbon neutrality for
electric supplies, but says that a transition to carbon neutral gas can start and increase over
time. It would be perhaps most advisable to start with offsets first and move to renewable
biogas over time. He would recommend #3 and move to #4 by 2030. He would like to see the
costs for these options.
Commissioner Schwartz said that the issue with smart meter rollout happened when there
were many missteps caused by a rate increase, very hot weather and the new meters were
blamed. She said that rising rates are not a good time to introduce a new program that costs
more. The downside is that the program could fail spectacularly if it becomes the rallying point
for complaints.
Commissioner Schwartz advised that a survey could be taken to determine the level of support.
Chair Cook said he appreciated the additional options presented by staff. He pointed out that
gas prices are currently very low and rates in the five utilities are increasing. Chair Cook said he
was not prepared to adopt a carbon-neutral program supplied with only biogas. He said the
rate impact would be less than the opt-in or opt-out options for a carbon-neutral portfolio.
Dailey confirmed that administrative costs for the portfolio are near zero. He said he prefers
starting with offsets and slowing adding biogas to the carbon-neutral portfolio. Chair Cook
recognized that there will be some complaints but said the rate impact is low and the impact of
a carbon-neutral portfolio is high.
Commissioner Trumbull stated that he was supportive of having more detail available for a
program before going to Council with a final recommendation.
ACTION:
Vice Chair Danaher made a motion that the UAC recommend that Council adopt a carbon
neutral gas portfolio and direct staff to develop an implementation plan. Commissioner
Trumbull seconded the motion. The motion passed (6-1) with Chair Cook, Vice Chair Danaher,
and Commissioners Ballantine, Forssell, Johnston and Trumbull voting yes and Commissioner
Schwartz opposed.
Vice Chair Danaher left the meeting at the conclusion of the discussion of item #2.
ATTACHMENT D
EXCERPTED DRAFT MINUTES OF THE AUGUST 31, 2016 – SPECIAL MEETING
UTILITIES ADVISORY COMMISSION MEETING
ITEM 2. ACTION: Recommendation that Council Approve a Carbon Neutral Natural Gas
Portfolio Plan to Achieve Maximum Carbon Neutrality Using a Combination Of Offsets and
Biogas in the Gas Supply Portfolio by Fiscal Year 2018 with No Greater than 10¢/Therm Rate
Impact; and Related Termination of the Palo Alto Green Gas Program
Senior Resource Planner Karla Dailey provided a presentation summarizing the written report.
Chief Sustainability Officer Gil Friend said that the Sustainability/Climate Action Plan (S/CAP)
includes a plan to get to a carbon neutral utility and an aspirational goal of a carbon neutral
city. He said that moving to an electrified city will be a long and complex process. He said the
proposed program is a bridge to using less natural gas and that a comprehensive approach
including offsets, biogas, efficiency and electrification will be necessary to achieve the city’s
long-term goals. He pointed out that buying offsets provides capital for more projects in the
U.S. and potentially locally.
Public Comment
Sandra Slater said that proposal is an interim strategy to get to carbon neutrality as soon as
possible and offsets are a good tool to use for the time being. The price signal that the program
cost provides will encourage gas efficiency and electrification of gas appliances. She suggested
the money currently used to market the voluntary program could be redirected to efficiency
and fuel switching programs. Offsets are not a “pass” for consumers as evidenced by the fact
that Palo Altans continue to conserve electricity despite the carbon neutral electric supplies.
Lisa van Dusen said that we must do everything and the beauty of this is that it can be done
now and shows an intention to reduce carbon emissions in the long term. We have policies in
place such as the 2009 proclamation to include environmental externalities and the S/CAP goal
to reduce greenhouse gas (GHG) emissions by 80% by 2030. It may be faulted as not enough or
too much, but it’s a good move in the right direction.
Vice Chair Danaher said that the UAC received a comment from a member of the public who
pointed out the proposed offset purchases do not cover fugitive methane losses from natural
gas production and transportation. Vice Chair Danaher added that methane is as bad as coal
due to the fugitive emissions. Commissioner Ballantine said that that position is not reflected in
any DOE report that he searched for. Commissioner Schwartz agreed that the coal and natural
gas are not considered to be equally bad by industry experts.
Vice Chair Danaher said the proposed program is a good starting point and asked about the
value of purchasing biogas. Dailey confirmed biogas is more expensive than offsets and it is
Council’s prerogative to decide whether biogas is worth including. Commissioner Danaher
asked where the methane comes from. Dailey explained the gas comes from landfills and
agriculture, mainly dairy farms.
Commissioner Ballantine said that if the source is dairy farms, then avoided methane emissions
need to be considered. Dailey explained that offsets are generated by preventing methane
from entering the atmosphere and the resulting biogas is a renewable fuel. A specific project
can produce both offsets and renewable biogas.
Commissioner Trumbull said that the request is fine, but he would like to get off gas as soon as
possible. He suggested that rather than buying biogas, extra funds be used for electrification.
Commissioner Johnston asked about the monthly bill impact of the 10 cent per therm rate
increase. Dailey answered that an average residential customer’s winter bill would increase by a
little more than $5 per month and pointed to a chart in the written report with the detail.
Commissioner Forssell clarified the proposed amount of carbon to be covered by offsets is only
that combusted in town and does not include methane leakage from the production fields or
leaks in the transportation system. Assistant Director Jane Ratchye said leakage in the
distribution system is covered. Commissioner Forssell asked about leakage data, and Ratchye
said we know the difference between purchases and sales, but that some of the difference is
due to mechanical meters operating slowly and not measuring all the gas flow so that the
difference cannot all be attributed to leaks.
Commissioner Schwartz pointed out that the strategic plan says customers should be offered
choices for managing their environmental footprint, but this proposed program does not offer
consumers choices and asked if the strategic objective needs to be changed. Ratchye said that
the supply source is a Council decision similar to the decisions made regarding the composition
of the electric supply portfolio. Commissioner Schwartz disagreed. She said where the
electricity comes from is irrelevant, but if she is being told she can’t have an electric stove, that
is a problem. Ratchye explained again that the proposal is about the gas supply portfolio and
not about electrification.
Commissioner Forssell observed there may be confusion between electrification efforts versus
the proposed carbon neutral gas portfolio.
Commissioner Schwartz asked if we need to change the strategic plan. Interim Director Ed
Shikada said that the strategic plan will be updated.
Commissioner Schwartz said biomethane is not very hard to come by. She said Apple can’t find
biogas to serve its facilities. Dailey replied there is biogas available but very little in California.
She explained that the plan is to get gas elsewhere and displace it in accordance with the
federal renewable fuels rules. She said she has talked to all of the City’s regular gas suppliers
and there is biogas available. She explained the some biogas producers are interested selling a
portion of their production for at a longer term at a fixed price discounted to the spot price in
order to diversifying their sales portfolios.
Commissioner Schwartz said if we are pushing everyone to electrify, we should talk about that
in the future.
Commissioner Ballantine said he likes the flexibility of the proposal that allows more biogas to
be included as it becomes available. Natural gas infrastructure is more resilient than electric
infrastructure. He said that, if and electric outage occurs, it would be a dark day in Palo Alto if
all is electric. He said the proposal is good because it includes biogas at a modest rate increase
while we start to work on initiatives to improve the resilience of the electric grid. He added that
this action helps to support a biogas marketplace and level the playing field for other ways to
get heat, including solar thermal heating. He also noted that energy efficiency and the incentive
to reduce local leaked gas is valued more.
Vice Chair Danaher said he likes the flexibility of the proposal to maximize biogas.
Chair Cook said he likes the staff proposal and appreciates the public comment. He pointed out
Carbon Free Palo Alto’s caution that it will be a distraction from the real goal of electrification
to reduce GHG emissions and might discourage fuel switching. He noted the differences
between the carbon neutral electric portfolio and the proposed carbon neutral gas portfolio
but suggested we test the hypothesis by determining whether the carbon free electricity
dampened the penetration of rooftop solar. He said helping to build a biogas market may lead
to lower prices as has happened with renewable electricity, and this program signals a move
away from the GHG emissions associated with natural gas usage.
Commissioner Schwartz asked if staff has done an analysis of where the electricity comes from
with electric used for heating, positing that additional electric load may cause the use of more
gas to power electric generation. Dailey answered that this proposal has nothing to do with
electric generation or increased electric usage.
Commissioner Ballantine asked if we electrify, would we increase our GHG footprint without
realizing it. Ratchye said that a discussion about electrification will happen at a later date.
ACTION:
Vice Chair Danaher made a motion that the UAC recommend that Council approve a Carbon
Neutral Gas Plan to achieve a carbon-neutral gas supply portfolio starting in Fiscal Year 2018
with a rate impact not to exceed ten cents per them; and terminate the PaloAltoGreen Gas
Program established by Resolution 9405. Commissioner Forssell seconded the motion. The
motion passed (6-1) with Chair Cook, Vice Chair Danaher and Commissioners Danaher, Forssell,
Johnston, and Trumbull voting yes and Commissioner Schwartz voting no.
FINANCE COMMITTEE
EXCERPT MINUTES
1 Finance Committee
Excerpt Minutes
October 18, 2016
Special Meeting
Tuesday, October 18, 2016
Chairperson Filseth called the meeting to order at 7:00 P.M. in the
Community Meeting Room, 250 Hamilton Avenue, Palo Alto, California.
Present: Filseth (Chair), Schmid, Wolbach
Absent: Holman
2.Utilities Advisory Commission Recommendation That Council Adopt a
Resolution Approving a Carbon Neutral Natural Gas Portfolio Plan to
Achieve Maximum Carbon Neutrality Using a Combination of Offsets
and Biogas in the Gas Supply Portfolio by Fiscal Year 2018 With No
Greater Than 10¢/Therm Rate Impact; and Related Termination of the
Palo Alto Green Gas Program.
Chair Filseth: Welcome. So next item on the Agenda is the Utilities Advisory
Commission (UAC) Recommendation for Carbon Neutral Gas Portfolio Plan
and I guess there is a Staff presentation, at which point we’ll do public
comment after that and then Committee questions and comments. Okay.
Ed Shikada, General Manager for Utilities: Just a quick intro that Karla Dailey
will report for Staff. We also have two of our UAC Commissioners here
present if the Committee is interested for additional feedback.
Chair Filseth: Super. Thanks for coming. Please proceed.
Karla Dailey, Senior Resource Planner: Good evening. Thank you. My name
is Karla Dailey. I’m a Senior Resource Planner in Utilities, and I do, as we
said, have a short presentation for you. This is just a quick outline of what
we’re going to talk about. So we’ve been doing a number of things over the
past years to address the carbon footprint of our gas utility. I wanted to
point out a couple of policies that are in place right now. The gas utility long-
term plan, which was last revised and approved by Council in 2012 has a
ATTACHMENT C
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October 18, 2016
strategy, it happens to be Number 4, that says, Reduce the Carbon Intensity
of the Gas Portfolio in accordance with the Climate and Protection Plan by:
1) designing and implementing a voluntary program; and secondly,
purchasing non-fossil fuel gas as long as it can be done with no rate impact.
So that’s what the current policy in place as far as the long-term plan looks
like. So, because of that policy there was designed and implemented a Palo
Alto Green Gas Program that was modeled very closely after the Palo Alto
Green Program, which I know you are all very aware of. It was a very
successful program, won lots of awards, 20 percent participation, kind of a
model for similar programs around the country. The current participation in
the gas program is about four percent of residents, 100 percent of City
facilities and that results in about six percent of the City’s total gas demand.
We supply that program with high quality environmental offsets with a
preference for California projects, but we did go back earlier this year and
take a really close look with our UAC Commissioners at the current program,
looked at the possibility of converting it from an opt-in program to an opt-
out program, but also presented the UAC with some other alternatives to
that and the UAC supported, instead of converting that program to
something like an opt-out program, moving to a completely carbon neutral
gas portfolio. So that’s how we came to work on the program that is being
proposed this evening. Natural gas use accounts for about 27 percent of Palo
Alto’s greenhouse emissions, and you can see that while mobile combustion
is by far and away the largest culprit, since the electric utility is carbon
neutral, the largest, second largest remaining chunk is attributed to the gas
portfolio. The recommended program achieves 100 percent carbon neutrality
with these four sort of constraints. The rate impact being no greater than 10
cents/therm, proposing to use a combination of the same type of offsets that
are used currently for the voluntary program, but trying to incorporate some
biogas into that portfolio as well, as much biogas as possible without
exceeding that 10 cent/therm rate impact. The time frame proposed is Fiscal
Year (FY) 2018 and again, we are proposing that 100 percent of our portfolio
be covered. Now, of course, for all four of those constraints, any one of them
or any combination of them could be changed to come up with a slightly
different program, really a continuum in all directions, but this table shows
you some discrete options for different rate impacts, different combinations
of offsets in biogas and different amounts of the portfolio that could be
covered in a carbon neutral fashion. Of course, the time frame could be,
achieving any of these benchmarks, could be done within any time frame as
well. So, just to talk about the rate impact a little bit more, I think it’s
important to think about the electric program, the electric carbon neutral
program rather than the Palo Alto green program and compare that to what
Staff is proposing on the gas side. The electric portfolio was quite different.
We had a renewable portfolio standard requirement that was quite
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October 18, 2016
significant prior to moving to a carbon neutral electric portfolio, and the
combination of that RPS requirement and our large amount of hydro supplies
really resulted in a largely carbon-free content of the electric portfolio
already, and so in order to move from that to a 100 percent carbon
neutrality there was a very small rate impact to do that, one to two percent
for a few years, and then almost zero after that. The gas portfolio, on the
other hand, is 100 percent fossil fuel with no renewable aspect to it. Ten
cents/therm is about a 10 percent rate increase based on today’s rates and,
again, part of why that 10 percent or 10-cent number was anchored on in
the proposal is that we could include some biogas in the portfolio at that
level. If you get much lower than a 10 cent/therm rate impact to biogases,
it’s too expensive to include in it. So…
Jane Ratchye, Assistant Director of Utilities: Can you go back one Slide,
point out the Pacific Gas and Electric (PG&E) rate.
Ms. Dailey: Oh yeah, down at the bottom of that Slide you can see the
difference between Palo Alto’s rates and PG&E’s bundled rates. So for
residential customers Palo Alto’s rate is significantly lower.
Council Member Wolbach: Is that gas only, or is that gas plus electricity?
Ms. Dailey: Just gas.
Chair Filseth: And is commercial and large commercial the other way? Am I
reading that right?
Ms. Dailey: It’s very close for commercial and we are slightly higher for large
commercial. So should the program be approved ultimately by Council, our
next steps would be to execute enabling agreements for purchasing
environmental offsets. Right now, even though we are purchasing some for
the voluntary program, we are doing that through a turn-key contract with
our marketing consultant, so we are not directly buying those. We would
need to develop new rate schedules for Council approval, given the gas
utility long-term plan that says we won’t do anything that has any rate
impact whatsoever, we would have to go back and revise the gas utility
long-term plan, and we would need to do some communication and outreach
with the existing Palo Alto green gas participants and perform some fairly
insignificant administrative tasks to terminate the program. The request
before you this evening is from the UAC and Staff to adopt a resolution
approving the Palo Alto, the proposed carbon neutral gas plan and
terminating the Palo Alto green gas program established by Resolution
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October 18, 2016
(Reso) 9405, and secondly, to direct Staff to develop an implementation
plan for getting to carbon neutrality for the gas portfolio. And that’s all the
official presentation I have. We can take questions or public comment.
Chair Filseth: Okay. Thank you very much. I think the next step is we should
do public comment, so the first speaker, there are six speakers, I think, so
you will each have three minutes. The first speaker is Sandra Slater.
(crosstalk)
Chair Filseth: Ah, let’s see. Should we have the UAC. Actually, why don’t we
do that. Is that okay, the Chair of the UAC speak. Sorry Sandra.
James Cook, Chair, Utilities Advisory Commission: I was last to arrive and
did not fill out a card, so sorry. James Cook. I’m currently the Chair of the
Utilities Advisory Commission, and I live at 730 College Avenue. So I just
wanted to briefly run down how we looked at this. We voted 6-1 in favor of
the Staff recommendation, as we thought this was a great way to reduce
greenhouse gas emissions for the City. You know, obviously, natural gas is,
at least for the utilities, is the next big hurtle to overcome in terms of
greenhouse gas emissions, the biggest greenhouse gas emitter for the gas
utilities and a big part of what the City does. So we thought this was a great
way to raise awareness and take some action on the issue, and also a great
way to replace the Palo Alto green gas, and at the same time to replicate the
success we’ve seen in the carbon neutral portfolio on the electrical side.
They are not the same thing. The carbon neutral electricity is based on
having actually, if the market system is a lot more open to inexpensive
electricity that is green, so it’s not the same thing. Here you’re facing a
market situation where there really isn’t a market for the biogas, or there is
a very small one, but it gives, I think it gives a good market signal for that
industry possibly to develop in a greater way. Also, the offset, using offsets
versus Renewable Energy Certificates (RECS) are not the same thing. So it’s
not considered, I would consider it not as high quality a way to offset your
emissions, but it is what the green gas system uses right now is offsets.
There is also a cool opportunity to use local, potentially local offsets because
the system isn’t as clearly defined as RECS are. You know, there is a
possibility you can fight climate change and reduce greenhouse gases here
locally with those offsets, so I like that possibility. Also, I think we liked it as
a good policy to improve what we’re doing, and it’s a policy that can be
adjusted over time, so if, you know, we tried, like the carbon neutral
electrical side we tried to cap it. I think that came from the Staff, but it was
replicated, certainly a good part of the policy on the carbon neutral
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electricity. But it also says, recognizes that biogas isn’t ready now, but it
might be in the future, or there might be other ways to do it, so I like that it
sort of establishes this framework, gets everyone involved in it right away as
opposed to your four or five or six percent or whatever who are involved
now in the green gas. And, so I think we like this as a great way to take
action locally to do something different than we’ve been doing in a much
greater way and reduce greenhouse gases. So I think there wasn’t that
much debate at the UAC level. The question really was, are these quality, is
this one-time or I think I’m on different sides from our friends at, Zero
Carbon Palo Alto, what’s is it?
Chair Filseth: Carbon Free Palo Alto.
Mr. Cook: Carbon Free Palo Alto, thank you very much. You know, we talked
about this and we don’t see it as a problem with, if the City were to try to
push for a greater electrification, which would be a real great way to also
reduce greenhouse gas emissions, it looks like, we don’t see that this is in
conflict with that, and we also don’t see that would take any energy away
from that, so we did discuss that. Obviously you guys can decide whether or
not you feel that’s true or not, but that was the other thing we wanted to
consider when we were looking at this policy. But I think as far as we were
concerned, that we did spend a lot of time discussing this. This has been a
long discussion. Obviously, it started back in 2013 really, and I think what
Staff ended up with is really, we felt like this was the best option of the
things we’ve seen over the last three years. Thanks very much.
Council Member Schmid: Question.
Chair Filseth: Let’s see, so how should we do this? I mean if we have
questions for the UAC do we do that now?
Council Member Wolbach: I’d say, since we are saving questions for Staff till
later, let’s also save questions for the UAC till later and hear from the public.
Chair Filseth: You’d like to ask them now.
Mr. Cook: I’d be happy to stay, so…
Council Member Wolbach: I have a million questions for Staff and UAC but
I’d kind of like to…
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Chair Filseth: I’ve got a few too. Let’s see.
Council Member Schmid: It’s your decision.
Chair Filseth: Yeah, um. If you’ve got a million questions for Staff and UAC,
then we’ll probably have Steve up here for a long time.
(crosstalk)
Chair Filseth: So why don’t we, if Greg only has one, why don’t we let Greg
ask his question, this will be a little bit of a hybrid here, let’s have Greg ask
his question, then we’ll do public and you and I can ask all ours.
Council Member Schmid: There was one dissenting vote on several
meetings. Could you articulate what the…
Mr. Cook: Yeah, sorry, I was going to bring that up too. So Commissioner
Schwartz had a dissenting vote on this and on when we were discussing the,
I think it was the Green Gas Program. I think her concerns centered around
whether or not, I think she is not so concerned about gas, natural gas, and I
also think she felt like, she did have one concern, remember Karla, one time
she was bringing up to you like that she thought that there might be, if you,
and I think this is, it gets, I think some of her thoughts were sort of led off
into more on the electrification question, but she was concerned that if we
encourage more electrification would that possibly somehow lead to higher
use of gas, because you are using some gas in the grid that is being used in
order to create electricity and that we have the carbon neutral portfolio.
Lisa Forsell: If I may.
Mr. Cook: Commissioner Forsell.
Lisa Forsell: My recollection of her opposition was concern for rate payers.
(crosstalk)
Lisa Forsell: Lisa Forsell, also Utilities Advisory Commissioner. If I recall,
Commissioner Schwartz was mainly concerned about the impact to rate
payers and she favored the opt-out program because it gave customers
choice and her dissenting vote wasn’t that she didn’t, you know, want the
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carbon neutral gas portfolio is that she wanted to maintain choice for the
rate payers.
Mr. Cook: Yeah, that’s a more articulate and short (crosstalk). There were a
couple of other things that she had brought up, but her probably number
one concern was choice, whether or not you were forcing people to do
something or not. And, again, one of the things we discussed was, of course,
we did that we did that on the electrical side.
Chair Filseth: Which is one of your options up here.
Mr. Cook: That’s right. So it was more, and it was also when we were talking
about opt in and opt out in previous meetings as well.
Chair Filseth: Okay, why don’t we do the public comments now and then
we’ll come back and if you guys, especially if you guys will still be able to be
here, okay? So first public speaker is Sandra Slater.
Sandra Slater: Thank you Council and Staff for all your hard work and for
allowing me the opportunity to address you this evening. I got to expand on
a letter that Lisa VanDusen and I wrote to the UAC back in August, which is
on the record. You can take a look at that, and we’re very grateful for the
support of both the UAC and Staff for the green gas program. Natural gas
was originally considered as a way to wean the country off of coal and it was
touted as sort of a cleaner bridge to a renewable energy future, and we
were, frankly, I think, misinformed. Natural gas is an extremely potent
greenhouse gas. In fact, according to the Union of Concerned Scientists,
“the drilling and extraction of natural gas from wells and its transportation
and pipelines results in the leakage of a methane that is 86 times stronger a
greenhouse gas over 20 years.” In addition, the calculations we were initially
given regarding natural gas versus coal does not take into account the
fugitive emissions from extraction and you can think of the Porter Ranch
leak that was so pernicious just last year, which produced 1,200 tons of
methane every day, and in terms of greenhouse gas output per month it
“compares to the equivalent effluvia of 200,000 cars a year”. So preliminary
studies in field measurements show that these so-called fugitive emissions
are just the tip of the iceberg. They occur not only in extraction, but in the
transporting of gas right here in Palo Alto even, there are fugitive emissions
in our gas pipelines. This is no clean energy bridge to a renewable future.
It’s imperative that we wean ourselves from fossil fuels as quickly as
possible, and in the meantime, purchasing a biogas in offsets is basically, as
far as I can see, the least we can do. It’s not a panacea, but it’s a great step
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in the right direction. Palo Alto has a set goal of reducing our Greenhouse
Gases (GHGs) by 80 percent by 2030 and this green gas initiative supports
that effort and will send a signal to Palo Altons that we are using all the tools
in our toolbox to try to reach that goal. Green gas offers an interim strategy
of carbon offsets that can be used as a bridge to get us weaned off of gas
entirely, something that's going to take quite a few years, if not a decade or
more. I’m a firm believer in an all of the above strategy to get us quickly to
carbon neutrality as possible. We need quick and effective efficiency
programs. We need a fuel switch to cleaner sources for our cars and our
homes, and we need a real tax on carbon, but all these things take time.
The program Staff outlined will begin to place a price signal to consumers
that gas is something that should be used sparingly, if at all. It makes
efficiency that much more attractive, because the more expensive the gas,
the more attractive efficiency measures will be and electrification will
become. So this is not an infrastructure investment or spend. We can dial
the cost up or down and efficiency is certainly the low-hanging fruit. This is
not giving a pass to Palo Altons to use as much gas as possible. The Electric
Utility I see Palo Altons every day trying to reduce their electric usage and
we have a carbon neutral electricity, so I think Palo Altons want to do the
right thing if they can so this is a roadmap, interim tool, what we got. Thank
you.
Chair Filseth: Thank you. Next speaker Catherine Martineu.
Catherine Martineu: Thank you. Good evening. I’m the Director of Canopy,
which is an urban forestry organization based here in Palo Alto. I’m here
actually to talk about another maybe more fun aspect of this project, which
is the potential for local carbon offsets. There is a group of people, a climate
action reserve, who are working right now on a new protocol for urban
forestry carbon offsets that will, should allow a city like Palo Alto to use local
tree planting programs, such as for example, tree plantings in South Palo
Alto, which is something that we want to do to bring South Palo Alto tree
cover at parity with North Palo Alto to use these type of programs and with
this new protocol and obtain the offsets. So obviously, then you get the cake
and you get the revenue as well, because we can get the offsets, all of the
extra benefits of a healthy tree canopy and we get to keep the revenue to
fund the program itself. So this is something that is being worked on right
now. This replaces an older protocol that was basically not practical to use, it
was very onerous to administer. This one uses new technology such as
remote sensing, which makes it cost effective, so I’m very hopeful. And it
looks like probably in the spring of 2017 we will see this protocol sent to the
ERB and other agencies for validation and then vetting and so forth, and we
might see potential program by the end of 2017. We are very lucky that
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Walter Passmore, our urban forester, is one of the advisors on the carbon
action reserve team. So there is absolutely no risk that either he or I would
forget to let you know when the protocols are available, but I wanted to
make sure, and I think actually, Commissioner James Cook mentioned that
the program that Staff is recommending allows for local programs. But I just
want to make sure that when the time comes, it is a possibility, that it is
evaluated as part of the carbon offset portfolio.
Chair Filseth: Thank you very much. The next speaker is Bruce Hodge.
Bruce Hodge: Hello. I’m Bruce Hodge from Carbon Free Palo Alto. I’ll be
speaking on what we view as problematic aspects of this plan, and my
colleague, Bret Anderson, will explain our alternative proposal. Carbon Free
Palo Alto does not support this plan. The use of offsets and biogas are
nonscaleable solutions that don’t address the root cause of our natural gas
emissions. The plan is a stand-alone effort that doesn’t serve as a bridge to
more robust solutions. It is an underprised green washing approach that will
most likely be hard to move away from when required additional
investments and real solutions are proposed in the future. Many local
community stakeholders, likely the majority, prefer directly addressing
natural gas problem without using offsets. Other entities, such as the
innovative Sacramento Municipal Utility District (SMUD) Utility are very
interested in Palo Alto’s approach to reducing the use of natural gas and will
not be impressed with an offset solution. Instead, Palo Alto should be
advising innovative solutions that are scaleable and affordable. An offset
solution was vigorously debated during lead up to the Sustainability and
Climate Action Plan (S/CAP) and offsets were eventually dropped from the S-
CAP 80 by 30 plan because of opposition to them. Solving the natural gas
situation here at home is crucial. Offsets will result in approximately $3
million a year leaving the community, money that could be spent more
wisely on investing in our own infrastructure. The use of offsets is essentially
a green washing approach for several reasons. Number one, the market has
failed to price carbon emissions realistically and hence offsets based on an
unrealistically low cost of mitigation was not grounded in reality. And
secondly, offsets only count the combusted emissions from gas and discount
the real cost by as much as 50 percent by ignoring the impact of fugitive
emissions of natural gas itself, as Sandra mentioned earlier. Just to be clear,
the cumulative emissions from natural gas are estimated to be
approximately double the reported figure. This means that in Palo Alto
natural gas accounts for about half of our total emissions and that reduces
the transportation percentage from two-thirds down to about half. We object
to the use biogas as well. Biogas is not a scaleable solution, supplies are
likely to remain limited because of lack of feed stocks and it just perpetuates
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the use of a leaky gas infrastructure with fugitive emissions. Lastly, the plan
is presented in isolation, with no linkage to other efforts that will be
occurring in the same time frame. The proposed expenditure is somewhat
arbitrary and there is no way to compare the potential costs (inaudible) to
other approaches. We urge a more comprehensive approach.
Chair Filseth: Thank you. The next speaker is, you already know that, Bret
Anderson.
Bret Anderson: So I’m also a member of Carbon Free Palo Alto. I’m going to
explain a little bit about what we are proposing as an alternative. What we
think of this alternative is that it’s really Plan A. This is what we should be
doing to reduce gas use in Palo Alto and Plan B could be offsets, but we
should only do that if we have a full comprehensive plan for what plan A
really entails. We’re talking about efficiency measures, electrical equipment
upgrades and upgrades to the electric panels in our homes and in our
businesses and amid infrastructure upgrade to Palo Alto’s grid. So these are
the things that we must do. We know we’re on the path to do them, but we
have not yet, from our Utility Staff, a comprehensive plan that addresses
how we’re going to get these adopted, these measures adopted. So we need
to flush that out. That’s, goal number one would be to lay that plan out, look
at how much it costs, how much it’s going to take from Staff to develop and
run that program, how much would it take to fund that program. The key to
all of this is the high up-front cost of these measures. We know these
measures are tough and they’re going to be mostly done in a retrograde
situation, so we have to come up with a way to finance this. The utility mode
for financing using on-bill financing, tariff based financing is the best pass
forward to get adoption rates high in a retrofit situation, which is really what
we’re dealing with in an 80/30 scenario for reducing gas use in Palo Alto. So
we really have to look at the way we’re going to get on-bill financing for
single measures like a large meter or Heating, Ventilation and Air
Conditioning (HVAC) or efficiency or a whole-house upgrade where we could
finance $30,000 or $20,000 worth of upgrades for a home and have that
billed over ten years or whatever it takes to make that flow for the
customer. It should be a check-the-box decision for the customer as an opt
in, but we need to do all the thinking beforehand and the financing
beforehand using the Utility Financing Mode, which is low cost to capital and
a very easy understood relationship with the end-user customer. We need to
define that funding mechanism is a plan drawn up by Staff where we would
love to work with Staff as Carbon Free Palo Alto to flush that plan out, but
we also need to enumerate the (inaudible) benefits of this kind if a program,
doing it ourselves to the rest of the community to sell the fee, maybe a use
fee, that funds this effort, to sell it to our community, because we’re talking
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about improving our infrastructure, our resiliency, benefits for the
environment for not using fracked natural gas. We’ve got local jobs to create
using these measures, or implementing these measures and I’d also add the
home value that is improved by investing in the infrastructure, so you can
improve the value of your home when you make this investment so offsets
really represent a rent moving, exporting our problem outside of Palo Alto,
whereas our own program, if we fund that through (inaudible) financing is
an investment in our own community. Thank you.
Chair Filseth: Thank you very much. The next speaker is Lisa VanDusen.
Lisa VanDusen: Good evening. Thank you for considering this issue and I
just want to say that Sandra Slater and I have been having these
conversations with the UAC and with others for a while, yes, some years at
this point, so it’s great to have come this far. I just want to comment a little
bit on the remarks that these folks made, and I just want to say that all
sounds great and it’s not entirely clear to me how that’s separate and not
combinable with what we’re doing here. So I would hope that would be and I
would contend that this does not slow us down or prevent us from moving in
that direction at all. So great work, both of you. So first, also I want to say
how much the Staff has done a really excellent job of flushing out the
specifics of this, Karla and Jean, in particular. So I think the benefits you’ve
heard, but I just want to reiterate that this program is really flexible. It can
flex with the marketplace, with what’s available, with the tide of where we
are with efforts like that or anything else. It really does, as James said,
create a framework and allow us to really move around with availability, with
rate payer concerns, with sustainability targets, with progress and cost. So
the second thing is that, and I think you also said this, that it sends a signal.
It sends various kinds of signals. It sends a price signal that, in fact, natural
gas should not be less expensive than electricity. It is not the direction we
want to go, so it sends the signal that way. It sends a market signal to tell
the world and the marketplace that we want alternatives to natural gas.
And it tells consumers, rate payers here and elsewhere that we are doing
what we can to move in the right direction. And when I think, you know,
maybe East Bay Municipal Utility District (MUD) is looking at us, but I think
others the world over are looking at what we’re doing and I agree with the
“all of the above” strategy that Sandra mentioned. So the fact that, I want
to just speak to the concern that Commissioner Schwartz had, which was
that the matter of choice and the importance of that and, in fact, we have
competing things. We have consumer choice, but we also have a mandate
and really a moral calling right now to do everything that we can, and the
City has already adopted the 20 by 2020, 80 by 2030 goal and we have also
the proclamation from 2009, the Council said we wanted to be considering
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externalities in our decisions as we do business, so I hope that you will go
forward with this and take this to the Council and we can all move forward
quickly with this. Thank you.
Chair Filseth: Thank you very much. And our final speaker tonight is Lisa
Forsell.
Lisa Forsell: Hi. Lisa Forsell, UAC Commissioner, although tonight I’m not
representing the UAC but I just wanted to share my own thoughts as to why
I support the proposal. A lot of things have been said tonight that I will try
not to rehash at length. I see it as a transition strategy, not the permanent
strategy, that we shouldn’t go like, “okay, we’re done now, our gas portfolio
is carbon neutral, no more work to be done”. It’s a way to start having an
impact now while we implement the long-term electrification strategy. I like
the current proposal because it’s flexible, so Council, there was a good slide
about it, can decide how much appetite you have for rate impact, and if you
feel it is too high you can go with five cents/therm or, you know, another
number, or if you have a great appetite for rate impact, more physical
biogas could be added to the portfolio. I might also throw in there that, you
know, Carbon Free Palo Alto has also raised a very legitimate concern about
fugitive emissions and if I recall, Staff isn’t quite sure what’s the appropriate
estimate for Palo Alto fugitive methane emissions, but one could attempt to
purchase offsets against the fugitive emissions as well, if that was something
that we wanted to pursue. And finally, just a couple of thoughts about the
opt out, because when we started the conversation at the UAC meeting in
June, we did spend a lot of time talking about opt out and one of the reasons
that I was against an opt out program was because a lot of the rate impact
actually went to administrative costs to operate the opt out program and all
the sort of complicated corner cases about what if you only noticed it six
months later and you wanted retroactive opt out and all these things, so it
felt like, for the money rate payers were spending, I’d rather that money go
to the offsets and the physical biogas than to a big administrative burden for
staff. And I also felt that if we went with an opt out, that could not be a
transition to a full portfolio because we then had, you know, let members,
let rate payers who did not want to be part of the program identify that they
didn’t want to be in and then it’s quite rude to pursue upon them later and I
felt it was better for the community to just take a stand and go with the
whole portfolio. Thank you very much.
Chair Filseth: Thank you. I have a couple of procedural comments. Do you
have a question?
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Council Member Wolbach: Actually a procedural question for you.
Chair Filseth: Okay.
Council Member Wolbach: Do you want take five before we get into
questions? I just want to go grab a cup of coffee before we get into the rest
of this. If we’re going to lose quorum (crosstalk) Take a couple of minutes to
absorb the comments.
Chair Filseth: Yeah, let me make a couple of procedural comments and then
maybe… Is two minutes enough?
Council Member Wolbach: Sure.
Chair Filseth: A maximum of five. Okay. So thank you very much everybody
who came. My question for you guys. I guess what you guys are suggesting
is that we should proceed straight to figuring out how to move to
electrification, get rid of gas and what’s the financing strategy for that. Did I
get that right? That’s, I’m going to guess, is beyond the scope of our agenda
tonight, and it’s something that would be sort of a complex agendized
process, so we’re probably not going to dive into that. Is that accurate?
Terence Howzell, Principal Attorney: That is accurate.
Council Member Wolbach: Can I ask (inaudible) to that one?
Chair Filseth: Yes.
Council Member Wolbach: To the degree that one program might be an
opportunity, present an opportunity cost that deprives us of funds or Staff
resources to pursue another program, we can talk about, you know, the fact
that, we can talk about it in that context, correct?
Mr. Howzell: In passing.
Council Member Wolbach: In passing.
Chair Filseth: Okay. So the second one is, and there may be some
disagreement a little bit on this side, which is okay, right? But it seems to
me that what we’re talking about here is sort of a long and complicated
decision for the City, right. Are we going to move to sort of a different way
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of doing gas? It seems to me that the heavy lifting on that decision should
be borne by the UAC and by the full Council, right. So the question is, what
is our role here in the Finance Committee, because obviously we could cover
a lot of territory. It seems to me that our role in these kinds of things in the
Finance Committee is not, for example, to go back and revisit policy, so I
don’t think the Finance Committee should say, “no, we think it should be
option number 3 instead of Option Number 4”, right. It seems to me that
sort of the center of gravity, what we should be doing is looking at is, you
know, is the City going to go broke trying to do this, right. I mean, it’s our
money to do this. And to a lesser extent, maybe get into the issue of is the
City getting its money’s worth from this kind of program, right. It seems to
me that’s sort of the space that we ought to spend most of our time today.
Do you guys agree generally with that or disagree?
Council Member Schmid: Disagree a little bit.
Chair Filseth: Okay.
Council Member Schmid: I think the function of the committees are to look
in detail at what the consequences of decisions might be. Primarily financial
but I don’t think exclusively financial.
Chair Filseth: Primarily financial would be my comfort zone for this
Committee, because the Utilities Advisory Committee is another committee
another Council Committee that looks at this, and this is their job, to set
rate and things like that seems to me is the purview of the Utilities Advisory
Committee and we can look at that, right, but it doesn’t seem to me that we,
they ought to be going one way and we ought to be going the other and
they ought to provide the guidance on this.
Council Member Schmid: The difference between the UAC and a Council
Committee is we also are elected and have to go in front of the voters, and
so we should be taking into account the public more maybe than the UAC.
Chair Filseth: Sorry. Maybe I haven’t been clear on that. I think as members
of the full Council, I think we are going to be very, very interested in that.
So, I mean, I sort of see myself as having two hats, one is Finance
Committee and the other is, I’m very interested, I mean, I’m going to be
interested in a lot more aspects of this when it comes to Council than on this
Committee. That sort of has been my thought process. But I don’t want to
constrain you from going outside that, to be too narrow. I want to go outside
that somewhat, and I think have at it. But I think my guidance on this would
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be the heavy lifting on policy issues ought to be borne by the UAC and the
full Council when it comes to this. Okay. But as members of the full Council
we’re going to see this thing again, so it’s not completely divorceable. With
that, why don’t we take a couple of minutes break, two minutes.
The Committee took a break from 8:04 P.M. to 8:08 P.M.
Chair Filseth: Okay, with that let’s do Finance Committee comments and
questions and why don’t we do both at once. Council Member Wolbach.
Council Member Wolbach: So a few questions at the moment. I’ll probably
have more later. I guess a good place to start for me would be if somebody
from Staff or UAC perhaps provide just a quick reminder of the difference
between offsets and RECS, first.
Ms. Dailey: So a REC is only associated with Renewable Electric Energy, so
when you generate electricity from a renewable resource, there is an
attribute attached to that electron that is a renewable energy credit. So it
doesn’t make sense to use, you can’t use that for gas. Those are particular
to energy, not to natural gas. An offset is generated by an action to prevent
greenhouse gases from going to the atmosphere by, for instance, planting
trees to sequester carbon, if it’s an additive tree-planting operation. So trees
that are just sort of hanging round town don’t generate offsets, but a
program that is financed by being able to collect revenue for the offsets in
order to achieve that carbon reduction generates offsets.
Council Member Wolbach: So RECS are not an option for natural gas I heard
you say.
Ms. Dailey: Yes, that’s correct.
Council Member Wolbach: So they’re off the table and that’s why it’s not
part of this discussion.
Ms. Dailey: That’s right.
Council Member Wolbach: Thank you for clarifying that question. Okay, I can
move on from there. Next question, there seems a clear emphasis on biogas
over offsets aside from the concerns about costs, biogas being very
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expensive. Just for our edification, maybe a real quick summary why there is
the emphasis on biogas over offsets?
Ms. Dailey: Well, I think because offsets are kind of a more esoteric product,
there has been an emotional leaning toward liking biogas, but it is a very
expensive resource and Staff felt like the rate impact of achieving carbon
neutrality just with biogas would be unacceptable, and so tried to strike a
middle ground. It’s a matter of personal preference, but…
Council Member Wolbach: Any input from the UAC on that one? See if there
are any further thoughts from the recommending body.
Mr. Cook: No, I think that captures it pretty well. I think there is a sense of
biogas as preferable to the existing stock of natural gas, but this is still seen
as a bridge or some sort of transition to using less gas because it does have
the methane emissions, most of the people who have talked from the public
have said. So I think that, you know, we are seeing either that if there is
more biogas you might have an increased percentage of biogas usage in the
program or if there is some other way to transition away from… You know, I
think ultimately may want to transition away from gas, but it’s just that they
don’t have a better explanation. Karla is the real expert on gas, so maybe
she… But I think there is much more to it.
Council Member Wolbach: Okay, next question. On Slide 8 of tonight’s
presentation, Palo Alto’s gas rates are compared to PG&E gas rates, and I
just want to be clear. These are our current gas rates, correct? And I was
hoping to see a quick side-by-side, if it’s available, of… Are we facing some
expected increases in our gas rates anyway? Aren’t we planning to increase
our gas rates already or and if so…
Ms. Ratchye: Yeah, in the long-term plan, the Ffinancial Plan, we had an 8
percent expected increase for Fiscal Year, the next Fiscal Year.
Chair Filseth: And that goes on for a few years, right?
Ms. Ratchye: Yeah, I can’t remember the whole trajectory, but next year we
did and I think there are a couple of years.
Ms. Dailey: But these rates do include a big rate increase that we
experienced as a result of a lot of the money that’s being spent on safety in
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the PG&E system. It gets passed straight through to us from all the work
they are doing.
Council Member Wolbach: Okay, so we’re including some of that.
Ms. Dailey: Oh yeah.
Council Member Wolbach: But this does not include the potential 10 percent
rate increase from this proposal?
Ms. Ratchye: That’s correct.
Council Member Wolbach: So we could… And you said there was also an 8
percent that we’re going to be increasing this coming year anyway, correct?
Ms. Ratchye: That was the expectation that we had in the long-term
Financial Plan, that next year for FY’18 so July 1 it would be 8 percent.
Council Member Wolbach: That’s what I thought. And so I want to make
sure I did my math right here. Looking at just Tier 1 residential, which is
currently we’re at 0.8707 and multiplying that by 1.18, so adding 10 percent
and another eight percent.
Ms. Dailey: Ten cents is the proposed.
Council Member Wolbach: Oh, I’m sorry, it’s 10 cents. We’re not looking at
10 percent.
(crosstalk)
Council Member Wolbach: But it says it’s about a 10 percent rate increase.
Ms. Ratchye: On a winter bill, yeah, there’s a little apples and oranges.
Council Member Wolbach: So estimating a little bit, so we’re still looking at
less than a PG&E bill. So that would be still under Tier 1, for residential Tier
1.
Ms. Dailey: Right.
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Council Member Wolbach: And for, so that would be 0.952. Sorry I’m taking
long doing the math, but doing the same for Tier 2, it would also still be
cheaper, again anyone can check my math here, Tier 2 would still be
cheaper than PG&E at 1.663. Again, these are estimations. So I just want to
get kind of apples to apples what we would be looking at. And I appreciate
the PG&E information being included in this report so we can do a
comparison. As a quick comment on that, one of the most important things I
think about our electricity portfolio which is carbon neutral, is that we are
substantially cheaper than PG&E and being able to stay cheaper than PG&E
on our gas, I think, is also important.
Ms. Ratchye: I want to point out one thing about the gas rates when you’re
making these comparisons, PG&E doesn’t have a fixed charge for residential
and so these rates are the volumetric rates shown, plus you have to add in
this monthly service charge too.
Council Member Wolbach: I got you, thanks.
Ms. Ratchye: So there is another part of it that does kind of effectively bump
up our rates.
Council Member Wolbach: Right but that’s just a fixed $10.32, right?
Ms. Ratchye: Yes.
Council Member Wolbach: And that’s a good reminder. I guess I’m still kind
of sorting out my thoughts about all the public comments we have heard, so
I’m happy to turn it over to colleagues for questions, as I continue to mull
over the different pieces we’ve heard.
Chair Filseth: Very good. Council Member Schmid.
Council Member Schmid: I think there is no question that it is an important
issue and something we’ve got to act on. The opt out decision is a big one.
It’s striking that the Palo Alto Green got four percent of the customers
jumping in and the green electricity had, what, 24 percent? So maybe one
question is, why are there different perceptions out there in the customer
land between gas and electricity.
Ms. Dailey: You know, one answer, and I’ll let Jane chime in too, is we didn’t
market it very heavily, and part of what was going on was so much drought
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messaging over the last couple of years, particularly last year, that there is
some limit to the number of messages that are going out to customers, so a
lot of focus was placed on the drought and not so much on this program. Do
you want to add anything else about why?
Ms. Ratchye: No, I think that’s true. We didn’t market it, and then we
started having all these conversations about, are we going to change it, and
then we’re like, let’s not market it heavily now and then switch it up really
quickly, and so we stopped kind of actively marketing it. The other aspect is,
we did achieve a tremendous number of fraction of customers who joined
the Palo Alto Electric Green Program, but that still amounted to less
percentagewise total electric use than this program, which was not marketed
as a fraction of gas use, and that’s because residential was the bigger
number of participants and so it’s a bigger part of the gas use. So we
actually had more participation in this program, however poorly marketed, in
terms of percentage of gas use than we did after ten years of marketing the
Palo Alto Electric Program.
Chair Filseth: Can I chime in on that briefly? I would concur with that, so I
mean, this focus group of one here, okay, you know we were one of the
earliest adopters of Palo Alto Green, so I asked my spouse, “so are we doing
this?” She said, “no, I don’t know much it”. So… There wasn’t much
information about it so I’m concurring with sort of the, not a lot of
investment in the marketing.
Council Member Schmid: The thought process is a little different. I think the
electricity comes easy to jump on. So my question is, you know, what’s an
offset? Talk to me a little bit about what offsets are. You’re going to depend
for 95 percent of your program on offsets. What is an offset? People have
said gas is worse than electricity in terms of…
Ms. Dailey: Right. An offset is a credit generated from a project that keeps a
greenhouse gas from entering the atmosphere.
Ms. Ratchye: Can you give an example.
Ms. Dailey: For instance, urban forestry, it’s a large planting of trees that
stay in the ground for 100 years and are verified to be there year after year.
Council Member Schmid: I guess offset in electricity is easy. You buy solar
power made in the desert. It doesn’t come to Palo Alto, but it substitutes for
what you’re getting.
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Ms. Dailey: That’s a Renewable Energy Credit.
Council Member Schmid: Okay, what’s an offset?
Ms. Ratchye: Can you do the cow farm thing?
Ms. Dailey: Right, so if you have a, say you have a dairy farm that obviously
cows leave a lot of manure that emits methane into the atmosphere. You
can take that methane and generate electricity with it. That electricity has a
Renewable Energy Credit associated with it, because it was generated with a
renewable resource. But if you are just capturing that methane and not
letting it go to the atmosphere, that’s generating an offset. So you can
actually have an offset, you can have offset generation and renewable
energy credit generation from the same project.
Council Member Schmid: Okay, but cows in California might offset 1 percent
of our natural gas usage. Where are the other 99 percent of offsets?
Ms. Dailey: So you’re buying offsets from a specific project. Are you saying
there are not enough dairy farm projects in California? Yeah, so they’re
coming from other parts of the country. I mean, the biggest sources are
landfills, but also dairy projects in other parts of the country as well.
Council Member Schmid: So we are shifting our offset to somewhere else,
not to the central Sierras that are most important to us?
Ms. Dailey: Well, I mean, the atmosphere is the atmosphere I would argue,
and you know, we’re concerned about global warming, not necessarily Palo
Alto warming.
Council Member Schmid: There was some discussion earlier about landfill,
garbage being turned into through conversion technologies into gas. Is that
an offset?
Ms. Dailey: If a project is preventing methane from a landfill from going into
the atmosphere, that would generate an offset.
Mr. Cook: If it’s a new program.
Ms. Dailey: If it’s a new program and it’s not required by some existing
regulation.
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Council Member Schmid: Right, but stopping garbage going into landfill
would, of course, stop it for the next 50 years.
Ms. Dailey: There’s no protocol for that type of project developed yet.
Council Member Schmid: Why not?
Ms. Dailey: Um.
Council Member Schmid: There are such conversions going on. There is a big
debate in Sacramento about it, so why wouldn’t that be effective? We’re
dumping thousands of tons a year.
Ms. Dailey: Well, we’ve only proposed to use offsets from protocols that are
approved by the California Air Resources Board and…
Council Member Schmid: and so far it’s just cow farms.
Ms. Dailey: Sorry?
Council Member Schmid: So far it’s just cow farms?
Mr. Cook: No, it could be planting trees.
Ms. Dailey: Yeah, I think it’s in the Staff Report actually.
Chair Filseth: Forestry, livestock, landfill, coal mine methane, urban forestry,
ozone depleting projects and (inaudible) projects.
Ms. Dailey: Those are all the Comprehensive Air Resources Board (CARB)-
approved protocols right now.
Council Member Schmid: Yeah, I guess my point about those, that list, is
that list would not deal with California’s gas problem. It might deal with two
percent, three percent, but…
Ms. Dailey: That’s right, it’s Greenhouse Gas Prevention Protocols. Not
necessarily natural gas and they are different.
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Council Member Schmid: Los Angeles is working very hard to try to get
landfill gas conversion technologies and they feel it’s the only way they can
really get offsets.
Ms. Dailey: Let me put it another way, I mean, you as an individual could go
out and buy an offset for your airline travel, if you wanted to, to counteract
it. Or you could go out and buy offsets to counteract the gasoline that you
are burning in your car, assuming you don’t have an electric vehicle. So an
offset can be used to cover many different types of greenhouse gas
emissions. It’s not, as opposed to biogas, which is a physical commodity that
could be used in place of natural gas.
Council Member Schmid: I guess I thought landfill conversion into gas is a
biogas.
Ms. Dailey: It is, absolutely, so that’s the other product that we’re proposing
to use in this. So we’re proposing to use two things to get to carbon
neutrality. One is biogas and the other is offsets, and they are separate.
Council Member Schmid: I guess conversion of waste is not technically
biogas because it uses a broader set of inputs than biogas?
Ms. Dailey: Conversion of waste to methane is biogas, yes.
Council Member Schmid: Okay, I worked it out earlier, and it’s not included
on most biogas lists, and I think for that reason it has been difficult to get
approval in Sacramento for it. Let me ask another question…
Chair Filseth: Before you leave that one, I actually had a question on exactly
the same thing.
Council Member Schmid: Okay, good.
Chair Filseth: Would you mind? So, yeah, I was looking at your example of
offsets that pay to convert waste into methane and was used by a dairy
farmer in Wisconsin I think was one of the examples, right? That sounds like
biogas to me.
Ms. Dailey: There is also biogas that’s generated from the same project, so if
you’re preventing the methane from going into the air, that generates an
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offset. If you’re using the methane from the dairy farm, that’s biogas, if
you’re buying the molecules.
Chair Filseth: So why is the offset only worth 12 cents/therm, but the biogas
is $2/therm?
Ms. Dailey: You know, all these different environmental parks have different
markets that they’re being traded in, and biogas can be used for the Federal
Clean Fuels Program. You can’t use an offset for the Federal Clean Fuels
Program, and so that program is driving the (crosstalk).
Chair Filseth: So there’s a limited supply of biogas and it’s bid up by these
other programs? That’s not fair. Got it. I’m sorry, go ahead.
Council Member Schmid: On Packet Page 29, Figure 8.
Council Member Wolbach: Staff Report Page 15?
Council Member Schmid: Page 15 of the Report. You have the environmental
offsets very cheap at the moment. Things like infrastructure, water heating,
space heating, stoves, get more expensive, biogas very expensive. Then you
have compact vehicles pay for themselves. What do you mean by that?
Ms. Ratchye: What this is is the societal abatement cost for the carbon
equivalent ton, so what that’s basically saying if you bought, this is a Nissan
Leaf instead, I can’t remember what it is, a Civic…
Chair Filseth: A Honda Civic.
Ms. Ratchye: A Honda Civic, then it’s cheaper for society just to do that
alone, so if you say that it’s a negative cost divided by how many therms of
carbons you saved, it’s a negative amount. That’s how all the things on this
graph are done.
Chair Filseth:…your cost right, because you have a bunch of government
credits and so forth, right? Isn’t that what it says?
Ms. Ratchye: No, this is the societal one. We do have also the customer, the
participant cost.
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Council Member Schmid: So why don’t we spend our $3 million per year in
buying Nissan Leafs?
Ms. Ratchye: This is actually the electrification analysis that we did, and
Council has seen this. So, is your question, yeah, that’s like the most cost-
effective way to get carbon reductions.
Council Member Schmid: Yeah, as Chair pointed out, the role of the Finance
Committee is to try to find the best financial option. Are you saying that we
should be spending our $3 million per year to buy Nissan Leafs?
Ms. Ratchye: Well, it might be a better investment for society to make, but
the problem is, who is going to be making this expenditure is the gas rate
payers. So I don’t know if you had anything to add to that.
Council Member Schmid: I mean, you can spend it on Wisconsin cows or…
(crosstalk)
Ms. Ratchye: It becomes a Proposition (Prop) 26 issue.
Council Member Schmid: But you want to spend it on cows in Wisconsin, and
you say, “oh, that’s good”. I mean, why should we be spending it on cows in
Wisconsin instead of, say, replace the bike program with a Nissan Leaf
program? Put Nissan Leafs all over town bought by the City and drive
(crosstalk) save $183.
Ms. Dailey: Bought by the City would be fine.
Mr. Shikada: Is there a protocol for that?
Chair Filseth: He’s tugging on an interesting thread here. Go ahead.
Mr. Shikada: Jane, is there a protocol there for hybrid cars that would allow
us to do that?
Ms. Ratchye: It wouldn’t be an offset, not an offset. I mean the problem is
this program is to buy something for the entire portfolio for all gas rate
payers. And buying Nissan Leafs, there would be…
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Council Member Schmid: I don’t get what the difference is between a cow in
Wisconsin and a Nissan Leaf in Palo Alto.
Chair Filseth: She’s saying it’s a Prop 26 issue, is that right.
Ms. Ratchye: I mean, what this electrification analysis basically shows is
everyone should have a Nissan Leaf, absolutely shows that.
Council Member Schmid: I guess we’re looking at it from the point of view of
the City, how can the City take money from the rate payer and get the most
productive use out of it. And if you are going to have an opt-out program,
you want to be able to say, we are using this money effectively.
Ms. Ratchye: We’re not proposing an opt-out program.
Chair Filseth: UAC’s proposal was to make it mandatory, not opt out.
Mandatory for everybody, right.
Council Member Schmid: Well, even more so then, you have to convince
people if you’re taking $43 from every citizen of Palo Alto, that you are using
it in the most effective way.
Chair Filseth: He’s tugged on an interesting cord here, right, which is, Prop
26 says that we’re allowed to pass the cost of the gas onto the consumer.
We’re not allowed to just tax it and go off and use it to buy park space or
something like that, okay. But what if we spend it on something that reduces
co2 more efficiently than cows in Wisconsin? Is that legal under Prop 26?
Council Member Wolbach: There has to be a protocol. We need a (CARB)
Comprehensive Air Resources Board approved protocol for the offset. It will
have one for car sharing, for electric vehicles, which would be interesting,
but it will have one you just said, right?
Mr. Shikada: Or even like more broadly than the protocol itself is the
question of the legitimacy of the use of the funds, and is…
Mr. Perez: What is the benefit to the gas rate payer…
Council Member Schmid: Okay, let me go a step further then.
Chair Filseth: The benefit to the gas rate payer is less emissions, right?
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Council Member Schmid: People earlier said a more effective use of the
money would be to start dealing with heating in the homes, heating water,
warming homes, would that be (crosstalk)
Ms. Ratchye: That’s the same answer.
Council Member Schmid: But it’s not, you cannot justify it?
Ms. Ratchye: You can’t use all rate payer funds to benefit just particular
individuals who are going to do an electrification of their water heating or
space heating or whatever.
Chair Filseth: But the benefit to rate payers by this program you’re
proposing is that they produce less carbon dioxide when they cook their
Ramen, okay, it reduces carbon dioxide, and so if you have some other
program that reduces carbon dioxide even more when they cook that
Raimen, how is that not a benefit to rate payers? If the first one is a benefit
to rate payers?
Council Member Schmid: Let me pursue…
Ms. Ratchye: It’s a use of the funds. It’s basically a Prop 26 issue. It’s, when
you’re buying these offsets or biogas, that is something you’re doing for the
entire customer, all customers.
Council Member Schmid: Let me pursue then the other issue of opt in and
opt out. Wanting to leave the opt out in, and you get rid of 26.
Council Member Wolbach: Is that true?
Council Member Schmid: No one has to do it. It’s their own volition. So Prop
26 is not relevant, then you could spend it on the most effective thing for
Palo Alto.
Mr. Shikada: Again, the nature with the opt out or opt in is the
administrative costs, and effectively running a program that allowed that
choice.
Ms. Ratchye: I’m just trying to contemplate, I mean, we could do that. That
is an option to change the Palo Alto Green Gas opt in program to an opt out
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program. I’m trying to imagine a marketing campaign for it that says pay a
little bit more for somebody who might get (crosstalk).
Council Member Schmid: You would have to effectively convince the people,
which is exactly what you want to do. You don’t have to convince all of
them. You say convince 90 percent of them. And that’s what politics is, so
that’s what we should be doing.
Ms. Ratchye: And as you see, if you’re looking at this graph, the only thing
that’s cost effective is the Nissan Leaf, that’s it. Heat pump water heaters,
no,unless you value carbon at $59 a ton.
Chair Filseth: Well, you’re valuing it at $8 a ton here.
Ms. Ratchye: Offsets, that’s the cost of that.
Council Member Schmid: A question to the Chair, keep on finances?
Chair Filseth: Yes, we are still on, we are in the zone of is the City getting its
money’s worth.
Council Member Schmid: Okay, good. That’s the questions I had.
Chair Filseth: That was yours. Well, you took all the good ones. So I have a
couple of procedural questions and sort of my questions sort of come back in
sort of the some of the same zone, although not as clever as Greg. If we
proceed with this program, there is basically a 10 percent rate hike, right,
does all that go to the commodity price or is there an expansion of sort of,
it’s going to, you know we’re going to have to have… You know, the
administration of it is going to take some resources, and so forth, is some
going to go to overhead, or…
Ms. Dailey: No, that’s just the commodity price and we would just, I mean,
it’s just kind of the normal course of business. We could certainly buy biogas
from the contracts we already have in place for brown gas and have a one
time set up some enabling agreements for offsets, but it’s a very low
administrative cost program.
Chair Filseth: I assume what we’re talking about here is legal with respect to
Prop 26?
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Mr. Howzell: It is. And the appropriate use of gas rate payer funds.
Chair Filseth: So the sense of the program is that we said, okay, we think a
10 percent rate increase is a reasonable thing for Palo Alto residents, you
know, to move to a carbon neutral gas supply, okay? We think 10 percent is
about appropriate. Now, we could do it for less than that if we, because
we’re doing, basically we’re going to modulate the amount of biogas versus
the offsets we do right? We could do it for less than that if we use less
biogas and more offsets, or we could do it for more than that, if we said
we’re going to buy more biogas because we think biogas is a better thing
than offsets. But I assume there is a range of quality of offsets, right? I
mean, you pick, for example, one which is animal waste is going to be
converted into methane and it’s just going to be gone, as opposed to planted
trees, which is a good thing, but in 100 years the trees going to fall down,
the carbon is going to be released into the atmosphere again, right. So I
assume there is a range of quality of offsets. Is that an accurate
characterization?
Ms. Dailey: I don’t believe so. I mean, we have placed that onto CARB and if
the project meets the protocol that CARB has laid out, then it’s an offset. So
we’re not going to place, we’re not proposing the place some other layer of
verification or scrutiny above and beyond what CARB says is a verifiable real
offset.
Chair Filseth: Okay, I understand. So if I understand what you just said, it’s,
excuse me, as long as you stick to the CARB schedule, you’re at the highest
quality of offsets that there is?
Ms. Dailey: Right, and another reason for using CARB-certified protocols is
because all those offsets could be used to meet an Renewable Portfolio
Standard (RPS) compliance requirement, so in effect, by us purchasing them
for our gas portfolio voluntarily, we’re taking them off the market and
retiring them so that someone else can’t use them to pollute.
Chair Filseth: So I guess sort of the thing that I’m wondering about this is,
you know, assuming the offsets are real, I mean we said well we think
biogas is a higher quality thing than the offsets, why is that? I mean, Cory
sort of tugged on that one a little bit. Why is that? I mean, the both get rid
of carbon, right?
Ms. Dailey: Right. I mean I think we’d be naïve to say that there isn’t some
public perception that doesn’t quite… Biogas is a very physical, definable
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thing. The offsets you have to have a bit more faith in the verification
system and the CARB protocol, so again, it’s a little bit of an emotional
thing.
Chair Filseth: I mean, we’re paying a non-negligible price for that emotional
thing, right? So let me as the question a different way, the way I’d really like
to ask it. I mean given the immense difference in cost, okay, between biogas
and the offsets, you know, let’s say for the sake of argument, you went to
100 percent offsets and 0 percent biogas, okay, but you kept the 10 percent
rate increase, okay, and used the difference to buy a whole lot more offsets,
I mean, wouldn’t you go from carbon neutral to massively carbon negative.
It’s like ten times as many, or 20 times as many carbon offsets as you’re
buying biogas. I mean wouldn’t that be a better use of that investment? I
mean, did you guys talk about that at all?
Council Member Wolbach: Can I chime in on this?
Chair Filseth: Okay, if they’re done.
Mr. Cook: Yeah, let me just answer (crosstalk) The UAC did not consider
that. I think it’s an interesting thought exercise. That’s primarily why you
guys get paid the big bucks.
Chair Filseth: We’re just the bean counters on this side. Go ahead.
Council Member Wolbach: I think we heard from members of the public
some of the concerns around offsets are that they’re, some people interpret
offsets to be green washing. That perhaps CARB’s protocols aren’t as tight
as they could be. Actually that’s a quick question, do we know if CARB is
considering those criticisms, and considering updating their standards to be
more stringent around how they identify and measure offsets. I don’t know if
you’ve paid any attention to that. Maybe that’s a question we should ask
our…
Ms. Ratchye: I actually think they have the strictest there are. There are
protocols developed by different agencies and then CARB certifies those for
their own use and they only accept a fraction of what other people accept.
They, because they do it for compliance, so they’re pretty strict. I’d say
they’re the strictest.
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Council Member Wolbach: So if we did switch to more offsets and less
biogas, that might help make up for any under valuation that was raised by
members of Carbon Free Palo Alto.
Chair Filseth: Or leakage for example, etc.
Council Member Wolbach: And, I’m getting into comments. I’ll let you finish
your questions and I have a couple of comments.
Chair Filseth: I think we’re (crosstalk), so…
Council Member Wolbach: Well then, since I’ve stolen the mike, that’s a
really interesting idea of maybe just focusing on offsets rather than biogas
entirely and my hope is that, I think if we’re talking about, you know, a plan
not for just this year but setting up a process that will probably last a few
years, CARB standards may continue to improve to address the concerns
raised by members of Carbon Free Palo Alto that the offsets might not be as
substantial as they should be, but if we’ve set up a system in saying we’re
going to buy offsets and maybe offsets continue to improve, I think the
concept of offsets, well, that’s the question, right, is the whole concept of
offsets a joke, or is it just that the current system for evaluating them is not
stringent enough? I don’t know if we can ask members of the public who
spoke earlier on this.
Chair Filseth: Well, that’s sort of the rub, right, which is, do we believe in
offsets or not. If you believe in offsets, why are we not looking. If we don’t
believe in offsets, why are we doing this, right?
Council Member Wolbach: Chair, may I, may we?
Chair Filseth: Yeah, you can ask them.
Council Member Wolbach: Let me ask either or both members of Carbon
Free Palo Alto who spoke earlier who were critical of offsets, if you would like
to come to mike and weigh in on this question. Is it impossible that offsets
could be improved in the future through more stringent regulation?
Mr. Hodge: I think that the earlier comments that were made about CARB
and the quality of the offsets is spot on. I think they are probably the
highest offsets that are available, and because CARB has defined those
offsets to be the equivalent of buying allowances so they are for compliance
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purposes. So I don’t, I wouldn’t expect that the quality of the offsets to
somehow get measurably better over time.
Council Member Wolbach: So why is it still considered green washing in your
view then?
Mr. Hodge: It’s considered green washing, we would consider it green
washing because it’s not something which is scaleable. In other words, it’s
something that you can buy, there’s a limited quantity of offsets that are out
there. Certainly Palo Alto could go off and buy these offsets, right, and it
would solve Palo Alto’s problem, but clearly everybody cannot do that, and
so one of the things that we have concentrated on as our group is to focus
on innovative solutions that Palo Alto can deploy and serve as a leader for
the region and state.
Council Member Wolbach: While we’ve got you up there, one other question,
which is people who spoke after you during the public comment period on
this topic expressed their view that this proposal and your ideas are not
incompatible. I would be curious if you would have any further explanation
about why you think this current proposal and your proposals are not
compatible.
Mr. Hodge: I guess one of the things we’re concerned about is this lost
revenue. So that’s the $3 million a year we’re estimated leaving the
community where imagine that $3 million spent on our infrastructure
instead. Buying the offsets does absolutely nothing for our community
except it’s sort of a feel good thing, but it doesn’t really address the issue
that we have directly.
Council Member Wolbach: Did your proposal have a mechanism by which
that same $3 million would be turned around in our own community?
Mr. Hodge: We believe that we have a mechanism that’s too complicated to
describe now, but there are financing mechanisms that are out there that we
believe where the cost actually can be in the same range of costs. In other
words, for the amount of money that we would be spending on offsets, we
believe for instance, that you can have electrification efforts for about the
same price, depending on the driving factors.
Chair Filseth: Although then you may run afoul of Prop 26?
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Mr. Howzell: …gas rate payer funds for those efforts, yes, a Prop 26 issue.
And also we need to just be careful to say…
Chair Filseth: We’re getting close to the edges we understand.
Mr. Howzell: Yes, we may be on the edge.
Chair Filseth: So we’re getting close to the edge, we may be on the edge.
Mr. Anderson: Okay, at a simplistic level, we had the idea of a utility fee, a
utility use fee. There’s already one there for gas. You could replace that, you
could put another one on, but that would be used to basically finance or fund
programmatic improvement in the utility to allow your rate payers options to
reduce their gas use through electrification and efficiency, so if you funded it
at the same level as the offset proposal, then you could get some real work
done in terms of getting those options out on the bill for customers. So you
allow them choice to reduce their gas use through electrification, which
allows them to benefit from that investment as a gas user. Just one
additional point on the quality of offsets, so offsets by nature are difficult to
measure. It’s just the nature of the beast. You can put as many, as heavy a
qualification and activity and protocol in place, but you can’t get away from
the fact that they have to be additive. The project that they promise
happens, would not happen otherwise but for your purse with that offset.
They have to be measurable also. Those things are just difficult to do. They
will never be surety around that and there’s always ways to cut corners and
you have five years later saying, well, is it still in place, are they still
monitoring it. So it’s just a hard thing to kind of keep your arms around and
it’s prone to problems. So that’s one of the difficulties in just, that’s why
they’re suspect in terms of…
Chair Filseth: How are we going to manage that, who is going to be… Oh, I
see, if we just use CARB, CARB manages it we don’t have to worry about it.
Mr. Anderson: Yeah, so CARB’s are reliable. There are third parties. There
are watchdogs. We just trust them.
Council Member Wolbach: But you guys are saying don’t trust them.
Mr. Anderson: Well, we’re saying just the principal of offsets doesn’t work in
terms of we’re trying to reduce gas use, not compensate and export that
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problem outside our community with something that is, by nature,
suspicious.
Chair Filseth: Well, I mean if offsets don’t work then we shouldn’t do this.
And if they do work, then we’re sort of, what’s the right mix of biogas versus
offsets, right, you know, because you could go negative, you could
compensate for, you know, losses, transmission losses and stuff like that. So
what’s the right, I mean, that’s what we’re grappling with, right? Mr. Cook.
Mr. Cook: Yeah. I just thought what Bret said last was the most important
thing, and that’s what I wanted to say when I raised my hand earlier. It’s
just that what we want to do is not generate greenhouse gases, right, and
by burning gas we generate greenhouse gases, so where Carbon Free Palo
Alto is going and where I’d love to see this City go ultimately through the
mechanism of this policy, you know they’re saying don’t do this policy, do
something else and I totally respect that. But we all agree on the core
problem with the offsets is just that you’re, you still are generating the
greenhouse gases. Now you’re offsetting that by reducing greenhouse gas
emissions somewhere else, whether it’s Wisconsin or wherever, it doesn’t
matter in the way that it’s the globe, it’s our planet. But is there, should the
money be spent and the effort be spent locally to reduce the initial
greenhouse gas emission by reducing the use of gas to do the things that we
want to do every day, so can you cut straight to that, and I guess what I’m
saying is and I think what the UAC is saying, and I think what, you know,
what Sandra and Lisa are saying is, hey, let’s do this as an interim step, as a
transitional step to ultimately get to where we’re reducing our greenhouse
gas emissions, not an offset.
Chair Filseth: Can I, I don’t think there’s disagreement on that here.
Mr. Cook: So the question is with policy. How do you get to that point, and
we’re just saying this is the transition to that.
Chair Filseth: But we’re not, that’s not agendized for tonight so we can’t…
Council Member Wolbach: I hate to be asking so many questions, because
we, I mean we’re almost 2 hours in, but there was some discussion about
the possibility of local offsets, and that does sound like keeping the money
locally or making the investment locally to some certainty, to some degree.
Can we get any more color on that concept?
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Ms. Ratchye: Any urban forestry project is absolutely welcome to go meet
the protocol and get that done and we would then be able to buy those
offsets, but it has to be verifiable. You know, it has to be those same high
quality, and if the local project can actually achieve that, that would be
awesome.
Council Member Wolbach: So when we move to a Motion, I’m not sure if it
was already in the recommendation from the UAC to prioritize identifying
local offset opportunities, if they’re available, and if we move this forward to
the Council, maybe that’s something that we could tag on to say that as
we’re looking for offsets, it’s, what’s that?
Ms. Ratchye: At a premium price?
Council Member Wolbach: Maybe at a premium or...
Chair Filseth: It can’t be as big a premium as biogas.
Mr. Hodge: Your trees, your urban forestry is not going to offset the total
emissions from the canopy.
Council Member Wolbach: I would not expect any one item would be, would
solve the problem, but to the degree that it’s an option, maybe that’s
something we would include in directing the Staff to present an option or
two to the full Council when it comes to Council.
Chair Filseth: I think the point here is that there’s probably going to be a
limited capacity, right, it’s a nice thing to do so I’m not arguing against it.
It’s probably going to be limited.
Council Member Schmid: Let me state one possibility. Palo Alto dumps tens
of thousands tons of garbage each year in landfill, which produces methane
gas for 50 years. If there is a conversion technology that translated that into
gas, biogas.
Chair Filseth: You’d like the anaerobic digester or something.
Council Member Schmid: No, conversion technology (inaudible). That would
directly deal with two Palo Alto problems, the need for an offset and what we
do to stop the creation of future methane gas. That’s a double win.
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Chair Filseth: Let me pause for a second and ask our colleague from the
Legal Department. Presumably we’re going to do a Motion at some point,
somebody brought it up, right, and the Motion is going to have to do with
the Staff recommendation and the UAC recommendation adopting the
Carbon Neutral Gas Plan. What does it mean for the Finance Committee to
approve it, right? This is a policy issue that goes far beyond the purview of
Finance, so I mean, let’s say we adopt the Staff recommendation
unanimous. The Council is going to go debate this again, right, and much
more broadly, so it doesn’t go on the consent calendar or something like
that, right?
Mr. Howzell: It could, but there would be a further discussion as to whether
it is appropriate to have it on the consent calendar and based on your
comments suggesting that it really should be something that the Council
would want to necessarily discuss and they will do what they will, what the
recommendation, you know, a unanimous recommendation and interpret it
as they will. But you raise an interesting issue.
Chair Filseth: Well, to me, I’m not comfortable having this Committee sign
off on the whole program. I think it’s beyond our scope, right, to do that. I
think the whole Council should look on it before we just enact it into law,
right.
Mr. Howzell: Well, we have to. (crosstalk) We legally can’t.
Council Member Wolbach: That’s the Staff recommendation?
Chair Filseth: I think in that context, so what is a Motion from us going to
look like? It’s going to look like we adopt this, we vote in favor of the Staff
Motion, but we have these three comments, or what does it look like?
Council Member Wolbach: Can I give it a try?
Mr. Howzell: You could do it that way, or you could inform the full Council of
what the nature of the discussion was. The limits on what your
recommendation is.
Chair Filseth: Okay, right.
Mr. Perez: Let me see if I can add. You have, not necessarily this
Committee, but the Finance Committee have added a condition that it be an
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Action Item. You know. So it could be heard and discussed by the full
Council.
Council Member Schmid: I guess another option is we could ask either the
UAC or Staff to come back with some amendments. (Inaudible) so we don’t
have to send it directly to Council without some adaptation.
Chair Filseth: We could.
Council Member Wolbach: I’ll try my hand at a Motion. I’m just looking at
the time. So I’ll move the Staff recommendation with a couple of minor
changes. Do you need me to read the Staff recommendation or… Okay, so
the changes would be to provide an option for Council to consider to
prioritize locally generated offsets or local offsets. That would be the first
change. And the second one would be to prioritize offsets over biogas.
Chair Filseth: I would second that, but I guess I’d be more comfortable with
language on the second piece. It doesn’t specifically say, well I guess the
Council could, maybe it works. The same discussion, prioritize offsets over
biogas, but I’d like to see a discussion of the relationship between biogas,
offsets and emissions. Because of it’s cost, and I’d like to see, if we’re going
to spend rate payer money on reducing carbon, I’d like to see us reduce
carbon as much as we possibly can, and I think that’s kind of the discussion,
I’d like to hear a little more discussion on that, between UAC and Council.
Council Member Wolbach: What if we, instead of saying prioritize offsets
over biogas, say prioritize maximum carbon reduction within the 10 percent,
I’m sorry, within the 10 cent/therm rate impact cap? And that allows
flexibility.
Chair Filseth: Are you okay with that?
Council Member Wolbach: Well, I’ll speak to that if I have a second.
Chair Filseth: So you can speak to it and I’d like to hear the response from
the UAC and the…
Council Member Wolbach: Do I have a second?
Chair Filseth: Sure, I second it.
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MOTION: Council Member Wolbach moved, seconded by Chair Filseth to
recommend the City Council:
A. Adopt a Resolution that:
i. Approves the Carbon Neutral Gas Plan, enabling the City to
achieve a carbon-neutral gas supply portfolio starting in Fiscal
Year (FY) 2018 with a rate impact not to exceed ten cents per
therm (10 ¢/therm); and
ii. Terminates the PaloAltoGreen Gas program established by
Resolution 9405; and
B. Direct Staff to develop an implementation plan for the Carbon Neutral
Gas Plan; and
C. Direct Staff to provide an option for Council to consider prioritizing
local offsets; and
D. Direct Staff to prioritize maximizing carbon reduction within the 10
cents per therm (10 ¢/therm) rate impact cap.
Council Member Wolbach: So that would allow the flexibility by the Utilities
Department within the program to go with biogas or with offsets,
understanding that their priority would be maximum carbon reduction and
again, it also gives to Council the option to promote local offsets.
Chair Filseth: I see a frown over here. So you’re worried about Prop 26?
Ms. Dailey: No, let me take those in two different chunks. The first one was
prioritizing local projects. I mean, we do have a preference for California
projects in here, which could be modified to local. We’ve never put a price
on that. So we’ve never said we’d be willing to spend X more on a local
California project. So we just put that out there that it’s an undefined thing
now and under your amendment it still stays undefined. As far as prioritizing
offsets, to me that just changes the recommendation to use offsets and it
changes it to spend 10 cents/therm and buy as many offsets as you can with
that, no matter, without tying it to the gas burned.
Chair Filseth: The territory you’ll get into is, well, actually if we did it all with
offsets, it would only take a five percent rate increase.
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Ms. Dailey: Well, that’s right and it’s in your Staff report already, so you
have that information.
Chair Filseth: But you come back and said if you spend 10 cents (crosstalk)
Then we have Prop 26 issues, right? You’re offsetting more carbon than
you’re actually producing, right? But you also get into the issue of the value
of biogas versus offsets, right, and I think you need to grapple with that.
Council Member Wolbach: Can we ask the City Clerk to read back the
Motion, just to make sure it was captured.
Jessica Brettle, Assistant City Clerk: Sure. Would you like me to read the full
Staff recommendation as well?
Chair Filseth: I think so, yeah.
Ms. Brettle: I have a Motion by Council Member Wolbach, seconded by Chair
Filseth to recommend the City Council adopt a Resolution that: A, approves
the carbon neutral gas plan, enabling the City to achieve a carbon neutral
gas supply portfolio starting in Fiscal Year 2018 with a rate impact not to
exceed 10 cents/therm; B, terminates the Palo Alto Green Gas Program as
established by Resolution 9405; C, to direct Staff to develop an
implementation plan for the carbon neutral gas plan; D, to also provide an
option for Council to consider prioritizing local offsets. And I think D, to
prioritize maximizing carbon reduction within the 10 cents/therm rate impact
cap.
Council Member Wolbach: Right, so it’s not specifically saying prioritize
offsets over biogas. It’s saying whatever Staff is deciding, you know, within
this, because this program does allow flexibility already, it was intended to
and that was one of the benefits we heard by UAC and analyzed it. This
would just provide a little bit more encouragement to Staff to really say, as
you’re working within that flexibility, rather than the emotional bias towards
biogas, our emotional bias is towards maximum co2 reduction, however you
do it.
Chair Filseth: Right. Let me try another slice, another view on it. I’m
(crosstalk)
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Ms. Dailey: I’m just wondering what is it that we’re, that we’ll be looking at?
What are the products. There’s biogas, there’s offsets. What other things are
you thinking of that are going to reduce…
Council Member Wolbach: I’m just saying, when deciding what mix, rather
than stipulating fove percent and 95 percent, it’s saying you can stay flexible
on the percentages, depending on Staff’s interpretation or, you know, if
biogas improves, if something changes in the marketplace, if something
changes in technology.
Chair Filseth: …high quality offsets to buy.
Ms. Dailey: If there’s no, I mean the way it’s structured now is to include as
much biogas as possible, staying within the 10-cent rate cap. If it’s
structured the opposite way, we will not buy any biogas, period. I think if
that’s what you’re leaning toward, then it’s a different plan that just says
use offsets.
Chair Filseth: We didn’t understand why there was a bias in favor of biogas
versus offsets. That’s one of the things I think all of came to understand
here tonight, because we were all asking questions about it.
Ms. Dailey: Yeah, and I think, you know, again, over, the main discussions
we’ve had at the UAC and some discussions at Council around the Climate
Action Plan, there’s never been a policy against offsets, but there has been a
feeling about the preference for physical commodity, and so the plan that we
developed was kind of the minimum rate impact you could possibly have and
have any biogas in the portfolio at all.
Chair Filseth: I understand, and that’s part of the reason I like this Motion,
okay, as is. Because we’re not telling, and as I read this Motion, we’re not
telling you to go with offsets and forget about biogas. What we’re saying is,
prioritize CO2 reduction, okay, and if you can translate that feeling into tons
of carbon dioxide, then go for it. But if it’s just a feeling and we really don’t
know, please wait rate payer money and CO2 reduction and go for the max
CO2 reduction, do the 10 percent, you know, take care of Menlo Park
carbon, that’s fine. But prioritize that, because look at it this way, you’re
going to like this, right. You know, look at this Wisconsin example. The
question we asked Greg and I sort of scrummed on earlier, right, said, well
you converted waste into methane and then you’re taking the gas and
making electricity out of it and if you buy the offset, it’s 10 cents/therm and
if you buy the gas it’s two bucks a therm, why is that? Well it’s because
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other people are bidding on the gas. Well, I don’t think rate payers in Palo
Alto, I mean the value here is the offset, right, at least to this program, so it
doesn’t make sense to charge Palo Alto rate payers for these two other guys
bidding against, bidding up the price of the gas, if that makes sense.
Ms. Dailey: Let me try it another way. Would it be, if we could, as we said
somewhere in the Staff Report, cover the entire gas portfolio with offsets,
with a rate impact of two cents, would you rather be there or would you
rather spend 10 cents and do something beyond that?
Chair Filseth: Excellent question. I think that’s a good question for the
Council, not the Finance Committee.
Council Member Wolbach: So the Motion on the table is to spend up to the
10 cents and get as much CO2 reduction as you can within that 10 cent
impact, 10 cents/therm.
Ms. Dailey: Actually, the proposal is to spend 10 cents and to incorporate as
much biogas in that as you can.
Council Member Wolbach: Right and what we’re saying is spend the 10
cents.
Chair Filseth: Spend up to 10 cents.
Council Member Wolbach: And get as much CO2.
Chair Filseth: I’ll take it the way he’s doing it.
Council Member Wolbach: It’s to spend (crosstalk) and get as much CO2
reduction as you can, rather than saying buy as much biogas as you can.
Ms. Ratchye: That’s getting 200 percent of the production.
Council Member Schmid: Let me suggest an alternative.
Chair Filseth: But you’re going to have some flexibility here. You’re going to
have losses in our transmission system. You’re going to have losses in the
nationwide transmission system.
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Ms. Dailey: Right, I hear you.
Council Member Schmid: Can I make a suggestion.
Chair Filseth: Okay, go ahead.
Council Member Schmid: The pressure is to do it by Fiscal Year ’18, 100
percent carbon neutral. It seems to me we’re talking about two different
things. You know, get that done, meaning offsets, or work toward a program
that will achieve that with local offsets, and local offsets could involve things
like infrastructure changes and conversion technology, so that says spend
the 10 cents/therm, but let’s use the money to have a plan, a strategic plan,
to get us somewhere three, four or five years.
Chair Filseth: Yeah, give the difference to those guys. Figure out some way
to do that.
Council Member Wolbach: Was that an Amendment, or is that, are you
suggesting that’s still plausible within the Motion as it’s currently drafted.
(crosstalk)
Council Member Schmid: I think we’d have to change A to read, enable the
City to work towards a carbon neutral gas portfolio with the rate impact, and
to add the local offsets, things like conversion technology and infrastructure.
Council Member Wolbach: We already have that in the Motion.
Council Member Schmid: Do we have those words?
Jessica Brettle, Assistant City Clerk: Do you want me to read it again?
Council Member Wolbach: Could you read just the things that we added.
Ms. Brettle: The two things you added were to provide an option for Council
to consider prioritizing local offsets and to prioritize maximizing carbon
reduction within the 10 cents/therm rate impact cap.
Council Member Schmid: Yeah, such as, I want to add after that local, such
as infrastructure and conversion technology.
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Council Member Wolbach: I would actually not accept that Amendment. I
don’t think it’s necessary. I think it’s redundant, or I think it’s getting too
specific.
Chair Filseth: Wait a second. Can you repeat the second addition again.
Ms. Brettle: Sure. The second addition said, to prioritize maximizing carbon
reduction within the 10 cents/therm rate impact cap.
Chair Filseth: Right.
Ms. Brettle: And Council Member Schmid added a friendly amendment, such
as, or an amendment, “such as infrastructure and conversion technology”.
Council Member Schmid: That would be under C.
Chair Filseth: What you’d really say is, potentially include infrastructure and
conversion technology.
AMENDMENT: Council Member Schmid moved, seconded by Counci Member
XXX to add to Motion Part C “such as infrastructure and conversion
technology.”
Chair Filseth: But does that take us outside the place where we’re not
allowed to go tonight? I don’t know.
Mr. Howzell: I think at this point I think you’re fine and obviously the caveat
on everything that you’re talking about is that we will also work within the
constitutional limitations of Prop 26 regarding the use of rate payer funds,
won’t go beyond the cost of service parameters.
Chair Filseth: So I don’t have a problem with it the maker of the Motion has
a problem.
Council Member Wolbach: Yeah, I’d prefer, I don’t think it’s necessary and
again, you know, looking at the alternatives that are in the Staff Report on
Page 16, I think that the tweaks we’ve made to the Motion reasonably fall
within that range of alternatives. I think that goes a little bit further and I
think that gets more towards other initiatives that should be agendized
separately. I don’t see how it would be accommodated into this effort.
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Chair Filseth: We’re staring into space. You want to get the idea in front of
Council on the Agenda that some of it could go to future mechanisms to
reduce carbon?
Council Member Schmid: Yes, we could start working on things, won’t deliver
them in 2017, but would work to have a long-term global impact.
Mr. Howzell: And I would suggest that that is outside of what we are, the
scope of what we are agendized for this particular meeting.
Chair Filseth: I think you’re probably right.
Council Member Wolbach: And that’s why I didn’t accept it, even though I
think it’s an interesting idea.
Chair Filseth: Okay, your Amendment is not accepted, your friendly
Amendment is not accepted. You can offer it as an unfriendly one.
AMENDMENT FAILED DUE TO THE LACK OF A SECOND
Chair Filseth: Once the City Attorney weighs in (crosstalk). Okay, so we
have a Motion.
Council Member Wolbach: Should we add also that we wanted to come on as
Action rather than consent?
Chair Filseth: Yeah, I think it should go on Action.
Ms. Brettle: I’ll add that on there.
Chair Filseth: Okay, I’m satisfied. All in favor? All opposed.
MOTION PASSED: 2-1 Schmid no, Holman absent
Chair Filseth: Okay, Motion carries with Council Members Filseth and
Wolbach in favor, Council Member Schmid opposed and Council Member
Holman not present. Thank you guys very much. We like it.
Council Member Schmid: Yeah, very important.
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Chair Filseth: Yeah, go look at the tradeoff between offsets and so forth.
ADJOURNMENT: The meeting was adjourned at 9:27 P.M.