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HomeMy WebLinkAboutStaff Report 3950 City of Palo Alto (ID # 3950) City Council Staff Report Report Type: Consent Calendar Meeting Date: 8/5/2013 City of Palo Alto Page 1 Summary Title: Utilities Strategic Plan Modifications Title: Utilities Advisory Commission Recommendation that Council Approve Changes to the Performance Measures and Strategic Initiatives in the 2011 Utilities Strategic Plan From: City Manager Lead Department: Utilities Recommendation Staff and the Utilities Advisory Commission recommend that Council approve changes to the Performance Measures and Strategic Initiatives in the 2011 Utilities Strategic Plan as summarized below (see Attachment A for the complete plan showing the proposed changes). Executive Summary This is the third semi-annual update of the Council-approved Utilities Strategic Plan for the six month period covering July through December 2012. In addition to the six-month update, modifications to the plan are proposed at this time. Based on two years of experience managing with the Strategic Plan, Utilities proposes changes to some of the performance measures and strategic initiatives. In addition, many of the strategic initiatives have been completed and, therefore, are proposed to be removed from the plan. See Attachment C for a complete list of the strategic initiatives and the status of each as of December 2012. The Utilities Strategic Plan uses a Balanced Scorecard concept with four main perspectives— Customer and Community, People and Technology, Internal Business Processes, and Financial— with strategic objectives identified for each. To translate these objectives into plans for action, performance measures were identified for each strategic objective. The Balanced Scorecard Performance Measures Summary (Attachment B) provides a more detailed description of the objectives and performance measures within each of the Four Perspectives. It should be noted that the Four Perspectives are presented in no particular order; they are not arranged in order City of Palo Alto Page 2 of importance and no single item is weighted more heavily than another. Figure 1 summarizes the status of the performance measures for each perspective. Figure 1 Balanced Scorecard Progress Toward Specific Targets (July - December 2012) Performance Measure Status Performance Measure Status System Interruptions Met Interruption Duration Met Service Restoration Not yet met Leak Response Time Met Satisfaction Not yet met Gas Incident Rate Met Competitive Bill Met Gas Safety Awareness To be measured Rate Change Met Infrastructure Backlog To be measured PaloAltoGreen Participation Met Call Wait Time Not yet met Billing Adjustments To be measured Emergency Notification Met Performance Measure Status Program Participant Satisfaction Met Employee Satisfaction Met Competitive Commodity Bids Not yet met Certification & Training Met Unaccounted Gas & Water To be measured IT Service Needs Not yet met Full Value from Redwood Gas Met New Technology Evaluation Met Electric Portfolio Carbon Intensity To be measured Electric Efficiency Achievement To be measured Performance Measure Status High Credit Ratings Met Maintain Reserves Met Fixed Charges Recovered Not yet Met Returns to Community Met Internal Business Process PerspectiveCustomer & Community Perspective Financial Perspective People & Technology Perspective Background On July 18, 2011, the Council approved the 2011 Utilities Strategic Plan (Staff Report #1880). In implementing the Utilities Strategic Plan, staff regularly reviews the performance measures and strategic initiatives and recommends any appropriate updates on an annual basis. In addition, on a semi-annual basis, staff reports progress on implementing the plan to the UAC and Council. This is the third of those semi-annual reports and the first one which requests changes to the performance measures and strategic initiatives. The Balanced Scorecard tracking methodology was chosen to assist in performance measurement and to promote a better understanding of the City of Palo Alto Utilities’ (CPAU’s) strategic business processes. These updates help keep staff on track, but not all measures may have progress to be reported semi-annually either because updated data is not yet available or because the data is more meaningful as an annual measurement. The performance scorecard will evolve over time and respond to changes in the business climate, with potential new measures added and others modified or completely removed. Utilities managers meet on a City of Palo Alto Page 3 regular basis to review the overall Utilities Strategic Plan and evaluate the strategic objectives, performance measures, and targets, and strategic initiatives. From time to time, management will recommend changes to keep the Utilities Strategic Plan aligned with changing environments and priorities. Proposed Changes to 2011 Utilities Strategic Plan Strategic Initiatives Changes:  Under the Customer and Community Perspective: o C2 – Remove “By the end of 2011,” since customer feedback and surveys are an ongoing process. o C3 – Replace “Reassess the design and delivery of the Utilities bill to improve understandability and implement the changes by 2012.” with “Improve the electronic bill presentment, payment functionality, and enhance the utility’s mobile app capabilities.” o C3 – Since it is complete, remove this initiative: “Reassess the gas portfolio laddering purchasing strategy.” o C4 – Replace “June 2012” with “January 2014”.  Under the Internal Business Processes Perspective o BP1 – Remove “by the end of 2011”. o BP5 – Since it is complete, remove this initiative: “Prepare a Utilities Communications Plan by June 2011 that incorporates increased use of neighborhood and business organizations and schools to disseminate program and educational information.” o BP8 – Since it is complete, remove this initiative: “Actively participate in Citywide efforts to improve the procurement process.” o BP9 – Remove “Evaluate and implement opportunities to maximize the value of the Calaveras project in the new electric market framework.” o BP10 – Since it is complete, remove this initiative: “Develop a program to ensure that the strategic plan is pursued and that objectives and initiatives are managed.” City of Palo Alto Page 4 o BP12 – Since it is complete, remove this initiative: “By June 2011, develop implementation plans to achieve the long-term water and energy efficiency goals and implement programs as outlined in the implementation plans.”  Under the People and Technology Perspective o PT1 – Since it is complete, remove this initiative: “Implement an annual survey to determine employee satisfaction levels and establish the baseline satisfaction level for 2011.” o PT4 – Since it is complete, remove this initiative: “Develop a process to evaluate and implement new technology through targeted programs and consider creating a fund for innovative projects and pilots.”  Under the Financial Perspective: o F2 – Since it is complete, replace this initiative—“Re-evaluate the need for and purpose of the Calaveras (stranded cost) Reserve by the end of 2011.”—with a new initiative: “Develop a comprehensive Utilities financial policy by January 2014 to provide direction for future cost of service studies and rate-setting priorities.” Performance Measure Changes:  C2 – Add “Residential and commercial surveys alternate every other year  BP1.2 – Replace “Response time to water and wastewater leaks” with “Response time to all emergency calls”  BP2.1 – Replace “Less than industry (APPA, APGA, AWWA) average with a goal of 0” with “Zero reportable incidents”  BP5 – Replace “Less than 90 minutes” with “Less than 60 minutes”  BP7 – Add “bids for electric power”  BP12 – Strike word “electric”  PT3 – Add “based on Utilities-specific IT strategic plan.” Discussion Four key perspectives are used in the Strategic Plan:  Customer and Community  People and Technology  Finance  Internal Business Processes City of Palo Alto Page 5 Each of the perspectives represents a specific viewpoint and ensures business activities are aligned to the Strategic Plan. The Customer and Community Perspective represents customer satisfaction and delivery of services to stakeholders. People and Technology includes employee training and development as well as keeping pace with technological advancements in the utilities industry. The Finance Perspective focuses on having a strong financial base and delivering cost-effective services. The Internal Business Processes Perspective covers operational goals and outlines the key processes necessary to deliver services to customers. Within the four perspectives, the Utilities Strategic Plan contains 17 strategic initiatives (Attachment C) which are key programs or projects required to achieve one or more objectives and the overall strategic plan. Strategic initiatives aim to significantly change the way we do business, require significant resources to complete, and have a defined timeline. What follows is a summary of performance under each of the four perspectives. CUSTOMER AND COMMUNITY PERSPECTIVE Four categories are measured from this perspective, namely service reliability, customer satisfaction with CPAU’s responsiveness, competitive bills compared to neighboring communities and care for the environment. CPAU thus far has achieved 4 of 6 performance measures in these categories. Performance Measures Service reliability performance measure targets:  an average number of 3 or fewer interruptions per customer per year  an average restoration time after an outage of 90 minutes or less The number of electric system interruptions per average customer of 0.21 is well below the national average of less than three interruptions due to the strength and continuous improvement of the Electric infrastructure. However, the average time to restore service was 108 minutes. CPAU did not meet the national average of less than 90 minutes due to lack of staffing resources and insufficient number of staff experienced in underground system outages. Of the 20 positions assigned to the overhead and underground electric construction crews, we currently have eight vacancies due to challenges in recruiting Lineperson Cable Splicer positions. CPAU is working with Human Resources by posting the positions on external websites and joining workforce consortiums to collaborate on recruiting and retention ideas with other agencies. City of Palo Alto Page 6 Customer satisfaction performance measure target:  to be rated 85% or higher in overall customer satisfaction This target is currently evaluated using a statewide customer satisfaction survey coordinated by the California Municipal Utilities Association (CMUA). Residential customers are surveyed in odd fiscal years (FYs) and businesses are surveyed in even FYs. The surveys compare customer satisfaction measures for customers of municipal utilities in California and of customers of investor-owned utilities (IOUs). CPAU came close to meeting its target of 85% or above, with an overall customer residential satisfaction score of 83% in FY 2013, compared to 65% in FY 2011. During a difficult economic environment CPAU is doing substantially better than many municipal utilities. Customer paying a reasonable bill performance measure targets:  bill is less than the average bills in neighboring communities  rate increases are less than 10% (electric, gas, wastewater) and 20% (water) CPAU met the “reasonable bill” performance target, with the total average residential bill for electric, gas, water and wastewater services in Palo Alto being $173.50, just under the average bill of $175.53 in neighboring jurisdictions (i.e. Menlo Park, Mountain View, Santa Clara and Redwood City). CPAU also met the performance measure of a “less than 10%” rate increase for electric, gas, and wastewater and a “less than 20%” rate increase for water. In FY 2013, CPAU changed its gas rate structure due to a change in gas purchasing strategy from laddering to market based pricing, which reduced residential gas rates significantly due to low market price conditions. Electric rates were not changed. There was a 5% rate increase in wastewater collection services, and water rates increased approximately 15% due primarily to the increased cost of water from the San Francisco Public Utilities Commission (SFPUC) and lower customer water usage. Generally, water rates are higher in Palo Alto due to the fact that CPAU has been making more safety and capital improvement investments in our local water distribution systems and because of the 100% reliance on SFPUC deliveries. CPAU is developing a comprehensive Utilities financial policy which includes rate-setting priorities that could lead to changes in the performance measure on rate increases. PaloAltoGreen performance measure target:  top-ranked nationally in terms of customer participation City of Palo Alto Page 7 For the strategic objective of demonstrating environmental responsibility, CPAU is continuously looking to add sustainable resources to the energy supply portfolios while offering a large portfolio of efficiency programs. The performance measure for this objective is participation in the PaloAltoGreen program, which continues to be recognized as one of the top utility green programs with the highest percentage of customer participation in the nation. Strategic Initiatives Under the Customer and Community Perspective, the Utilities Strategic Plan identified four strategic initiatives. The following provides the status of these initiatives. Two initiatives are ongoing  To establish more mechanisms for eliciting feedback from customers. Due to staffing and resource limitations, CPAU does not anticipate fully implementing mechanisms for immediate feedback for all customer interactions until 2014. In the meantime, we have received positive customer feedback from energy efficiency and water conservation workshops and the backflow prevention device program. CPAU is also redesigning the “My Utilities Account” web portal and “MyCPAU Mobile App” to make it easier for users to give us feedback online.  To redesign the PaloAltoGreen program. The redesign of the PaloAltoGreen program is being done in the context of the plan to achieve a carbon neutral electric supply portfolio. That plan was approved by Council in June 2013 with the redesign of the PaloAltoGreen program to occur by December 2013. One initiative is proposed to be cancelled and replaced:  To reassess the design of the Utilities bill to improve its understandability. This project has been cancelled due to Council’s concerns about the high cost to develop and implement bill design changes. However, incremental changes are being made as needed for individual services including Electric Time-of-Use. CPAU proposed to replace the bill redesign with improving the electronic bill presentment, payment functionality, and enhancing the utility’s mobile app capabilities. To that end, a new strategic initiative is proposed: “Improve the electronic bill presentment, payment functionality, and enhance the utility’s mobile application capabilities.” City of Palo Alto Page 8 One initiative has been partially completed:  To reassess the gas portfolio laddering purchasing strategy and develop a rate change performance measure for gas service. This initiative to reassess the gas laddering purchasing strategy is complete. The gas purchasing strategy was changed to market base pricing effective July 1, 2012. Development of a gas rate change performance measure will be a part of the new Rates Policy, which is being developed. PEOPLE AND TECHNOLOGY PERSPECTIVE CPAU is measuring the attraction and retention of employees, training and development, and implementation and evaluation of technologies. So far, CPAU has reached 3 of 4 performance measures in these categories. Performance Measures Employee attraction and retention performance measure target:  Improvement from 2011 baseline employee satisfaction survey CPAU conducted an employee satisfaction survey in October 2011, generating 135 responses, a 55% participation rate. The survey consisted of ten brief questions addressing career growth, training, recognition, respect, and stress at work. Overall, approximately 63% of CPAU employees were either “very satisfied” or “satisfied” with the work they do at the City. In the second survey conducted in 2012, participation rate dropped from 55% to 34% or 82 employees but overall satisfaction improved from 63% to 66%. In both surveys, the percentage of employees who responded with “neutral” on their overall satisfaction with the work they do at the City was 13%. CPAU will continue to encourage employees and develop alternative methods for employees to participate in the annual survey to improve the participation level and accuracy of the results. Training and development performance measure targets:  100% of Operations personnel have the appropriate certification and training for their assigned work area CPAU is committed to provide training and development for all employees to be able to be successful in their current jobs. The Operations performance measure has been fully met. City of Palo Alto Page 9 Ensuring workgroups have necessary tools and technologies performance measure target:  All employee technology needs are being met based on Utilities-specific IT strategic plan. To operate in an effective manner in the modern municipal environment, CPAU staff requires high-quality information tools to process that information and technical service support and needs them delivered in a timely manner. CPAU’s active participation on the City’s IT strategic planning efforts has resulted in incorporation of certain key Utilities IT issues. The IT Department presented a 3-year IT strategic plan to Council on May 6, 2013. CPAU currently does not have sufficient staffing resources to develop its own Utilities-specific IT strategic plan but continues to work with IT to address our immediate technological needs. Evaluation of new technologies performance measure target:  Evaluate at least three new technologies per year Technologies are advancing rapidly throughout the utility industry in areas such as renewable energy generation, energy and water efficiency and conservation, process streamlining, improved customer service, improved utility operations, and smart grid applications. In addition, since CPAU is in the heart of Silicon Valley, staff regularly discusses and shares insights with many start-up and venture capital funds managers on the viability and markets for their early stage technologies. CPAU launched the Emerging Technologies Pilot and Demonstration Program in the spring of 2012. Staff is accepting applications on a continuous basis with applications being reviewed quarterly. As of the end of 2012, CPAU received seven applications. CPAU has accepted one of these applications with Stanford Bidgely, which will provide itemized energy usage per appliance along with recommendations on how to reduce energy consumption. Strategic Initiatives Under this perspective, the Strategic Plan identified four strategic initiatives. The following gives the status of these initiatives. Two initiatives are underway and ongoing:  To develop a five year department-wide succession plan. In response to recent retirements, the high number of active employees eligible for retirement, and the loss of key employees to other municipalities or to PG&E, CPAU is identifying cross-training and development opportunities to fill potential staffing needs in the organization, including identification of skill set gaps as well as employees who are currently or soon City of Palo Alto Page 10 to be eligible for retirement. Management will continue to identify developmental goals and objectives in the employee annual appraisal process.  To develop a Utilities-specific IT strategic plan. This initiative has been delayed due to a lack of sufficient staffing resources. The Utilities IT strategic plan is also dependent on the IT Department’s 3-year strategic plan which was presented to Council in May 2013. CPAU is working with IT to deploy new mobile applications and is working with the new IT Governance and Planning Manager to prioritize IT-related projects. Two initiatives are successfully completed and are proposed to be removed:  To implement an annual survey to determine employee satisfaction levels and establish the baseline satisfaction level for 2011. CPAU will continue to report the employee satisfaction survey results and participation rate on an annual basis.  To develop a process to evaluate and implement new technology through targeted programs and consider creating a fund for innovative projects and pilots. The Utilities Emerging Technology Demonstration Program was approved by Council in January 2012. FINANCIAL PERSPECTIVE Under this perspective, the performance measures involved maintaining financial strength, designing rate structures that balance costs of service with the promotion of conservation and providing an investment return to the community. CPAU has thus far met all three performance goals under this perspective. Performance Measures High credit rating performance measure targets:  At least AA by Standard and Poor’s  At least Aa3 by Moody’s CPAU exceeded its performance target to have a high credit rating for bond financing. In the recent 2002 Utility Revenue Bonds refinance, CPAU received strong ratings of AAA by S&P and Aa2 by Moody’s which was reflected in the large numbers of bidders and an exceptionally low true interest cost of 2.28%. The refinance resulted in a net present savings of over $3 million. City of Palo Alto Page 11 Keep rate stabilization reserves for all utilities adequate performance measure targets:  Adequate to cover expected costs over a 2 year period  Meet rate stability objectives These targets were met, with all utility reserves projected to meet or exceed the minimum guidelines at the end of FY 2013 and exceed the short-term risk assessment level. CPAU is developing a comprehensive Utilities financial policy which will provide guidelines on establishing reserve levels. General Fund transfer performance measure target  Deliver 100% of the amount calculated by the Council-approved methodology CPAU provides the City of Palo Alto with a return on the City’s original investment in the Utilities in the form of an annual equity transfer to the City’s General Fund. The equity transfer is used by the General Fund to support activities such as Public Safety, Library, and Community Services for Palo Alto residents and businesses. CPAU is expected to meet its performance targets, with the Electric Fund and Gas Fund transferring $11.8 million and $6.0 million respectively to the General Fund in FY 2013, which is 100% of the amount calculated by the Council-adopted equity transfer methodology. Strategic Initiatives There were two strategic initiatives already existing for the financial perspective and CPAU is recommending a new initiative as well. One initiative is partially completed:  To determine the appropriate fixed costs that should be collected by fixed charges versus volumetric charges. Rates consist of fixed charges and volumetric charges, which are based on usage. Fixed charges consist of customer-related costs (i.e. meter reading, billing, operations and maintenance, capital projects) while variable costs include the cost of buying commodities (water, gas, or electricity). Total fixed costs are determined by periodic cost of service studies for each utility. This initiative was recently completed for the gas, water, and wastewater utilities. Council adopted rate changes effective July 1, 2012 for gas, water and wastewater that were consistent with cost of service analysis results CPAU is planning a cost of service study for electric in FY 2014. City of Palo Alto Page 12 One initiative is completed and is proposed to be removed:  To re-evaluate the need for and purpose of the Calaveras Reserve. This was accomplished in November 2011 when Council renamed the reserve the Electric Special Project Reserve and approved new reserve guidelines. One new initiative is proposed:  Develop a comprehensive Utilities financial policy by January 2014 to provide direction for future cost of service studies and rate-setting priorities. Consistent with the City Auditor’s Reserve Audit recommendation, CPAU will establish formal and comprehensive policies and procedures for its Utility Reserves. UTILITIES INTERNAL BUSINESS PROCESS PERSPECTIVE The largest number of performance measure targets fall under this perspective. Six were met, six cannot be updated as yet for the reasons indicated, and two are not yet met. Performance Measures The targets for the following measures were met:  restoring electrical power in less than 60 minutes  responding to leaks in less than 30 minutes  having zero gas incidents  reporting significant outages within 90 minutes  having at least 90% of surveyed customers satisfied with program experiences  capturing 99% of the full capacity value of the Redwood gas pipeline Several of the performance measures were not updated as of the end of 2012 either because survey results or other data were not yet available, or the measure is only meaningful as an annual measurement.  customer awareness of gas safety issues  backlog of infrastructure beyond its useful life  number of billing adjustments  lost and unaccountable volumes of gas and water  carbon intensity of the electric portfolio  energy efficiency achievement City of Palo Alto Page 13 The following performance measure targets have not yet been met:  average phone wait time for customer service – The primary reason CPAU did not meet this target is staffing and training. This is the first year Customer Service instituted a cross rotational task program to be able to better respond in the event there is a shortage of staff in any of its work areas. The Customer Service Representatives and hourly employees were cross trained in all areas of Customer Service, including Credit Collections and Customer Service Specialist areas. There was also a vacancy for an entire year and other personnel leaves which contributed to the increase in average phone wait time.  at least 3 competitive bids for each gas and electric fixed-price purchase transaction – This target, related to controlling commodity costs, was not met. Staff proposes to modify this target to electric only, since gas is now purchased on the spot market only with no fixed-price purchases. For the electric portfolio, although the City has enabling agreements with five eligible counterparties, only three are active. Council recently approved nine new enabling agreements which will expand the pool of eligible counterparties for electric transactions and is expected to increase the competitive bids for market-based transactions. Strategic Initiatives There were seven strategic initiatives for the internal business process perspective. Two initiatives are underway and ongoing:  Develop a plan to complete a new electric transmission interconnection. Staff has met with Stanford and SLAC on a few occasions to discuss the feasibility of a second electric transmission line source. Subsequent discussions will follow.  Pursue gas prepay transactions to leverage the City’s low cost of capital and tax-exempt status to acquire low cost gas supply resources. CPAU is beginning to work with a risk management and the City Attorney’ Office to put structures in place when economic conditions are right for such a transaction. One initiative is proposed to be removed:  Evaluate and implement opportunities to maximize the value of the Calaveras project in the new electric market framework. Staff is proposing to remove this initiative because optimizing the Calaveras Hydroelectric Project is an ongoing task for CPAU. City of Palo Alto Page 14 Four initiatives have been successfully completed and are proposed to be removed:  Prepare a Utilities Communication Plan that incorporates increased use of neighborhood, business organizations and schools to disseminate program and educational information. The Utilities Communication Plan has been drafted and is a working document that is constantly being updated.  Actively participate in citywide efforts to improve the procurement process. The City has rolled out a new procurement card system which should result in higher participation and better internal controls and reporting. The procurement design team is also working with Purchasing to offer training workshops and explore other areas of improvement.  Develop a program to ensure that the strategic plan is pursued and that objectives and initiatives are managed. The Utilities Balanced Scorecard Performance Measure Results has been implemented to track the performance measures in the strategic plan every 6 months.  Develop implementation plans to achieve the long-term water and energy efficiency goals. The ten-year energy efficiency plans and the Urban Water Management Plan were adopted by Council in FY 2011. These plans are required by law to be updated every four years (for gas and electric energy efficiency) or every five years (for the Urban Water Management Plan). Environmental Review The provision of these changes to the Strategic Plan does not constitute a project pursuant to Section 21065 of the California Public Resources Code, thus no environmental review under CEQA is required. Attachments:  Attachment A: 2011 Utilities Strategic Plan with Changes in Redline/Strikeout text (PDF)  Attachment B: Balanced Scorecard Performance Measure Results (PDF)  Attachment C: Utilities Strategic Initiatives Update (PDF) Utilities Strategic Plan – Strategic Objectives ATTACHMENT A 1 Strategic Objective Objective Statement Performance Measure 2015 Target Strategic Initiative Customer and Community Perspective C1. “I receive safe and reliable service.” Customers expect that Utilities services are provided on a continuous basis, without interruption. In addition, customers expect that the Utilities delivery systems are safe and will not harm them or put them in any danger. We will listen to our customers and seek to understand their reliability and safety concerns and implement programs and projects to address them. Average time to restore service per interrupted customer Less than 90 minutes Number of electric system interruptions per year for average customer Ranks in the top quartile nationwide (less than three) C2. “Be responsive to all my utilities- related service needs.” We understand that the customer wants clear, accurate bills with easy methods of payment; access to usage history and enough understanding to efficiently manage usage; to feel quickly and completely “taken care of” when they have concerns, questions or requests and to be communicated with effectively both as individuals and as CPAU’s owners. One of the ways to achieve this is to elicit feedback from customers to help improve service. Customer satisfaction scores on annual surveys for overall value. Residential and commercial surveys alternate every other year. Ranking in the top two utilities statewide By the end of 2011, Establish mechanisms to elicit customer feedback on their satisfaction with all interactions with CPAU. C3. “I expect to pay a reasonable bill” We understand that customers expect their bills to be comparable to those in surrounding communities and do not expect to pay more than PG&E customers. Customers believe it is reasonable to pay slightly more in exchange for increased reliability, safety and protection of the environment. However, customers’ overall bills for Utilities services must remain reasonable and be reasonably stable and should not increase significantly in any one year. Customers also want their bills to provide useful information about their consumption of resources in addition to the rate so that they can understand how they The average combined residential customer bill for electricity, water, gas, and wastewater services Less than the average of bills for comparable services in nearby communities (MP, MV, SC, Hayward, RC, Roseville, and Alameda). Reassess the design and delivery of the Utilities bill to improve understandability and implement the changes by 2012. Improve the electronic bill presentment, Utilities Strategic Plan – Strategic Objectives ATTACHMENT A 2 Strategic Objective Objective Statement Performance Measure 2015 Target Strategic Initiative can influence their total cost for Utilities services. For natural gas service, Palo Alto’s supply cost has been relatively stable due to a laddered gas portfolio purchasing strategy; however, this strategy needs to be re-evaluated as gas prices are currently low and are projected to stay low for the foreseeable future. Although, the average bill for all services should be comparable to those in surrounding communities, staff will continue to monitor and report the bills for each service separately on a quarterly basis. Annual rate change Maximum of 10% per year for electric and wastewater services. Maximum of 20% per year for water service. payment functionality and enhance the utility’s mobile app capabilities. Reassess the gas portfolio laddering purchasing strategy (GULP initiative) and develop a rate change performance measure for gas service. C4. “Care for our environment” Our community wants its customer-owned utility to offer choices for them to manage their resource use in ways that reflect their environmental values. Utilities will improve existing programs and develop new programs to meet customer needs and allow customers to manage their own environmental footprint. Percentage of customers participating in the PaloAltoGreen program Top rank nationally Redesign the PaloAltoGreen program by June 2012 January 2014 (LEAP task). Internal Business Process Perspective Safety and Reliability BP1. Ensure a reliable supply of utility resources We will implement strategies that ensure the reliable supply of utility resources to meet present and future needs. To provide opportunities for economic development within Palo Alto, we must provide sufficient resources that meet the short and long-term needs of our customers. To achieve this we will maintain the utility system components, and provide for adequate utility resource supplies to our current and future customers. We will also develop new management practices and organizational structure to ensure compliance with regulatory requirements. Duration of electric system interruption per year for average customer Ranks in the top quartile nationwide (less than 60 minutes per customer) Develop a plan to complete a new electric transmission interconnection by the end of 2011. Response time to water and wastewater leaks Response time to all emergency calls Under 30 minutes BP2. Operate the utility systems safely We will continue to ensure the safety of our customers, employees and the community by the ongoing implementation of a safety programs. Protecting customers and employees from injury and AGA (American Gas Association) Incidence Rate Less than industry (APPA, APGA, AWWA) Utilities Strategic Plan – Strategic Objectives ATTACHMENT A 3 Strategic Objective Objective Statement Performance Measure 2015 Target Strategic Initiative customer’s property from damage is essential for delivering quality utility services to our customers. The safety programs will be implemented by updating safety procedures, educating customers via outreach materials and workshops, correcting system deficiencies, operating in accordance with existing safety rules, and ensuring that products delivered to customers are safe. average with a goal of 0 Zero reportable incidents Customer awareness of gas safety issues 90% of customers responding to annual gas customer safety awareness survey BP3. Replace infrastructure before the end of its useful life We will continue to implement a long-term strategy for replacing infrastructure before the end of its useful life. Reliable delivery of electric service to our customers is critical for the success of business and the quality of life for our residents. To accomplish this, we will focus on reducing the backlog and replaces infrastructure systems in a manner that spreads the expense across multiple years resulting in program with even expenditures patterns in future years. Backlog of infrastructure elements whose age is beyond its useful life. Zero Customer Service Excellence BP4. Serve customers promptly and completely We will provide customers with the highly responsive service they desire. We will do this by reviewing and improving our processes for managing accounts, handling payments, resolving billing issues, responding to information and field service requests and notifying customers during service disruptions. We will identify ways to streamline these processes and implement changes. Specifically, we will review, document and improve business processes that have been identified as having long customer response times. Average phone wait time Less than 90 seconds Number of billing adjustments 10% reduction from number in 2009. Utilities Strategic Plan – Strategic Objectives ATTACHMENT A 4 Strategic Objective Objective Statement Performance Measure 2015 Target Strategic Initiative BP5. Communic ate clearly and pro-actively with all our stakeholders We will proactively communicate with all our stakeholders, including all customer groups, civic leaders, community groups and the press. To achieve this objective we will provide the information needed for our stakeholders to effectively access, understand and utilize all utilities services and programs. In addition, we will design communication vehicles and dissemination processes that will enable our residents to be educated owners of their municipal utilities system. For example, Palo Alto’s gas rate stability is something customers should be educated about as it differentiates CPAU from PG&E. Time until informing the public and local media of a disruption affecting at least 500 customers or any sensitive major customers Less than 90 60 minutes after becoming aware of a disruption Prepare a Utilities Communications Plan by June 2011 that incorporates increased use of neighborhood and business organizations and schools to disseminate program and educational information. BP6. Offer programs to meet the needs of customers and the community We will assist customers to lower their cost of utilities services and support the environment. We will assist customers facing economic hardship by offering bill payment assistance programs. We will educate customers on the reasons for and their means of compliance with our safety and regulatory requirements. We will also identify all customer groups, identify any gaps in service provision to those customers, and propose new programs or changes to existing programs to close those gaps. Participant* satisfaction with Utilities programs (*rebate recipients, workshop attendees, callers, etc.) At least 90% of program participants satisfied with their experience Reduce Costs BP7. Negotiate supply contracts to minimize financial risk We will continue to negotiate supply contracts to acquire supply resources while managing supply portfolio cost uncertainty to meet rate and reserve objectives and following sound risk management practices. To ensure that we are buying commodities at as competitive prices as possible, we will negotiate contracts with new counterparties to continue to have a sufficient set of credit-worthy trading partners. We will continue to develop long-term acquisition policies and plans (LEAP and GULP) and update those plans at least every three years. We will also determine all that is necessary to execute a gas prepay transaction as that is one clear way to lower the cost of gas supply resources. Number of competitive bids received for each fixed-price transaction. Minimum of three bids for electric power Pursue gas prepay transactions to leverage the City’s low cost of capital and tax-exempt status to acquire lower cost gas supply resources (GULP Strategy). Utilities Strategic Plan – Strategic Objectives ATTACHMENT A 5 Strategic Objective Objective Statement Performance Measure 2015 Target Strategic Initiative BP8. Reduce cost of delivering service through best management practices We will reduce the cost of delivering service to customers. We will identify opportunities to better coordinate between Utilities and other City departments to improve efficient delivery of services. We will perform benchmarking studies to identify potential modifications to procedures, practices, materials, and plans and to ensure that we are following best practices. One best practice is to increase calibration and replacement schedules for gas and water meters since the meters slow over time causing actual usage to be under-recorded, resulting in lost revenue. “lost and unaccounted for” volumes of gas and water 80% of 2009 levels. Actively participate in Citywide efforts to improve the procurement process. BP9. Maximize value of existing generation assets Palo Alto owns significant supply resource assets including a portion of the Calaveras Hydroelectric Project, a contract with the Western Area Power Administration, a permanent allocation of water from the regional water system managed by San Francisco, and allocated capacity on a gas transportation pipeline. We will seek out both daily and operational and long-term opportunities to optimize the value of these assets to enhance revenue and/or to reduce costs. We will work with joint-owners of our resource assets to leverage those resources and advocate to maintain or improve the value of existing resources into the future (LEAP and GULP strategies). Value harvested from Redwood gas pipeline capacity 100% Evaluate and implement opportunities to maximize the value of the Calaveras project in the new electric market framework. BP10. Manage implementation of strategic plan Completing the strategic plan is only the beginning of getting value from the strategic planning process. Ongoing management of the strategies and initiatives and reporting on progress of those initiatives is essential to achieving positive results from the strategy. We will report to the UAC and Council on this plan’s progress twice annually and we will review and revise the objectives and develop new initiatives on an annual basis. Number of strategic initiatives completed 100% Develop a program to ensure that the strategic plan is pursued and that objectives and initiatives are managed. Utilities Strategic Plan – Strategic Objectives ATTACHMENT A 6 Strategic Objective Objective Statement Performance Measure 2015 Target Strategic Initiative Environmental Sustainability BP11. Increase the environmental sustainability of all Utilities activities Adding sustainable resources to the supply portfolios will help the City meet its Climate Protection Plan goals by reducing the carbon footprint of the utility services provided to our customers. We will achieve this by acquiring renewable resources and promoting the development of local renewable resources within the rate objectives in the Long-term Electric Acquisition Plan (LEAP). Sustainable practices will be pursued not just for the supply portfolios, but across all the Utilities day-to-day operations. Carbon intensity of the electric portfolio 80% of baseline (2005) level BP12. Promote efficient use of resources Resource efficiency programs meet our customers’ desire for environmental solutions that save money as well as contributing towards the Climate Protection Plan goals. We will promote resource efficiency by dedicating the tactical staffing and budgetary resources necessary to reach maximum deployment of economically feasible resource efficiency. We will revise and document our long-term efficiency strategies by updating our 10-year Energy Efficiency goals every three years and updating our water efficiency goals every five years in the Urban Water Management Plan. To maximize the savings potential for new development, coordinate with the City’s Economic Development Manager to ensure that new developments incorporate energy saving features in the design phase. Actual electric energy efficiency achievement At least as high as goals set in May 2010 By June 2011, develop implementation plans to achieve the long- term water and energy efficiency goals and implement programs as outlined in the implementation plans. Actual gas energy efficiency achievement At least as high as goals set in January 2011 People and Technology Perspective PT1. Be an attractive place to work We will create a positive values-based work environment which attracts and retains qualified staff. To achieve this objective we will try to better understand employees desires and incentives, and will articulate our values both internally and as we recruit. Employee satisfaction rating Improvement from baseline level Implement an annual survey to determine employee satisfaction levels and establish the baseline satisfaction level for 2011. Utilities Strategic Plan – Strategic Objectives ATTACHMENT A 7 Strategic Objective Objective Statement Performance Measure 2015 Target Strategic Initiative PT2. Obtain, develop and train employees to ensure an adequate and qualified workforce A properly sized, trained and certified workforce is essential to our effectiveness. We will identify skill and staffing gaps at the individual and organizational levels and seek to fill those gaps through the effective use of opportunities including hiring, mentorship programs, role rotations, knowledge transfer opportunities, long-term developmental assignments and both internal and external training opportunities. We will plan for workforce succession and provide cross-training opportunities for employees to improve employee satisfaction and build a more robust work force. Percentage of operations personnel that has appropriate certification and training required for working in all areas they may be assigned 100% Develop a 5-year succession plan for each division. PT3. Ensure employees have adequate tools to perform job duties As major users of technology assets, we must have access to quality and timely delivered IT services. We must build and maintain an effective relationship with the City’s IT division that includes clear, frequent communication as well as productive coordination. We will collaborate with IT to identify barriers to providing support for technology projects and remove them. In those instances in which our immediate technology needs cannot be addressed by the City’s IT division in a timely or sufficiently-comprehensive fashion, we will utilize external expertise. Technology needs being met based on Utilities- specific IT strategic plan 100% for all Utilities work groups Develop a Utilities- specific IT strategic plan. PT4. Investigate and adopt innovative technologies Our customers value Utilities embracing new technologies that will help reduce costs and/or meet Climate Protection Plan goals. We will innovate by researching technologies and cultivating relationships with entrepreneurs and academics to identify new cost-effective and environmentally sustainable technologies to consider adopting. The smart grid strategic plan will be complete by the end of FY 2012 and New technologies, programs, and projects identified in the smart grid strategic plan will be implemented. Number of new technologies evaluated per year by an in-depth study or pilot project Three Develop a process to evaluate and implement new technology through targeted programs and consider creating a fund for innovative projects and pilots. Utilities Strategic Plan – Strategic Objectives ATTACHMENT A 8 Strategic Objective Objective Statement Performance Measure 2015 Target Strategic Initiative Financial Perspective F1. Maintain financial strength Maintaining a high credit rating reduces the cost of borrowing if needed for capital projects. We will continue best practices for financial management, adhere to energy risk management policies and guidelines to minimize financial risk, and maintain sufficient reserves to cover debt obligations as required to retain CPAU’s current favorable bond rating so that the cost of capital is low for any bond funded capital projects. Credit rating At least AA as determined by Fitch Ratings or Standard and Poor’s or at least Aa3 as determined by Moody’s F2. Maintain adequate reserves Maintaining adequate cash reserves contributes to maintaining our overall financial health and retaining our current favorable bond rating. We will maintain Rate Stabilization Reserves levels within Council-approved guidelines and sufficient to provide rate stability as desired by ratepayers. During the annual budget and rate setting process, the risks that each Utilities fund is exposed to will be identified along with the trajectory of costs and revenues to allow Council to determine appropriate reserve levels and rate adjustments. Rate Stabilization Reserve levels Adequate to cover cost uncertainties over a two-year period while meeting rate stability objective Re-evaluate the need for and purpose of the Calaveras (stranded cost) Reserve by the end of 2011. Develop a comprehensive Utilities financial policy by January 2014 to provide direction for future cost of service studies and rate-setting priorities. Utilities Strategic Plan – Strategic Objectives ATTACHMENT A 9 Strategic Objective Objective Statement Performance Measure 2015 Target Strategic Initiative F3. Implement rate structures that balance cost of service and resource conservation Retail rates should be designed so that the revenues from a customer group match the cost to serve those customers. Rates consist of fixed charges and volumetric charges, which are based on usage. Fixed costs consist of customer-related costs (meter reading, billing, etc.) and costs related to capital projects and operations while variable costs include the cost of buying supplies (water, gas, or electricity). When fixed costs are recovered through charges based on usage, costs will not be recovered if customers reduce usage more than projected. To address this problem we will examine alternate rate structures that strike a balance between the two competing objectives (cost of service and resource efficiency) to ensure that certain fixed costs are recovered with a fixed charge, but other costs are recovered with charges that vary depending on usage (volumetric charges). By the end of 2011, evaluate the appropriate fraction of fixed costs that should be collected by fixed charges versus volumetric charges. F4. Provide a fair return to the City CPAU provides an equity transfer to the City of Palo Alto’s General Fund which provides a return on the City’s original investment in the Utilities and reflects the City’s ultimate responsibility for Utilities operations. Council approved the current equity transfer method in May 2009. The equity transfer is used by the General Fund as determined by the City Council and supports activities such as fire, police and library services to the City residents and businesses. This benefit, along with favorable rates and utility services, is a key value provided to the community from municipal ownership of Utilities. Equity transfer to the City’s General Fund 100% of the transfer as calculated by the Council-approved equity transfer methodology and permitted by law. 10 Balanced Scorecard Performance Measure Results Attachment - B Strategic Objective Measure ID Objective Statement Performance Measure 2015 Target Measure Goal Value FY 2010 FY 2011 FY 2012 Jul - Dec 2012 Score (Values: +, -, TBD) C1. “I receive safe and reliable service.” C1.1 Customers expect that Utilities services are provided on a continuous basis, without interruption. In addition, customers expect that the Utilities delivery systems are safe and will not harm them or put them in any danger. We will listen to our customers and seek to understand their reliability and safety concerns and implement programs and projects to address them. Average time to restore service per interrupted customer Less than 90 minutes <90 132 min 161 min 113 min 108 min - C1.2 Number of electric system interruptions per year for average customer Ranks in the top quartile nationwide (less than 3) <3 2.2 2.1 0.13 0.21 + C2. “Be responsive to all my utilities-related service needs.” C2 We understand that the customer wants clear, accurate bills with easy methods of payment; access to usage history and enough understanding to efficiently manage usage; to feel quickly and completely “taken care of” when they have concerns, questions or requests and to be communicated with effectively both as individuals and as CPAU’s owners. One of the ways to achieve this is to elicit feedback from customers to help improve service. Customer satisfaction scores on annual surveys for overall value. Ranking in 85-90% >85% 78% Commercial 65% Residential 81% Commercial 83% Residential - C3. “I expect to pay a reasonable bill” C3.1 We understand that customers expect their bills to be comparable to those in surrounding communities and do not expect to pay more than PG&E customers. Customers believe it is reasonable to pay slightly more in exchange for increased reliability, safety and protection of the environment. However, customers’ overall bills for Utilities services must remain reasonable and should not increase significantly in any one year. Customers also want their bills to provide useful information about their consumption of resources in addition to the rate so that they can understand how they can influence their total cost for Utilities services. The average combined residential customer bill for electricity, water, gas, and wastewater services. Less than the average of bills for comparable services in nearby communities (MP, MV, SC, Hayward, RC, Roseville, and Alameda). E - $51.39 G - $35.30 W - $45.34 WW - $43.50 Tot - $175.53 E - $42.76 G - $55.19 W - $43.89 WW - $24.65 Tot - $166.49 E - $42.76 G - $55.19 W - $43.89 WW - $27.91 Tot - $169.75 E - $42.76 G - $55.19 W - $53.62 WW - $27.91 Tot - $179.48 E - $42.76 G - $37.16 W - $62.14 WW - $29.31 Tot - $171.37 + C3.2 Annual rate change Maximum of 10% per year for electric, gas, and wastewater Utilities service. Maximum of 20% per year for water Utility service. <10% for E, G, WWC <20% for W E +10% G -10% W +5% WW +5% E 0% G 0% W 0% WW 0% E 0% G 0% W 12.5% WW 0% E 0% G -10%* W 15% WW 5% + C4. “Care for our environment” C4 Our community wants its customer-owned utility to offer choices for them to manage their resource use in ways that reflect their environmental values. Utilities will improve existing programs and develop new programs to meet customer needs and allow customers to manage their own environmental footprint. Percentage of customers participating in the PaloAltoGreen program Top rank nationally Top rank nationally 22% 21% 24% 20%+ Customer and Community Perspective 1 Balanced Scorecard Performance Measure Results Attachment - B Strategic Objective Measure ID Objective Statement Performance Measure 2015 Target Measure Goal Value FY 2010 FY 2011 FY 2012 Jul - Dec 2012 Score (Values: +, -, TBD) BP1. Ensure a reliable supply of utility resources BP1.1 We will implement strategies that ensure the reliable supply of utility resources to meet present and future needs. To provide opportunities for economic development within Palo Alto, we must provide sufficient resources that meet the short and long- term needs of our customers. To achieve this we will maintain the utility system components, and provide for adequate utility resource supplies to our current and future customers. We will also develop new management practices and organizational structure to ensure compliance with regulatory requirements. Duration of electric system interruption per year for average customer Ranks in the top quartile nationwide (less than 60 minutes per customer) <60 52 min 66 min 15 min 23 min + BP1.2 Response time to water and wastewater leaks Response time to all emergency calls Under 30 minutes <30m 31 min 27 min 22 min 25 min + BP2. Operate the utility systems safely BP2.1 We will continue to ensure the safety of our customers, employees and the community by the ongoing implementation of a safety programs. Protecting customers and employees from injury and customer’s property from damage is essential for delivering quality utility services to our customers. The safety programs will be implemented by updating safety procedures, educating customers via outreach materials and workshops, correcting system deficiencies, operating in accordance with existing safety rules, and ensuring that products delivered to customers are safe. AGA (American Gas Association) Incidence Rate Less than industry (APPA, APGA, AWWA) average with a goal of 0 Zero reportable incidents 0 0 1 0 0 + BP2.2 Customer awareness of gas safety issues 90% of customers responding to annual gas customer safety awareness survey >90% 97.70% 97.50% 96.70% TBD - Annual Measure TBD BP3. Replace infrastructure before the end of its useful life BP3 We will continue to implement a long-term strategy for replacing infrastructure before the end of its useful life. Reliable delivery of electric service to our customers is critical for the success of business and the quality of life for our residents. To accomplish this, we will focus on reducing the backlog and replaces infrastructure systems in a manner that spreads the expense across multiple years resulting in program with even expenditures patterns in future years. Backlog of infrastructure elements whose age is beyond its useful life Zero E - $0 G - $0 W - $0 WWC - $0 NA E - $6M G - $12M W - $3.1M WW - $8.5M E - $7M G - $1M W - $3M WW - $5M TBD - Annual Measure TBD BP4. Serve customers promptly and completely BP4.1 We will provide customers with the highly responsive service they desire. We will do this by reviewing and improving our processes for managing accounts, handling payments, resolving billing issues, responding to information and field service requests and notifying customers during service disruptions. We will identify ways to streamline these processes and implement changes. Specifically, we will review, document and improve business processes that have been identified as having long customer response times. Average phone wait time 90 seconds or less <90 sec 70 sec 90 sec 134 sec 101 sec - BP4.2 Number of billing adjustments 10% reduction from number in 2009 FY09 - 3286 90% - 2,958 2,313 909 843 TBD - Annual Measure TBD Internal Business Process Perspective Safety and Reliability Customer Service Excellence 2 Balanced Scorecard Performance Measure Results Attachment - B Strategic Objective Measure ID Objective Statement Performance Measure 2015 Target Measure Goal Value FY 2010 FY 2011 FY 2012 Jul - Dec 2012 Score (Values: +, -, TBD) BP5. Communicate clearly and pro- actively with all our stakeholders BP5 We will proactively communicate with all our stakeholders, including all customer groups, civic leaders, community groups and the press. To achieve this objective we will provide the information needed for our stakeholders to effectively access, understand and utilize all utilities services and programs. In addition, we will design communication vehicles and dissemination processes that will enable our residents to be educated owners of their municipal utilities system. Time until informing the public and local media of a disruption affecting at least 500 customers or any sensitive major customers Less than 90 60 minutes after becoming aware of a disruption <90m <60m < 90 min < 90 min < 90 min < 30 min + BP6. Offer programs to meet the needs of customers and the community BP6 We will assist customers to lower their cost of utilities services and support the environment. We will assist customers facing economic hardship by offering bill payment assistance programs. We will educate customers on the reasons for and their means of compliance with our safety and regulatory requirements. We will also identify all customer groups, identify any gaps in service provision to those customers, and propose new programs or changes to existing programs to close those gaps. Participant* satisfaction with Utilities programs (*rebate recipients, workshop attendees, callers, etc.) At least 90% of program participants satisfied with their experience >90% N/A 95% Average of all workshops: 94% Average of all workshops: 93%+ BP7. Negotiate supply contracts to minimize financial risk BP7 We will continue to negotiate supply contracts to acquire supply resources while managing supply portfolio cost uncertainty to meet rate and reserve objectives and following sound risk management practices. To ensure that we are buying commodities at as competitive prices as possible, we will negotiate contracts with new counterparties to continue to have a sufficient set of credit-worthy trading partners. We will continue to develop long-term acquisition policies and plans (LEAP and GULP) and update those plans at least every three years. We will also determine all that is necessary to execute a gas prepay transaction as that is one clear way to lower the cost of gas supply resources. Number of competitive bids received for each fixed-price transaction. Minimum of three electric bids > 3 E - 3.0 bids G - 2.7 bids E - 2.5 bids G - 1.9 bids E - 2.75 bids G - N/A (market based pricing) E - 1.9 bids G - N/A (market based pricing)- BP8. Reduce cost of delivering service through best management practices BP8 We will work towards reducing the cost of delivering service to customers. We will identify opportunities to better coordinate between Utilities and other City departments to improve efficient delivery of services. We will perform benchmarking studies to identify potential modifications to procedures, practices, materials, and plans and to ensure that we are following best practices. One best practice is to increase calibration and replacement schedules for gas and water meters since the meters slow over time so that the actual usage is under-recorded, resulting in lost revenue. “lost and unaccounted for” volumes of gas and water 80% of 2009 levels. 2009 G - 2.6% W - 5.0% G - 3.2% W - 7.6% G - 2.9% W - 8.2% G - 2.8% W - 8.2% TBD - Annual Measure TBD BP9. Maximize value of existing generation assets BP9 Palo Alto owns significant supply resource assets including a portion of the Calaveras Hydroelectric Project, a contract with the Western Area Power Administration, a permanent allocation of water from the regional water system managed by San Francisco, and allocated capacity on a gas transportation pipeline. We will seek out both daily and operational and long-term opportunities to optimize the value of these assets to enhance revenue and/or to reduce costs. We will work with joint-owners of our resource assets to leverage those resources and advocate to maintain or improve the value of existing resources into the future (LEAP and GULP strategies). Value harvested from Redwood gas pipeline capacity 100% 100% 97% 99% 99% 100%+ BP10. Manage implementation of strategic plan BP10 Completing the strategic plan is only the beginning of getting value from the strategic planning process. Ongoing management of the strategies and initiatives and reporting on progress of those initiatives is essential to achieving positive results from the strategy. We will report to the UAC and Council on plan progress twice annually and we will review and revise the objectives and develop new initiatives on an annual basis. Number of strategic initiatives completed 100% 100% N/A 3 initiatives 18% 7 initiatives 41% 8 initiatives 47%+ Reduce Costs 3 Balanced Scorecard Performance Measure Results Attachment - B Strategic Objective Measure ID Objective Statement Performance Measure 2015 Target Measure Goal Value FY 2010 FY 2011 FY 2012 Jul - Dec 2012 Score (Values: +, -, TBD) BP11. Increase the environmental sustainability of the supply portfolios BP11 Adding sustainable resources to the supply portfolios will help the City meet its Climate Protection Plan goals by reducing the carbon footprint of the utility services provided to our customers. We will achieve this by acquiring renewable resources and promoting the development of local renewable resources within the rate objectives in the Long-term Electric Acquisition Plan (LEAP). Carbon intensity of the electric portfolio 80% of baseline (2005) level (320.9) 256.7 331.9 159.8 182.1 TBD - Annual Measure TBD BP12. Promote efficient use of resources BP12 Resource efficiency programs meet our customers’ desire for environmental solutions that save money as well as contributing towards the Climate Protection Plan goals. We will promote resource efficiency by dedicating the tactical staffing and budgetary resources necessary to reach maximum deployment of economically feasible resource efficiency. We will revise and document our long-term efficiency strategies by updating our 10-year Energy Efficiency goals every three years and updating our water efficiency goals every five years in the Urban Water Management Plan. Actual electric energy efficiency achievement At least as high as goals set in May 2010 At least as high as goals set in January 2011 E - 0.72% G - 0.55% E - 0.47% G - 0.28% E - 0.55% G - 0.40% E - 1.52% G - 0.73% TBD - Annual Measure TBD 4 4 Balanced Scorecard Performance Measure Results Attachment - B Strategic Objective Measure ID Objective Statement Performance Measure 2015 Target Measure Goal Value FY 2010 FY 2011 FY 2012 Jul - Dec 2012 Score (Values: +, -, TBD) PT1. Be an attractive place to work PT1 We will create a positive values-based work environment which attracts and retains qualified staff. To achieve this objective we will try to better understand employees desires, work with City management to establish sufficient compensation, benefits, and incentives, and will articulate our values both internally and as we recruit. Employee satisfaction rating Improvement from 2012 basline level of 62.7% 100% N/A N/A 62.7% - Satisfied 12.7% - Neutral 66.3% - Satisfied 12.5% - Neutral + PT2. Develop and train employees to ensure a qualified workforce PT2 A properly trained and certified workforce is essential to our effectiveness. We will identify skill gaps at the individual and organizational levels and seek to fill those gaps through the effective use of opportunities including mentorship programs, role rotations, knowledge transfer opportunities and both internal and external training opportunities. We will plan for workforce succession and provide cross-training opportunities for employees to improve employee satisfaction and build a more robust work force Percentage of operations personnel that has appropriate certification and training required for working in all areas they may be assigned 100% 100% 100% 100% 100% 100%+ PT3. Ensure employees have adequate tools to perform job duties PT3 As major users of technology assets, we must have access to quality and timely delivered IT services. We must build and maintain an effective relationship with the City’s IT division that includes clear, frequent communication as well as productive coordination. We will collaborate with IT to identify barriers to providing support for technology projects and remove them. In those instances in which our immediate technology needs cannot be addressed by the City’s IT division in a timely or sufficiently-comprehensive fashion, we will utilize external expertise. Technology needs being met based on Utilities-specific IT strategic plan 100% for all Utilities work groups 100% N/A N/A N/A N/A TBD PT4. Investigate and adopt innovative technologies PT4 Our customers value Utilities embracing new technologies that will help reduce costs and/or meet Climate Protection Plan goals. We will innovate by researching technologies and cultivating relationships with entrepreneurs and academics to identify new cost-effective and environmentally sustainable technologies to consider adopting. New technologies, programs, and projects identified in the smart grid strategic plan will be implemented. Number of new technologies evaluated per year Three >3 N/A N/A N/A 7 + People and Technology Perspective 5 Balanced Scorecard Performance Measure Results Attachment - B Strategic Objective Measure ID Objective Statement Performance Measure 2015 Target Measure Goal Value FY 2010 FY 2011 FY 2012 Jul - Dec 2012 Score (Values: +, -, TBD) F1. Maintain financial strength F1 Maintaining a high credit rating reduces the cost of borrowing if needed for capital projects. We will continue best practices for financial management, adhere to energy risk management policies and guidelines and maintain sufficient reserves to cover debt obligations as required to retain CPAU’s current favorable bond rating so that the cost of capital is low for any bond funded capital projects. Credit rating At least AA as determined by Fitch Ratings or Standard and Poor’s or at least Aa3 as determined by Moody’s <=AA or <=Aa3 S&P = AAA Moody's = Aa3 S&P = AAA Moody's = Aa2 S&P = AAA Moody's = Aa2 S&P = AAA Moody's = Aa2 + F2. Maintain adequate reserves F2 Maintaining adequate cash reserves contributes to maintaining our overall financial health and retaining our current favorable bond rating. We will maintain Rate Stabilization Reserves levels within Council-approved guidelines and sufficient to provide rate stability as desired by ratepayers. During the annual budget and rate setting process, the risks that each Utilities fund is exposed to will be identified along with the trajectory of costs and revenues to allow Council to determine appropriate reserve levels and rate adjustments. Rate Stabilization Reserve levels Adequate to cover expected costs over a two-year period while meeting rate stability objective Above rate stabilization reserve levels All RSRs wre above mininum guideline levels. All RSRs wre above mininum guideline levels. All RSRs wre above mininum guideline levels. All RSRs are above mininum guideline levels.+ F3. Implement rate structures that balance cost of service and resource conservation F3 Retail rates should be designed so that the revenues from a customer group match the cost to serve those customers. Rates consist of fixed charges and volumetric charges, which are based on usage. Fixed costs consist of customer-related costs (meter reading, billing, etc.) and costs related to capital projects and operations while variable costs include the cost of buying supplies (water, gas, or electricity). When fixed costs are recovered through charges based on usage, costs will not be recovered if customers reduce usage more than projected. To address this problem we will implement rate structures that strike a balance between the two competing objectives (cost of service and resource efficiency) to ensure that certain fixed costs are recovered with a fixed charge, but other costs are recovered with charges that vary depending on usage (volumetric charges).Fixed charges on Utilities rates By 2013, adequate to cover 100% of the fixed costs of meter reading, billing, and other customer-related costs E - 100% G - 100% W - 100% WWC - 100% N/A E - NA G - NA W - 50% WWC - 100% E - NA G - 100% W - 100% WWC - 100% E -NA G - 100% W - 100% WWC - 100%- F4. Provide a fair return to the City F4 CPAU provides an equity transfer to the City of Palo Alto's General Fund which provides a return on the City's original investment in the Utilities and reflects the City's ultimate responsibility for Utilities operations. Council approved the current equity transfer method in May 2009. The equity transfer is used by the General Fund as determined by the City Council and supports activities such as fire, police and library services to the City residents and businesses. This benefit, along with favorable rates and utility services, is a key value provided to the community from municipal ownership of Utilities. Equity transfer to the City's General Fund 100% of the transfer as calculated by the Council-approved equity transfer methodology and permitted by law. 100% 100% 100% 100% 100%+ Financial Perspective 6 Attachment - C 1 Status of Strategic Initiatives of the Utilities Strategic Plan For the customer and community perspective: 1. Establish mechanisms to elicit customer feedback on their satisfaction with all interactions with CPAU.  The Utilities Communication Plan has been redrafted for 2013 and includes plans for further expanding available mechanisms for eliciting customer feedback. Due to staffing and resource limitations, we do not anticipate fully implementing mechanisms for immediate feedback after all customer interactions until 2014. Meanwhile, the CMUA/RKS survey of residential customers was conducted in 2012 which gave some generalized feedback on customer satisfaction. We have gotten more specific feedback via evaluations at workshops, events and as part of programs such as the backflow prevention device inventory program. We are redesigning the My Utilities Account web portals to include a user’s feedback mechanism and we are upgrading our MyCPAU Mobile App to make it easier for users to give us feedback. 2. Redesign the Utilities bill to improve understandability.  Complete redesign of the format of the current Utilities bill has been cancelled. Incremental changes are being made as needed for each of the billable commodities including Electric Time-of-Use and Refuse.  Replace bill redesign with improve the electronic bill presentment, payment functionality and enhancing the utility’s mobile web capabilities. 3. Redesign the PaloAltoGreen program.  The redesign of the PaloAltoGreen program is being done in the context of the development of the plan to achieve a carbon neutral electric supply portfolio. That plan is on track to be approved by Council in March 2013 with the redesign of the PaloAltoGreen program to occur by June 2013. Successfully Completed: 4. Reassess the gas portfolio laddering purchasing strategy.  Gas purchasing strategy was changed to market-price based pricing effective July 1, 2012. For the people and technology perspective: 5. Develop a 5-year succession plan for each division.  Each division identified skill set gaps and employees eligible for retirement. Each division is reviewing skills needed for each position and will undertake efforts to cross train, as appropriate. 6. Develop a Utilities-specific IT strategic plan.  The Utilities-specific IT strategic plan is on hold due to lack of staffing resources and pending completion of the citywide 3-year IT strategic plan. Attachment - C 2 Successfully Completed: 7. Implement an annual employee satisfaction survey.  An employee satisfaction survey was completed for Utilities in October 2011 that will be used as a baseline. The second survey was completed in October 2012. Compared to the 2011 baseline survey, employee satisfaction is generally better but the response rate dropped significantly. Overall, 66% of the employees are either satisfied or very satisfied with the work they currently do at CPAU compared to 63% in the prior year. In 2011, 57% or 136 employees responded to the survey compared to 34% or 82 employees in 2012. 8. Develop a process to evaluate and implement new technology through targeted programs and consider creating a fund for innovative projects and pilots.  The Emerging Technology Demonstration Program was approved by Council in January 2012 and was launched in the spring of 2012. For the financial perspective: 9. Evaluate the appropriate fraction of fixed costs to be collected by fixed charges.  On June 18, 2012, Council adopted rate changes effective July 1, 2012 for gas, water and wastewater that were consistent with cost of service analysis results regarding the amount of revenues to collect from fixed and volumetric charges. Electric cost of service analysis is planned for FY 2014. Successfully Completed: 10. Re-evaluate the need for and purpose of the Calaveras (stranded cost) Reserve.  The name and purpose of the Calaveras Reserve has been changed to Electric Special Project Reserve with new guidelines. New: Develop a comprehensive Utilities financial policy by January 2014 to provide direction for future cost of service studies and rate-setting priorities. Attachment - C 3 For the internal business process perspective: 11. Develop a plan to complete a new electric transmission interconnection.  Staff is meeting with Stanford and SLAC to discuss the feasibility of a second electric transmission line source for the City by connecting the City’s Quarry Substation to the SLAC National Accelerator Laboratory 230 kV Substation. 12. Pursue gas prepay transactions to leverage the City’s low cost of capital and tax-exempt status to acquire low cost gas supply resources.  Current goal is to establish prepay agreements, approval process, and structures in place. When gas commodity prices rise, staff will be better prepared to execute transactions. The decision to move to market-based supply rates and not purchase gas on a forward basis simplifies the implementation of prepay agreements by eliminating the need to hedge our transactions. The consultant for risk management will assist with this effort. 13. Evaluate and implement opportunities to maximize the value of the Calaveras project in the new electric market framework.  Staff is proposing to remove this strategic initiative because this is an ongoing task on CPAU’s work plan given the changes in the market. Successfully completed: 14. Prepare a Utilities Communications Plan that incorporates increased use of neighborhood and business organizations and schools to disseminate program and educational information.  The Utilities Communication Plan has been drafted and is a working document that is being constantly updated. 15. Actively participate in citywide efforts to improve the procurement process.  Utilities is a member of the City’s procurement design team which is tasked to make recommendations to improve sole source process, increase Cal Card usage, and implement departmental BID process. The new Pcard system was rolled out in May 2012 which should result in higher participation with better internal controls and reporting. The design team and Purchasing Division will begin to offer training workshops and explore other areas of improvement. 16. Develop a program to ensure that the strategic plan is pursued and that objectives and initiatives are managed.  A balanced scorecard has been implemented to track the performance measures and initiatives in the strategic plan. 17. Develop implementation plans to achieve the long-term water and energy efficiency goals and implement programs as outlined in the implementation plans.  The Urban Water Management Plan was adopted by Council in June 2011.  The ten year energy efficiency plans were previously updated in 2010 and 2011.