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HomeMy WebLinkAbout2001-11-19 City Council (7)City of Palo Alto City Manager’s Report TO:HONORABLE CITY COUNCIL FROM:CITY MANAGER DEPARTMENT: UTILITIES DATE: SUBJECT: NOVEMBER 19, 2001 CMR: 421:01 UTILITIES FY 2001-03 DEMAND SIDE MANAGEMENT AND PUBLIC BENEFITS PLAN RECOMMENDATION Staff and the Utilities Advisory Commission (UAC) recommend that the Council approve the proposed FY 2001-03 Demand Side Management (DSM) and Public Benefits Plan (Water, Electricity, and Natural Gas). PROGRAM/PLAN DESCRIPTION The Utilities Department provides a wide range of resource efficiency programs targeted to meet the diverse needs and interests of Palo Alto residents, businesses, and government entities. The proposed programs and plans for FY2001-02 and FY2002-03 continue a number of successful programs and introduce several new programs. The direction of the overall plan provides high value to the community, benefits ratepayers and Palo Alto taxpayers. Overall spending levels as budgeted are expected to decline from the unprecedented levels related to the energy crisis during FY 2000-01. Some of the key new programs include: ¯ Eichler Home Rebate Program. A pilot program offering rebates for combined packages of efficiency improvements specifically addressing the characteristics of Eichler homes that are not covered by other residential dwelling programs. ¯New Home Construction Rebate Program. Establish a Task Force in cooperation with the Planning Division to draft new- residential building standards more stringent than CMR:421:01 Page 1 of 3 Title 24. Institutional Rebate Program. Establish and budget for DSM and Public Benefits programs targeting the reduction of water and energy costs in City Facilities and schools based on additional incentives. Control Monitoring System Rebate Program. On a pilot basis, develop cost-effective, performance-based incentives for Direct Load Monitoring Control systems for lighting, chillers, boilers, cooling towers, and exhaust and ventilation systems. UTILITIES ADVISORY COMMISSION REVIEW AND RECOMMENDATIONS On October 3, 2001, the UAC unanimously approved staff’s proposed FY2001-03 DSM and Public Benefits Plan. RESOURCE IMPACT The DSM and Public Benefit Plan outlined in this report will be funded by the adopted Utilities Department operating budget for FY01-02 and FY02-03. The Electric Fund Public Benefit budgets for FY01-02 and FY 02-03 are approximately $3.3 million and $1.86 million respectively. In addition, there are carryover funds from FY00-01 that will be spent in FY01-02. The Gas Fund Public Benefit budgets for FY01-02 and FY 02-03 are approximately $180,000 each year. The Water Fund DSM budgets for FY01-02 and FY 02-03 are approximately $190,000 each year. POLICY IMPLICATIONS The DSM and Public Benefit Programs discussed in this report do not represent a change of current City policies with the exception of the program component to provide additional funding for energy efficiency in schools and City facilities. The proposed programs support the Utilities Strategic Plan Key Strategy 7: "Implement programs that improve the quality of the environment" and are consistent with the goals and objectives of the City’s Sustainability Committee. CMR:421:01 Page 2 of 3 ENVIRONMENTAL REVIEW The adoption of the resolution does not constitute a project under the California Environmental Quality Act; therefore, no environmental assessment is required. ATTACHMENTS UAC report dated October 3,2001 Minutes from UAC October 3, 2001 PREPARED BY: RAND)//BXLDSCHUN -’~- Assistant Director Utilities, Administrative Services DEPARTMENT HEAD: D of Utilities CITY MANAGER APPROVAL:EMI~L HARRISON Assistant City Manager CMR:421:01 Page 3 of 3 ATTACHMENT A MEMORANDUM 3 TO: FROM: AGENDA DATE: SUBJECT: Utilities Advisory Commission Utilities Department October 3, 2001 FY 2001-03 Demand Side Management (DSM) and Public Benefits Plan REQUEST Staff requests that the UAC recommends Council approval of the proposed FY 2001-03 Demand Side Management (DSM) and Public Benefits Plan. EXECUTIVE SUMMARY Attached are the updated descriptions, adopted budgets and proposed actions for the DSIVl and Public Benefits Programs to be offered during FY 2001-2003. Through this report, staff intends to receive UAC input on program directions and priorities before finalizing the plan for Council consideration. The proposed plan continues a number of successful programs while introducing a number of new programs as well. The direction of the overall program continues to shift more towards programs that provide the maximum benefit to the largest number of Palo Alto ratepayers and taxpayers. Overall spending levels as budgeted are expected to decline from the unprecedented levels related to the energy crisis this year. Some of the key new programs include the: ¯ Eichler Home Rebate Program. A pilot program offering rebates for combined packages of efficiency improvements tailored to the unique design characteristics of Eichler homes. ¯New Home Construction Rebate Program. Establish a Task Force in cooperation with the Planning Division to draft new Palo Alto-based residential building standards more efficient than current Title 24. Design new construction rebates to help defray the cost of the proposed higher standards. ¯Institutional Rebate Program. Establish and budget for DSM and Public Benefits programs specifically targeting the reduction of water and energy costs in City facilities and PAUSD schools. RESOURCE IMPACT The DSM and Public Benefit Plan outlined in this report will be funded by the adopted budgets for FY 2001-02 and FY 2002-03. Unspent, but encumbered funds from FY 2000-01 will be carried over and spent in FY 2001-02. POLICY IM PLICATIONS The DSM and Public Benefit Plan outlined in this report is consistent with existing City policies. ENVIRONMENTAL REVIEW Approyal and implementation of the staff recommendation project under the California Environmental Quality Act (CEQA). does not constitute UTILITIES STRATEGIC PLAN The DSM and Public Benefits programs support Key Strategy Seven ("Implement programs that improve the quality of the environment") of the Utilities Strategic Plan. ATTACH M E NTS Electric Demand Side Management FY 2001-2003 Summary Report PREPARED BY: Tom Auzenne, Manager, Utility Marketing Services Lindsay Joye, Marketing Engineer REVIEWED BY: Randy Baldschun, Assistant Director of Utilities, Admin. Services DEPARTMENT HEAD APPROVAL: Direct~or of Utilities DSH AND PUBLIC BENEFITS PLAN For FY 2001-03 This plan directs immediate and short-term actions to design and implement programs and services in support of Key Strategy 7 of the Utilities Strategic Plan ("Implement programs that improve the quality of the environment"). Guiding! Principles CPAU will: ¯Design and implement innovative programs and services that provide valuable benefits to our entire community; ¯Create customer programs and services with measurable satisfaction, consumption and positive environmental results; ¯Use prudent business management practices to ensure that all program and service objectives are achievable within the desired time frames and allocated resources; and, ¯Continue to provide the highest quality programs and services within existing financial and staffing resource constraints. ¯Develop or participate in pilot programs that advance technology and promote efficient resources. ¯Design and implement programs consistent with City policies, the Palo Alto Comprehensive Plan, and State and Federal law. Key Strateqies 1.Build on the successful programs and activities of FY 2000-01 over the next two years. 2.Establish "sunset dates" on all programs in order to add new programs in an organized manner. 3.Use appropriate cost-effectiveness criteria to prioritize new programs and services that offer the widest benefits to participating and non-participating ratepayers, Palo Alto taxpayers, and the environment. 4.Seek local, state and national recognition for innovative programs and services. 5.Seek grants and outside assistance to leverage DSM and Public Benefits budgets. 6.Collaborate with neighboring utilities on mutually beneficial DSM and Public Benefits programs and services in order to leverage CPAU funds. 2 oflO Proqram and Service Approaches ¯Water DSM Programs and services are limited by funding (approximately $130,000 annually). The primary focus over the next two years will remain the implementation of those efficiency measures required and reported annually under the signed MOU for the implementation of the Best Management Practices of the California Urban Water Conservation Council. A second focus will be to computerizea commercial irrigation water budget monitoring and reporting system in the Customer Information System. This will allow for constant customer feedback on appropriate levels of water consumption (and the variation from optimum) on a monthly basis. It will also allow for refining the water allocation process during the next drought. Palo Alto is the only major water agency in the county not supplied by the Santa Clara Valley Water District. CPAU is working cooperatively with the Water District to implement District programs such as commercial washing machine rebates, public workshops and irrigation auditing throughout the county by including their availability in Palo Alto. Our cooperation leverages our program dollars to reduce duplicative costs for marketing and promotion. We will investigate additional cooperative alliances with organizations such as the Regional Water Quality Control Plant in areas impacting both water consumption and treatment such as industrial water recycling and use of recycled water for irrigation in public and private facilities. ¯Gas Public Benefits Programs and services are limited by funding (approximately $140,000 annually). The primary focus has been the leveraging of gas public benefits dollars through the implementation of gas measures, which, over the course of an entire heating and cooling year, are easily combined with Electric Public Benefits funds (such as dual pane windows). As a result of the steep increase in natural gas costs in FY 2000-0::[, the focus over the next year will be to provide rebates in the residential sector for replacement of home space and water heating systems. Residential rebates for furnace tune-ups will also continue. Commercial systems will be addressed during FY 2002-03. ¯Electric Public Benefits Driven by the AB ::[890 requirements for funding and specific program categories, and then by the California energy crisis, programs and services have been characterized by a "prescriptive approach" (promotion of specific, detailed 3 of 10 measures). CPAU has created residential rebates for home appliances and solar systems and rebates and loans for building shell improvements in the residential sector. We have also provided rebates for equipment and specific end use systems in the commercial and industrial sectors. Rebates have been made for efficiency improvements in City facilities and traffic signal systems: A $5 million infusion of funding was made to reduce commercial and industrial demand during the energy crisis. Significant staff resources were also spent on the development of the Summer Load Reduction Program to reduce the frequency of rolling blackouts. There have also been investments in transportation technologies through RD&D funding, low income residential rate assistance (RAP), and investments in photovoltaics and other renewable energy projects (both local and regional). With this ramping up of energy efficiency programs in FY 2000-01, resource efficiency in Palo Alto has improved, demand and energy requirements have been reduced and conservation discussions and investments have moved out of the garage and maintenance shop into the family den and corporate boardroom. However, with the substantial reduction of forward electric costs, the conservation response in Palo Alto and the State, the addition of new generation resources in California, and other factors, it is likely that the energy environment over the next two years will be different than FY 2000-0!. Therefore, the level of funding and activity related to DSM and Electric Public Benefits programs will decline from the emergency funding levels required in FY 2000-01 and the early months of FY 2001-02. AB1890 sets forth four categories of Public Benefit Programs: Demand-side Management programs will continue to offer rebates. For residents, rebates will apply to selected home appliances and systems. Experience has shown that the most effective programs incorporate "sunset provisions" that result in a sense of urgency to act in the marketplace. With the success of our recent programs among commercial and industrial end use systems, the approach to this sector will focus on capturing additional energy savings through the use of performance based rebates. Targeted at the largest commercial customers, these custom rebates will be designed to allow the consolidation of savings in complex, multiple end-use projects. We will also increase our marketing efforts to add value to customer efficiency improvement efforts through knowledge and information by use of consultant reports. The Utilities’ contract with Planergy, Tnc., a leading energy services company, will continue to make available "turnkey" project management services available to customers lacking in- house staff expertise. 4 oflO Experience with the traffic signal conversion (to light emitting diode technology), the "City Lights" retrofit project, and development of the "Water and Energy Management Plan for City Facilities" (under the City Manager’s Sustainability Committee), reveal significant potential for water and energy savings in institutional (local government and education) facilities. This translates to "bottom-line" savings for taxpayers. To the extent CPAU Public Benefit programs reduce energy costs for City of Palo Alto facilities and PAUSD schools, all Palo Alto citizens and businesses indirectly share the benefit of a lower tax burden. Therefore, to leverage the benefits of energy cost savings among the widest beneficiaries, separate programs will be introduced and funded for the "institutional sector" such as the school and City facilities. These programs will cross all DSM Public Benefit categories and address water and energy efficiency, new technologies for lighting, heating and cooling, alternative sources of supply, and other facility issues. Renewables has succeeded in sponsoring, through rebates, a market transformation in the residential market sector installation in Palo Alto. The energy crisis has resulted in greater than anticipated program participation in Palo Alto and there has been a significant penetration of the newest generation of these technologies. To manage future expenses in the Renewables rebate programs, current rebate levels be frozen and a maximum rebate "cap" per application will be developed. The program budget will be segmented into residential, commercial and institutional sectors, and offered on a first come-first served basis to assure fair and broad coverage and to continue to support market transformation in all customer segments. The rebate program will continue to be limited to qualifying Palo Alto ratepayers only as the Remote Renewable Program window for applications was closed in .January 2000. Low-Zncome programs will continue to fund discount utility rates for program participants and defray the operating costs for such programs. The Utilities Residential Rate Assistance Program (RAP) provides rate relief to residents lacking adequate financial resources to pay utility bills. Based on household income guidelines, seniors on fixed incomes and other residents with limited earning power can receive a 20 percent discount on their monthly water, gas, and electric bills. Research, Development and Demonstration (RD&D) has focused on new technologies for generation (photovoltaics) and transportation (electric vehicles). New areas for investigation and/or demonstration projects will include end-use technologies such as ground-coupled heat pumps (as a low-energy alternative to traditional air conditioning), and local distributed generation technologies (small scale distributed generation, cogeneration, fuel cells, catalytic combustion, or solar). 5 oflO ELECTRIC PUBLIC BENEFIT BUDGET ALLOCATIONS This table shows the actual Electric Public Benefit program category expenses and encumbrances from FY 2000-01, and the proposed allocation for FY 200:1-02. Proposed funding allocations may be modified due to changes in market demands. FY 2000-01 Actual Expenses plus encumbrances FY 2001-02 Proposed Allocation Percentages FY 2001-02 Proposed Total Dollars Demand Side Management (DSM) $5,250,000 Renewable Energy $7,90,000 Research, Development and Demonstration $220,000 Low Income $9,000 Total $6,350,000 80%13%5%1%100% $2,500,000 $434,000 $155,000 $10,000 $3,100,000 6 oflO Action Steps Goal I - Plan, implement and evaluate a comprehensive set of water and energy efficiency programs and services to meet the needs of residential customers. Objective 1: Maintain the "Efficiency Advantage" program for gas and electric efficiency measures until June, 2003. Reorganize the list of qualifying measures for the residential "Efficiency Advantage Program" to reflect incentives for only the most cost-effective, non-mandated efficiency standards for appliances and building construction. Promote technologies through a series of seasonal, limited time rebate offerings. Objective 2: Design and implement a one-year pilot program offering rebates for packages of efficiency improvements targeting Eichler homes by June, 2003. Objective 3: Establish a Task Force in cooperation with the Planning Division to draft new Palo Alto-based residential building standards greater than Title 24. Design new construction rebates to defray the cost of the proposed higher standards. Prepare a draft for senior management review by June, 2002. Goal II-Plan, implement and evaluate water and energy efficiency programs and services to meet the needs of commercial and industrial customers. Objective 1: Maintain the current "Commercial Advantage" program offering to commercial and industrial customers through June 30, 2002. Objective 2: Develop and implement a custom, performance based rebate program for industrial customers which allow the consolidation of savings in complex, multiple end-use projects, by December 31, 2001. Goal III- Plan, implement and evaluate water and energy efficiency programs and services to meet the needs of Palo Alto institutional facilities (local government and education). Objective 1: Develop a cost-effectiveness methodology based upon the reduction of operational (and therefore taxpayer) costs in institutional facilities (local government and PAUSD schools) in Palo Alto by December 1, 2001. Objective 2: Achieve the multi-departmental FY 2001-02 objectives of the "Water and Energy Management Plan for City Facilities (WEMP)" created under the auspices of the Sustainability Committee. This action plan provides 7 oflO direction and identified specific measures to be achieved as initial steps in reducing water and energy costs in City facilities. Develop and implement the water and energy efficiency programs specifically required in WEMP by June 30, 2002. Objective 3: Coordinate the integration of recommendations for "WEIVlP-II" into the FY2001-02 budget for the City’s Infrastructure Management Plan by December 31, 2001. Objective 4: Establish water and energy efficiency programs specifically targeting the reduction of operational (and therefore taxpayer) costs in Palo Alto Unified School District facilities by December 1, 2001. Objective 5: Develop and implement a grant funding program for the PAUSD which serves to support water and energy education in the classroom by June 30, 2002. Objective 6: Continue to provide expert consulting services through June 30, 2002, to support the City’s Transportation Division’s public awareness efforts targeting zero and low-emission vehicle transportation technologies. Goal IV-Provide water and energy efficiency technical support to address the unique facility needs of commercial and industrial customers. Objective 1: Select and manage a team of CPAU-retained energy efficiency consultants by December 31, 2001, which provide written efficiency recommendations for small, medium and large commercial, industrial, and institutional customers. Objective 2: Continue to fund, or co-fund, efficiency studies by customer selected expert consultants which provide written efficiency recommendations to small, medium and large commercial and industrial customers through June 30, 2003. Objective 3: Offer "turnkey" project management assistance to commercial and industrial accounts through Planergy, International, a leading energy services company under contract to CPAU, through June 30, 2002. Goal V-Streamline the water and energy efficiency program record keeping and reporting systems to provide timely and accurate reporting capabilities. Objective 1: Establish a new DSM and Public Benefit Tracking System to track and record the activity level, accomplishments and environmental impacts of all DSM and Public Benefit programs and services by December 1, 8 oflO 2001. Objective 2: Report the City’s actions in meeting the requirements to implement the Best Management Practices of the California Urban Water Conservation Council (annual report). Objective 3: Improve enforcement procedures for the Landscape Water Efficiency Standards by June 30, 2003: a) establish and implement a commercial customer water budgeting and usage tracking system in BANNER, and, b) implement promotional and educational events to influence customer awareness. Objective 4: Integrate the existing commercial landscape plan review and water budget tracking process into routine City plan check processes by June 30, 2002. Retain expert landscape plan consultants; route Building Permit Application (BPA) plans through the City’s Development Center; inspect irrigation water meters; notify customers of water budgets; and; track and report consumption variances. 9 oflO ATTACHMENT B CITY OF PALO ALTO UTILITIES ADVISORY COMMISSION MEETING MINUTES OCTOBER 3, 2001 Excerpt FY 2001-03 DEMAND SIDE MANAGEMENT AND PUBLIC BENEFITS PLAN Bechtel: The Council approved a proposed FY 2001, 2003 Demand Side Management and Public Benefits Plan. The staff is provided a summary and then the details of the plan and so we will proceed with discussion of this item. John, do you have a presentation? Ulrich: Excuse me, Tom Auzenne has joined me up here and he’s been responsible for putting this together as you recall some months ago, we discussed where is the public benefit dollars being spent and you recall we had discussion around decisions that were made a number of years ago on some including remote renewables, and so we promised to come back and tell you where the money has been spent and then probably more importantly, new ideas on how to use that money effectively in our current energy situation. How to best use it within Palo Alto. So we’re here this evening to go through that and show that we can have a Public Benefit and Demand Side Management Programs that are focused right on Palo Alto. Do you have anything to say or do you just want to answer questions? Auzenne: I can probably just answer questions, otherwise I’ll just make a speech and you don’t want that. Bechtel: I think the report is fairly clear. I’m looking at the table numbers. There are some great comparisons between what the actual expenses plus encumbrances were and what you’re proposing for this year. And basically we’re looking at a reduction in the number of dollars but that is all well characterized. Comments from commissioners? Mr. Dawes. Dawes: Thank you for coming and staying around Tom to answer these questions. I was, we basically put up $5 million from our reserves to fund a high payback DSM project last summer during the sky high rate period and I assume that those numbers are in the.2001 actual and forecast expenditures and with that in mind, I looked at the2001- 2002 numbers and thought, wow, if we had a special supplement for this last year of $5 million, net that out $1,350,000 coming from the, I’ll call it, the override on the utility bills mandated by 1890. The increase between $1,350,000 to $3,100,000 was very substantial and I wondered, I just want to verify that that whole $3,100,00 was coming out of the state mandated override on all our utility bills. Auzenne: Correct. Basically the source of all of our funds was either the $5 million allocation for the AEEP Program, or the Accelerated Energy Efficiency Program, or our base budget. And what you’re seeing is we actually did not expend at that time, all of the $5 million. So in the budget process, we carried that forward as welt, so we’ll be recapturing some additional savings with the unencumbered, unspent dollars that rolled forward. Dawes: Okay, so that includes previously allocated from that rate stabilization reserve. Second question is I had not dwelled upon the fact that we had a water and a gas public benefit fund, all be it small. I’m familiar with the state mandated electric, where does the budget come from for water and gas? Auzenne: The nomenclature Gas Public Benefits was created out of the Gas DSM budget. Let me back it up. In 1996, it was determined that none of our, at that time, Energy Efficiency Demand Side Management Programs were cost effective anymore given the low cost of our wholesale cost and it wasn’t passing any type of test that we could develop. However, that did not accurately reflect the feelings of the community in their interest in efficiency and demand side management, so Council at that time created a new formulation whereby somewhere between .75 of 1% and 1.25% of sales for the prior year were to be allocated for efficiency programs. That was for water and gas and electric and they were all called Demand Side Management Programs, DSM. As a function of AB1890, that essentially took that percentage and increased it to approximately 2.85 for electric and it mandated a change of the name to match what the state requirements were. So then our Electric DSM Program became Electric Public Benefits. We had good authority that the state was going to be doing the same thing for natural gas as well. So in anticipation, we changed the name of our Gas DSM Program to Gas Public Benefits. Well all of that has gone by the way side, but we still continue those programs funded at approximately 1% of sales. Dawes: And that is a separate line item on the bill? Auzenne: Correct. Not on gas. Dawes:So it just is allocated from revenues but not as a separate line item that the customerpays? Auzenne: Correct. Bechtel: Mr. Ferguson. UAC MINUTES 10/03/01 Ferguson: A little mystery question. I’m just curious which projects just barely failed to make the cut? Give me a flavor of what things you left off this list, that were "close but no public-benefit banana." Auzenne: Electric vehicles for one, as it is becoming a mature, if not a niche technology. The city fleet is already in the process of installing electric vehicles where appropriate, so that’s one example. We’ve reallocated some dollars among Demand Side Management Programs as you see in the body of the text. Something that you don’t see here that I’m still trying to figure out how to do is Water Ultra Low Flow Toilet Program because we are sticking towards what is called Best Management Practices of the California Urban Water Conservation Council and they’ve come out with a strong recommendation that all of their member agencies do that. As soon as I figure out how to do it on my limited budget, I’ll try and do that. Some of it was change as a result of earlier discussions with the Commission. The Remote Renewables obviously was closed some time ago. We are nov,, looking at other opportunities in town and so as we get into program design, these are major design elements without the "t"s crossed and the "i"s dotted, but we’ve heard some of the recommendations of the Commission and the public and Council on all of these issues. Baldschun: I would say that what we’re seeing here is a continuing shift of our Public Benefit Plan to provide more direct benefits within Palo Alto. One point I want to mention too is our Photovoltaic Program. We’re going to continue that. We’re going to continue to have rebates, but I think we’re going to be reducing those rebates, if I’m not incorrect. So you asked what changes and that’s a somewhat of a change in an existing program. Bechtel: Other questions? Mr. Carlson. Carlson: Yes, my question is a link to the previous item. I think within several years a substantially higher proportion of our power is going to be bought on the market, which means we’ll be paying higher prices for peak and that implies that now that we’ve got a little breathing room, to shift both Renewables and the Demand Side Management Programs in the direction of peak shaving. And I want to be sure that’s in the plan because you know we have a couple of years to implement these things and the more we can shave that peak, the better off we are. Is that there? Auzenne: It is there in two ways. One, you saw the beginnings of that with the voluntary Time of Use Program. Once you start establishing a correct price signal, then customers can respond to that. In some of the especially commercial industrial efforts that we’re going to be undertaking, is going to be focusing on customized projects primarily revolving around controls. To my mind, controls are the great untapped resource for a lot of this. With sufficiently robust and intelligent control systems, customers will be able to shift their consumption, to off peak less expensive times, so that is part of my thinking. Carlson: Okay. Great. UAC MINUTES 10/03/01 Bechtel: Thank you Tom. Other questions? This is, does require a vote of the Commission to recommend the action. Do I hear a motion? Carlson: I move that we approve the recommendation. Bechtel: Mr. Carlson moves, motion to approve our recommendation to the Council. Do I hear a second? Rosenbaum: Second. Bechtel: Second by Mr. Rosenbaum. And no other discussion? All in favor, please signal by saying "I". All Commissioners: I Bechtel: Opposed? Motion passes unanimously. Thank you very much. A good job, I think, of addressing our concerns and of course your astute planning for the future. UAC MINUTES 10/03/01