HomeMy WebLinkAboutStaff Report 4169
City of Palo Alto (ID # 4169)
City Council Staff Report
Report Type: Informational Report Meeting Date: 10/21/2013
City of Palo Alto Page 1
Summary Title: Quarterly Utilities Update
Title: City of Palo Alto Utilities Quarterly Update for the Fourth Quarter of
Fiscal Year 2013
From: City Manager
Lead Department: Utilities
This report is provided for the Council’s information and no action is required.
Executive Summary
This update, on the City of Palo Alto’s electric, fiber, gas, wastewater collection, and water
utilities, efficiency and communications programs, legislative and regulatory issues, and a utility
financial summary, is for the Council’s information. Operational performance metrics for Fiscal
Year 2013 are provided in this fourth quarter update. This update has been prepared to keep
the Utilities Advisory Commission (UAC) and Council apprised of the major issues that are facing
the water, gas, electric, wastewater collection and fiber utilities. The UAC received this
informational report at its October 2, 2013 meeting.
Attachments:
Attachment A: Quarterly Utilities Update for Fourth Quarter of FY 2013 (PDF)
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Utilities Update for Fourth Quarter of FY 2013
October 2013
Table of Contents
I. Electricity ...................................................................................................................... 1
Electric Supplies .............................................................................................................................. 1
Electric Usage .................................................................................................................................. 2
Carbon Neutral Plan ........................................................................................................................ 3
Electric Market Price History and Projections ................................................................................ 3
Electric Transmission Alternatives .................................................................................................. 4
Cap‐and‐Trade: Use of Allowance Revenue ................................................................................... 5
Electric Budget and Portfolio Performance Measures ................................................................... 5
II. Natural Gas ................................................................................................................. 11
Gas Supply Portfolio ...................................................................................................................... 11
Gas Usage ...................................................................................................................................... 12
Gas Market Price History and Projections .................................................................................... 13
Gas Budget and Portfolio Performance Measures ....................................................................... 14
III. Water ......................................................................................................................... 18
Water Availability .......................................................................................................................... 18
San Francisco Public Utilities (SFPUC) Activities ........................................................................... 18
Bay Area Water Supply and Conservation Agency (BAWSCA) Activities ...................................... 18
Water Usage ................................................................................................................................. 19
Regional Water Usage Trends ....................................................................................................... 19
Water Budget Performance Measures ......................................................................................... 20
IV. Fiber Optics ................................................................................................................ 21
Commercial Dark Fiber Service ..................................................................................................... 21
V. Public Benefit, Demand Side Management Programs and Communications ............... 21
Renewable Energy Programs ........................................................................................................ 21
Energy and Water Efficiency Programs ........................................................................................ 22
Communications Update .............................................................................................................. 24
VI. Research and Development and Innovation ............................................................... 25
Emerging Technologies Program .................................................................................................. 25
Pilot Project for Building Energy Management System in Small/Medium Commercial Buildings 26
Assessing Long Term Impact of Electric Vehicles on Electric Distribution System ....................... 26
Smart Grid Pilot Projects ............................................................................................................... 26
VII. Legislative and Regulatory Issues ................................................................................ 27
Federal Legislative Issues .............................................................................................................. 30
State Electric Regulatory Proceedings .......................................................................................... 31
VIII. Utility Financial Summary ........................................................................................... 33
Electric Utility ................................................................................................................................ 33
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Gas Utility ...................................................................................................................................... 41
Water Utility .................................................................................................................................. 47
Wastewater Collection Utility ....................................................................................................... 51
Fiber Optic Utility .......................................................................................................................... 55
Utility Reserves Summary ............................................................................................................. 56
IX. Operations .................................................................................................................. 58
Reliability Impact Measures .......................................................................................................... 58
List of Figures
Figure 1: Citywide Electric Usage History ...................................................................................... 2
Figure 2: Electric Supply Resource Projection, 2013 to 2015 – as of September 4, 2013 ............. 3
Figure 3: Northern California Peak Electric Prices – as of September 4, 2013 .............................. 4
Figure 4: Electric Consumption ...................................................................................................... 6
Figure 5: Electric Supply Cost – Adjusted Budget vs. Actual .......................................................... 6
Figure 6: FY 2013 Electric Supply Costs by Category – Budget vs. Actual ..................................... 7
Figure 7: FY 2013 Electric Load and Resource Balance .................................................................. 8
Figure 8: FY 2013 Electric Supply Resources – Budget vs. Actual .................................................. 8
Figure 9: FY 2013 Electric Market Prices – Budget vs. Actual ........................................................ 9
Figure 10: FY 2013 Electric Forward Market Purchase Cost vs. Spot Market.............................. 10
Figure 11: Fixed‐Price Gas Commitments ..................................................................................... 11
Figure 12: Citywide Gas Usage History ........................................................................................ 12
Figure 13: Natural Gas Prices – Historical and Projected ............................................................ 13
Figure 14: Natural Gas Cost – Actual vs. Market Benchmarks .................................................... 14
Figure 15: Redwood Pipeline Cost vs. Market Benchmarks ........................................................ 15
Figure 16: Natural Gas Consumption – Budget vs. Actual ........................................................... 16
Figure 17: Natural Gas Supply Cost – Budget vs. Actual .............................................................. 17
Figure 18: FY 2013 Natural Gas Prices ($/MMBtu) – Expected vs. Actual ................................... 17
Figure 19: Citywide Water Usage History .................................................................................... 19
Figure 20: Water Consumption – Budget vs. Actual .................................................................... 20
Figure 21: Water Cost – Budget vs. Actual .................................................................................. 20
Figure 22: FY 2013 Electric Distribution System Service Reliability Indices and Definitions ........ 59
Figure 23: Gas System O&M – Service Installations ..................................................................... 61
Figure 24: Gas Main Leaks By Type of Pipe .................................................................................. 62
Figure 25: Gas System O&M Mainline Break Repairs ................................................................... 63
Figure 26: Gas Main Shutdowns and Customers Affected ........................................................... 64
Figure 27: Gas Service Disruptions by Cause ................................................................................ 65
Figure 28: Water Main Leaks by Type of Pipe .............................................................................. 66
Figure 29: Unplanned Water Service Disruption .......................................................................... 67
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List of Tables
Table 1: Renewable Energy Contracts and Project Start Dates ...................................................... 1
Table 2: Use of Cap‐and‐Trade Allowance Auction Revenue and Expenditures ............................ 5
Table 3: Electric Retail Sales and Rate .......................................................................................... 33
Table 4: Electric Operating Activity ............................................................................................... 34
Table 5: Electric Supply Rate Stabilization Reserve ...................................................................... 35
Table 6: Electric Distribution Rate Stabilization Reserve .............................................................. 36
Table 7: Electric Capital Improvement Project Reserve ............................................................... 37
Table 8: Residential Electric Bill Comparison ................................................................................ 40
Table 9: Commercial Electric Bill Comparison .............................................................................. 40
Table 10: Gas Retail Sales and Rate .............................................................................................. 41
Table 11: Gas Operating Activity .................................................................................................. 41
Table 12: Gas Supply Rate Stabilization Reserve .......................................................................... 42
Table 13: Gas Distribution Rate Stabilization Reserve .................................................................. 43
Table 14: Gas Capital Improvement Project Reserve ................................................................... 44
Table 15: Residential Natural Gas Bill Comparison ....................................................................... 46
Table 16: Commercial Natural Gas Bill Comparison ..................................................................... 46
Table 17: Water Retail Sales and Rate .......................................................................................... 47
Table 18: Water Operating Activity .............................................................................................. 48
Table 19: Water Rate Stabilization Reserve .................................................................................. 48
Table 20: Water Capital Improvement Project Reserve ............................................................... 49
Table 21: Residential Water Bill Comparison ............................................................................... 51
Table 22: Wastewater Operating Activity ..................................................................................... 51
Table 23: Wastewater Collection Rate Stabilization Reserve ....................................................... 52
Table 24: Wastewater Capital Improvement Project Reserve ..................................................... 53
Table 25: Residential Wastewater Collection (Sewer) Bill Comparison ....................................... 55
Table 26: Fiber Rate Stabilization Reserve .................................................................................... 56
Table 27: Utilities Reserves Summary........................................................................................... 57
Utilities Update for Fourth Quarter of FY 2013
October 2013
1
I. Electricity
Electric Supplies
Western Area Power Administration Issues
For Fiscal Year (FY) 2013, the Western Base Resource supply was 365 Gigawatt‐hours (GWh),
which is right in line with the long‐term average level. Assuming median precipitation levels
going forward, Western is projected to deliver 322 GWh in FY 2014 (12% below long‐term
average levels) and 370 GWh in FY 2015 (2% above long‐term average levels).
Calaveras Hydroelectric Project Issues
Calaveras generation for FY 2013 was just 61 GWh, which is 53% below the long‐term average
level. Assuming median precipitation levels going forward, Calaveras is projected to deliver 87
GWh in FY 2014 (34% below long‐term average levels), and 117 GWh in FY 2015 (11% below
long‐term average levels).
Renewable Energy Contract Summary
The Johnson Canyon landfill‐gas‐to‐energy (LFGTE) project is the most recent renewable energy
supply to begin delivering renewable energy. One aspect of renewable energy procurement is
that the projects often take more time than expected to build and work through planning and
construction issues, such as completing the studies required for interconnecting with PG&E’s
system. Table 1 lists the contracts that the City has executed for renewable energy supplies
and the actual date that the project commenced energy deliveries, compared to the originally
anticipated start date.
Table 1: Renewable Energy Contracts and Project Start Dates
Contract
Executed
Originally Anticipated
Start Date
Actual
Start Date
Small Hydro Before 2000 N/A N/A
High Winds Nov. 2004 Dec. 2004 Dec. 2004
Santa Cruz LFGTE Nov. 2004 June 2007 Feb. 2006
Shiloh Wind Oct. 2005 Dec. 2005 June 2006
Ox Mountain LFGTE Jan. 2005 Aug. 2007 April 2009
Keller Canyon LFGTE Aug. 2005 Dec. 2007 Aug. 2009
Butte County LFGTE Nov. 2008 Sept. 2010 CANCELLED
Johnson Canyon LFGTE Aug. 2009 Dec. 2010 May 2013
San Joaquin LFGTE May 2010 Jan. 2013 Nov. 2013
Crazy Horse LFGTE May 2010 Jan. 2013 CANCELLED
Western Geo geothermal Apr. 2011 Aug. 2013 CANCELLED
Brannon Solar Nov. 2012 Aug. 2014 N/A
Elevation Solar June 2013 Dec. 2016 N/A
W. Antelope Solar June 2013 Dec. 2016 N/A
Frontier Solar June 2013 Dec. 2016 N/A
Utilities Update for Fourth Quarter of FY 2013
October 2013
2
Electric Usage
Figure 1 shows the City’s electric use from Fiscal Year (FY) 1986 through FY 2013. As shown,
consumption peaked in FY 1998.
Figure 1: Citywide Electric Usage History
Electric Load and Resource Balance
The size of the committed and planned market purchases over the next three calendar years
(CYs) (shown in Figure 2 below) reflects a below average level of hydroelectric output, as
discussed above. The projections below incorporate the output of the 20 megawatt (MW)
Brannon Solar project, which is expected to begin operating in August 2014.
For CYs 2013 through 2015, committed fixed‐price forward market purchases currently account
for approximately 510 GWh, which represents 17% of the City’s total load for that three‐year
period. Planned market purchases represent 15% of the City’s total load for this period. Long‐
term resources (everything but forward and planned market purchases) currently account for
the remaining 68% of the City’s total load over this three‐year period.
Utilities Update for Fourth Quarter of FY 2013
October 2013
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Figure 2: Electric Supply Resource Projection, 2013 to 2015 – as of September 4, 2013
Carbon Neutral Plan
For calendar year 2013, existing long‐term carbon neutral resources (hydroelectric resources
and renewable power purchase agreements) are expected to supply 59% of the City’s total
electric load. Renewable Energy Certificates (RECs) will be procured for the portion of the
supply portfolio sourced through market purchases, which are assumed to originate mainly
from natural gas generation resources. The actual amount and cost of the RECs to be procured
will be assessed in early 2014. Although the current dry hydro conditions will result in a larger
than average volume of market purchases (and RECs), the estimated cost of achieving carbon
neutrality for 2013 is only $0.5 million due to the fact that REC prices are currently very low ($1
to $1.50/MWh). This total cost equates to an average retail rate impact of 0.05 cents per
kilowatt‐hour (₵/kWh), which is well within the Council‐approved rate impact limit for the
Carbon Neutral Plan of 0.15 ₵/kWh.
Electric Market Price History and Projections
As of September 4, 2013, the price for on‐peak energy for the prompt month (October 2013) in
Northern California was $45 per megawatt‐hour (MWh), while the price for November was
$44/MWh. These values are an average of $3/MWh lower than they were at the time of the
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Utilities Update for Fourth Quarter of FY 2013
October 2013
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last quarterly report.1 On‐peak prices for calendar year strips range from $45/MWh for 2014
up to $53/MWh for 2018. These longer‐term prices are also approximately $3‐$5/MWh lower
than they were at the time of the last quarterly report. Figure 3 below illustrates historical
monthly prices and projected monthly forward prices for Northern California from 2004
through 2017. The forward prices for 2014 and beyond are for a flat annual calendar year
product.
Figure 3: Northern California Peak Electric Prices – as of September 4, 2013
Electric Transmission Alternatives
Staff continues to communicate with staff at the California Independent System Operator
(CAISO) and PG&E on the status of the SLAC/Palo Alto transmission project. The CAISO is ready
to evaluate the SLAC project against PG&E’s alternative proposal to provide a second
transmission corridor connection to Palo Alto from south of Palo Alto. In the meantime, CPAU
is working with PG&E on their interim requirements for a special protection scheme, which
would drop a portion of Palo Alto load under certain transmission contingencies. CPAU’s
consultants reran the cost/benefit analysis, and the preferred routing of the SLAC connection
has been identified. Next steps are to finalize the reliability assessment for SLAC and start
1 Market prices for the previous quarterly report were from May 31, 2013.
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Utilities Update for Fourth Quarter of FY 2013
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discussions with PG&E and the CAISO on any mitigation measures that may be required and
principles for allocating the costs of such measures.
Cap‐and‐Trade: Use of Allowance Revenue
So far, CPAU has received $2.7 million in revenue from auctioning the emissions allowances
allocated to its electric utility. The City Council adopted a resolution on December 10, 2012
(Staff Report 3342) that identified the following permissible uses for allowance revenue: 1) the
cost of RECs to fulfill carbon neutrality goals, 2) RPS‐eligible renewable energy purchases above
State mandated purchases, 3) energy efficiency costs that are not funded by Public Benefits
collections, and 4) rebates to electric ratepayers.
For FY 2013, because there were no carbon neutral costs (carbon neutral costs for calendar
year 2013 will be incurred in FY 2014), allowance revenues were split between renewable
energy purchases and energy efficiency. There was a surplus of allowance revenue over
expenditures in FY 2013. This amount is available for expenditure in FY 2014. As the City’s
expenditures on energy efficiency and renewable energy increase as projects come online and
additional programs are launched, this excess revenue will be drawn down. Table 2 shows the
expenses and revenues for FY 2013 and FY 2014. Expenditures for FY 2014 are based on
forecasted costs and quantities of renewable energy delivered. Actual funding amounts will
vary.
Table 2: Use of Cap‐and‐Trade Allowance Auction Revenue and Expenditures
FY 2013 FY 2014
Projected Allowance Revenue
Annual Projected Revenue 2,712,927 4,296,000
Prior Year Carryover 0 527,093
Total Allowance Revenue 2,712,927 4,823,093
Eligible Expenditures Actual
Expenditures
Actual Funding
from Auction
Revenues
Projected
Expenditures
Projected
Funding from
Auction Revenues
Carbon Neutral REC Purchases 0 0 521,000 521,000
Additional Renewables 879,701 879,701 3,141,260 2,873,093
Additional Energy Efficiency 1,306,133 1,306,133 1,429,000 1,429,000
Total Expenditures 2,185,834 2,185,834 5,091,260 4,823,093
Remaining Funds 527,093 0
Electric Budget and Portfolio Performance Measures
Figure 4, Figure 5, and Figure 6 below show the City’s electric consumption by month as well as
the supply cost by month and by cost category. Consumption is in line with the revised budget
forecast, which is 7% below the adopted budget forecast. The aggregate supply cost for the
FY 2013 was $63.8 million, approximately $1.1 million less than the adjusted budget of $64.9
million. The revised budget includes a mid‐year adjustment reducing supply costs by
approximately $6 million. The lower costs for the year so far are due to lower than expected
Utilities Update for Fourth Quarter of FY 2013
October 2013
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transmission costs, fewer market purchases than expected due primarily to the fact that Palo
Alto electric load was less than forecasted in the budget, and also due to large one‐time
interconnection costs related to new renewable projects that had been expected to come due
in FY 2013, but which did not.
Figure 4: Electric Consumption
Figure 5: Electric Supply Cost – Adjusted Budget vs. Actual
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Utilities Update for Fourth Quarter of FY 2013
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Figure 6: FY 2013 Electric Supply Costs by Category – Budget vs. Actual
Figure 7 and Figure 8 below summarize the City’s electric supply sources for FY 2013. Due to a
dry spring, hydroelectric generation has been low compared to the budget. For March through
June this was accentuated by market prices that were higher than budget. These two factors
were offset by savings due to a delay in the operation date of the Ameresco Johnson Canyon
project. The price for this project is above current market prices, and the savings due to the
delay in the operation of this project offset the additional costs from the low hydroelectric
generation and higher market prices. The Johnson Canyon project commenced operation in
May 2013.
Utilities Update for Fourth Quarter of FY 2013
October 2013
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Figure 7: FY 2013 Electric Load and Resource Balance
Figure 8: FY 2013 Electric Supply Resources – Budget vs. Actual
Utilities Update for Fourth Quarter of FY 2013
October 2013
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Figure 9, below, shows that market electricity prices were above budget projections for the last
four months of the fiscal year, though they tracked closely for the first eight months.
Figure 9: FY 2013 Electric Market Prices – Budget vs. Actual
Utilities Update for Fourth Quarter of FY 2013
October 2013
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Figure 10 compares the current strategy of making laddered fixed‐price forward purchases to a
strategy of buying all market power in the spot market. As of the end of March 2013 the cost of
energy purchased through the City’s Electric Master Agreements for FY 2013 was roughly
equivalent to what it would have cost to purchase the same energy at spot market prices.
There were no forward market purchases for Q4 of FY 2013.
Figure 10: FY 2013 Electric Forward Market Purchase Cost vs. Spot Market
Utilities Update for Fourth Quarter of FY 2013
October 2013
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II. Natural Gas
Gas Supply Portfolio
Figure 11 shows the completed fixed‐price purchases compared to the load as of August 20,
2013. While fixed‐price gas purchases have ceased, prior commitments for fixed‐price gas
purchases remain through October 2013. Currently, fixed‐price purchases make up around 2%
of load for the remainder of FY 2014.
Figure 11: Fixed‐Price Gas Commitments
Utilities Update for Fourth Quarter of FY 2013
October 2013
12
Gas Usage
Figure 1 shows the City’s natural gas use from FY 1971 through FY 2013. As shown,
consumption peaked in FY 1973. Natural gas use for FY 2013 was about 4.5% below usage in FY
2012.
Figure 12: Citywide Gas Usage History
Utilities Update for Fourth Quarter of FY 2013
October 2013
13
Gas Market Price History and Projections
Gas prices at PG&E Citygate have declined by nearly 10% since the last UAC quarterly update.
Monthly gas price index at PG&E Citygate settled at $3.81 per million British Thermal Unit
(MMBtu), $3.76/MMBtu, and $3.88/MMBtu for July through September 2013 respectively.
Forward gas prices at PG&E Citygate currently average at $3.88/MMBtu for the remaining
months of 2013 and $4.12/MMBtu for 2014, and are projected to remain below $5.00/MMBtu
through 2020.
Figure 13 below shows historical monthly bidweek index prices and forward natural gas prices
at PG&E Citygate as of August 20, 2013. Also shown in Figure 13 are high and low ranges for
the projected future prices. The high and low prices are derived using the market’s perception
of future price volatility.
Figure 13: Natural Gas Prices – Historical and Projected
Utilities Update for Fourth Quarter of FY 2013
October 2013
14
Gas Budget and Portfolio Performance Measures
The monthly average natural gas purchase cost is compared to different market benchmarks in
Figure 14. The figure compares the actual commodity purchase costs for FY 2013, which
includes some purchases made under the City’s former gas purchasing strategy (the gas
laddering strategy) to the current strategy of purchasing gas indexed to monthly or daily PG&E
Citygate spot market prices. The cumulative actual cost of gas for the fiscal‐year‐to‐date is
$900,000 (8%) higher than if the gas were purchased at monthly index prices and $1.9 million
(18%) higher than if CPAU had purchased gas at the daily index prices. The last delivery month
for which forward purchases were made under the former strategy is October 2013, after which
the CPAU cost of gas will closely track the monthly index price.
Figure 14: Natural Gas Cost – Actual vs. Market Benchmarks
Value of CPAU’s Share of Redwood Pipeline Capacity
The City’s share of the Redwood pipeline provided a net savings of approximately $52,000 in
the fourth quarter of FY 2013. This is the difference between the value of Redwood capacity of
$168,000 (the difference of month‐ahead index prices at both ends of the Redwood pipeline in
Malin, Oregon and PG&E Citygate) and the transportation cost of using the Redwood pipeline
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Utilities Update for Fourth Quarter of FY 2013
October 2013
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of $116,000. Figure 15 below shows the cost of Redwood transmission compared to the value
at month‐ahead spot market prices as well as daily spot market prices.
Figure 15: Redwood Pipeline Cost vs. Market Benchmarks
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Utilities Update for Fourth Quarter of FY 2013
October 2013
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Natural Gas Consumption and Costs: Budget vs. Actual
Figure 16 and Figure 17 below demonstrate natural gas use and supply costs in comparison
with the FY 2013 budget. Natural gas use for FY 2013 was 6% below the budget forecast, but
costs were 18% ($2.9 million) lower than budgeted amounts. The lower costs were primarily
due to gas prices that were lower than in the budget forecast at PG&E Citygate (CG) (see Figure
18) combined with the fact that a larger percentage of the City’s gas purchases were made in
the month‐ahead or day‐ahead market. These lower gas supply costs were passed directly to
consumers in the form of lower commodity rates.
Figure 16: Natural Gas Consumption – Budget vs. Actual
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Utilities Update for Fourth Quarter of FY 2013
October 2013
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Figure 17: Natural Gas Supply Cost – Budget vs. Actual
Figure 18: FY 2013 Natural Gas Prices ($/MMBtu) – Expected vs. Actual
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Utilities Update for Fourth Quarter of FY 2013
October 2013
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III. Water
Water Availability
Precipitation at Hetch Hetchy for 2013 Water Year to date (October 1, 2012 through August 31,
2013) is around 70% of average. Recent projections indicate total storage for the system will
end the year approximately 70,000 to 100,000 acre‐feet (AF) lower than the previous year. No
calls for conservation are anticipated at this time.
San Francisco Public Utilities (SFPUC) Activities
Although there has been ash deposition on the surface of Hetch Hetchy reservoir due to the
Rim Fire, water quality throughout the fire remained within normal operational parameters and
no operational or water quality changes were experienced.
Bay Area Water Supply and Conservation Agency (BAWSCA) Activities
After a nation‐wide recruitment, BAWSCA announced that Ms. Nicole Sandkulla was appointed
the next CEO/GM for the agency. Ms. Sandkulla has been a staff member with BAWSCA for the
past 14 years, and has successfully represented the interests of BAWSCA’s member agencies
and their customers with the SFPUC and its staff, legislators in Sacramento, the Association of
California Water Agencies, and other California water‐industry organizations.
Utilities Update for Fourth Quarter of FY 2013
October 2013
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Water Usage
Figure 19 shows the City’s water use from FY 1974 through FY 2013. As shown, water
consumption peaked in FY 1976 and dipped during, and recovered after, droughts. FY 2013
water consumption was about the same as FY 2012.
Figure 19: Citywide Water Usage History
Regional Water Usage Trends
The latest SFPUC Regional Water Consumption Report details the current level of water usage
relative to the index period (5‐year average from 2008 to 2012). Total system consumption for
the January 1 to July 14th time period is slightly below the index period. Palo Alto’s
consumption for the same period is 3.87% above the index period.
Utilities Update for Fourth Quarter of FY 2013
October 2013
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Water Budget Performance Measures
Figure 20 and Figure 21 below compare actual water consumption and water supply cost to the
budget projections. Actual water use for FY 2013 was 2% higher than budget and actual supply
costs were 4% above the budget.
Figure 20: Water Consumption – Budget vs. Actual
Figure 21: Water Cost – Budget vs. Actual
Utilities Update for Fourth Quarter of FY 2013
October 2013
21
IV. Fiber Optics
Commercial Dark Fiber Service
The total number of commercial dark fiber customers is 89, for a net increase of 11 customers
since the end of FY 2012. The total number of active dark fiber service connections serving
commercial customers and the City is 222 (some customers have multiple connections). 78% of
dark fiber license revenues are generated by commercial customers. In FY 2013, 28 new service
connections to existing and new customers were completed while 11 dark fiber service
connections were disconnected.
The Fiber Utility continues to add capital improvements in the form of upgrades of additional
fiber in congested areas as well as areas of predicted growth. Two examples are the two
entrance points to Stanford campus. The Utility has also used capital to add six new
connections to multi‐tenant buildings to make it easier and more affordable for customers to
connect.
Palo Alto Unified School District (PAUSD) Fiber Project
The project to expand fiber optic cable network to 18 facilities of the Palo Alto Unified School
District got underway in August. Most of the substructure work for the PAUSD fiber project has
been completed. Two Stanford campus fiber access points have been recently reinforced to
support more connections to the Stanford campus and the Stanford Research Park, in addition
to the Nixon and Escondido schools located on Stanford property. The target date for
completion of the project is the end of January 2014.
Letters were sent to all impacted school principals so that parent groups could be informed
about what was going on. Work hours for these projects were set so as to avoid disrupting
traffic flow during school arrival and departure times.
V. Public Benefit, Demand Side Management Programs and
Communications
Renewable Energy Programs
PaloAltoGreen
On September 9, Council approved the recommendation from the UAC and the Finance
Committee to suspend the “full needs” part of the voluntary PaloAltoGreen and to maintain the
Commercial Customer Block Program with a reduced price of $2 per 1,000 kWh block, or
$0.02/kWh. Additionally, Council directed staff to develop a PaloAltoGreen Gas Program to
provide an opportunity for participants to reduce or eliminate greenhouse gas emissions
related to their natural gas usage, to be implemented by July 2014. Finally, Council directed
staff to return with a recommendation by March 2014 on how to allocate surplus revenues, if
any, associated with the PaloAltoGreen program.
Utilities Update for Fourth Quarter of FY 2013
October 2013
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Solar Water Heating Program
This program has paid rebates for 40 residential and two commercial solar water heating
installations through June 2013, despite gas price conditions that make this measure have an
extremely long payback. Planned program modifications are being developed to match the
Investor‐Owned Utility solar hot water heating program. Changes include increasing rebate
levels for Low Income Multi‐Family domestic SWH systems and expanding equipment eligibility
to include commercial and multifamily space heating and cooling.
Solar Photovoltaic (PV Partners) Program
The PV Partners Program provided over $8.94 million in rebates to 538 customers for installing
3.75 MW of photovoltaic systems from 1999 through June 2013.
Palo Alto CLEAN Program
No applications have been submitted. Staff continues to market the program to the solar
industry and CPAU customers and building owners.
Energy and Water Efficiency Programs
Home Energy and Water Reports
The Home Energy Reports are being sent to about 17,700 customers every other month,
through June 2016. This behavior‐based program continues to be our most cost‐effective
residential program. In April, Council approved a new 3‐year contract that will result in the
ability to also produce “Home Water Reports”. A control group of approximately 5% of
residential accounts has been established to benchmark results of the program. The Home
Energy Reports and the Home Water Reports will be separate and distinct until the vendors can
integrate the two platforms together. The first reports are scheduled to be delivered this fall.
Smart Energy Rebate Program
The City provides rebates to residents who install energy efficient appliances and equipment in
their homes or on their property. Among these are home heating and cooling systems,
insulation, water heaters, clothes washers, pool pumps, power strips, refrigeration and
refrigerator/freezer recycling. A total of 81 applications were processed in this quarter, for a
savings of 15,573 kWh and 1,869 therms. For FY 2014, the program includes rebates for mini‐
split ductless air‐source heat pumps in place of traditional air conditioning units.
LED Lighting Program
Each winter holiday season, CPAU offers a LED holiday light exchange. We have ordered
sufficient holiday LED lights for the upcoming season. This fall, CPAU will host an LED light bulb
rebate program and promote it in conjunction with a public art display of a large tree created
with LED bulbs, named the “Aurora.” A vendor is expected to be selected by mid‐September.
Utilities Update for Fourth Quarter of FY 2013
October 2013
23
Green@Home
Through a volunteer‐driven program with Acterra, CPAU offers free in‐home audits,
personalized efficiency tips and direct installation of CFLs, faucet aerators and home energy
monitors (for higher consumption customers). Over 75 homes were surveyed this quarter.
Combined Home Energy & Water Audits
We have launched two pilot programs testing out the efficacy of combining both water and
energy audits into one home visit. The total pilot program will host about 225 homes, and is
expected to be completed by late October. The knowledge gained by these pilots with help us
to make an informed decision when we go out to bid for our next round of water and energy
audit contracts.
Low Income Program, Residential Energy Assistance Program (REAP)
As the economy improves, customer involvement declines in this program. Currently all
moderate and high consumers in this program have received education, weatherization and
lighting upgrades. CPAU replaced a water heater on an emergency basis, installed attic
insulation and 4 new HVAC systems for some very grateful and needy residents. We are now
focusing on targeting fixed income recipients with full blown‐in insulation installation to reach
those who have need before the winter season approaches.
Water Conservation Programs
The City continues its delivery of water conservation and efficiency programs through a cost‐
sharing agreement with the Santa Clara Valley Water District (SCVWD). This program includes
free indoor and outdoor water audits for customers and rebates for upgrading or replacing
water‐using fixtures such as toilets, clothes washers, commercial food service equipment,
irrigation hardware, turf grass conversions and customized projects for facility process
improvements. A total of 147 customer audits and rebates were completed in this quarter. A
new three‐year contract began July 1 and will include new programs for large landscape
customers, graywater system rebates and delivery of Home Water Reports.
New Construction Assistance
The residential new construction rebate program, which provides incentives to make efficiency
improvements beyond what is required in the building codes, has seen a marked increase in the
number of applications. A 37‐unit development project that is close to completion will be
awarded over $100,000 in rebate funds for green building enhancements. Another 30
applications are pending until construction is complete.
Key and Major Accounts
Key Account Representatives continue to work with large customers on efficiency,
conservation, rate and fiber installation issues. Key Account representatives recruited
customers to participate in the 2013 Summer Demand Response program.
Utilities Update for Fourth Quarter of FY 2013
October 2013
24
Small and Medium Commercial Programs
There are currently three energy efficiency programs tailored specifically for small to medium‐
sized commercial customers. These include the Right Lights Plus, Palo Alto Hospitality and Keep
Your Cool programs. These programs cover a wide variety of measures for multiple business
types including: office buildings, restaurants, hotels, nursing facilities, medical and dental
offices, grocery, liquor, and convenience stores. To date, 58 commercial customers have
participated in the various programs.
General Business Programs
Business customers are offered rebates for many types of equipment and facility upgrades,
including: lighting, motion sensors, refrigeration, motors, pumps, boilers, pipe insulation,
commercial food service equipment, vending, LED exit signs, computer power management
software, fume hood and other laboratory equipment, and custom electric and natural gas
saving projects. Large business customers may receive building commissioning assistance
through the third‐party contractor, Enovity, while all business customers can apply for
prescriptive or performance‐based rebates through the Commercial Advantage Program.
Thirteen rebates were awarded this quarter for a total savings of 3,977,663 kWh
Education and Outreach Activities
Every quarter, the Utility Marketing Services (UMS) group hosts a variety of free residential
workshops on topics ranging from water‐efficient landscaping to green building and solar PV
technologies. This quarter, the City offered two workshops on irrigation and solar PV, as well as
an inaugural community fun run and walk to raise awareness about water resources and
conservation. Staff also coordinated several tours or open houses of the Palo Alto Eco Home for
various community groups, schools, camps and a Chinese delegation. Staff participates in
multiple tabling events throughout the year at community and business fairs to promote
residential and commercial programs, pilots, and services. Additional training and/or outreach
efforts are aimed at the business community, including major and key account customers.
Communications Update
This section does not detail all recent ongoing communications outreach activity and media
coverage but summarizes highlights from major campaigns and noteworthy events.
Annual Gas Safety Survey
Quest Fore consultants working for the American Public Gas Association conducted an annual
telephone survey in Palo Alto during August. Over 19,000 homes were contacted to get a
statistically significant sample size of roughly 1,100 complete responses. The survey asks a
variety of questions to assess gas safety awareness among customers, local excavators and
public officials. This year’s results included some substantial improvements over last year,
including:
Up from 72% to 91% for the number of customers who know CPAU is their gas provider.
Up from 48% to 59% for the number of customers who remember receiving gas safety
information in the past year
Utilities Update for Fourth Quarter of FY 2013
October 2013
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Up from 51% to 61% for the number of customers who remember seeing gas safety
information in their utilities bill
For other questions, the already high numbers held steady, such as “able to recognize the smell
of a gas leak” (84%) and “know to leave the house and call 911 if a leak is suspected” (96%).
Youth Safety Program
Motivated by participation in numerous safety/emergency preparedness events in September,
staff designed a youth outreach program, using a Utilities Safety Detective Kit to provide
children with an engaging activity to learn gas, electric and water safety principles as well as
identify safety problems requiring attention in their own home.
Summer Communications Intern Output
With help from a talented and enthusiastic crop of summer interns, CPAU now has a growing
video library of short films on safety and efficiency topics, as well as a series of 3‐D display
models depicting renewable energy sources and gas/sewer/electric safety issues. These items
will all be used in public workshops and youth outreach activities. The new videos will be run
on Cable TV, along with CPAU’s already running Carbon‐Neutral Electricity Video.
PG&E Projects
CPAU continues to handle public communications regarding the numerous projects related to
PG&E’s three big gas transmission lines that run through Palo Alto. The major pipeline
installation projects are now completed. Ongoing projects include the construction of an
inspection device “launching” facility on East Bayshore Rd and the above‐ground surveying to
identify and remove vegetation or structures inappropriately located above any of their three
transmission pipelines as they run through town.
VI. Research and Development and Innovation
Emerging Technologies Program
The CPAU Innovation Test Bed Program (www.cityofpaloalto.org/UTLInnovation) provides the
opportunity for local businesses to submit proposals to CPAU for review and potential pilot
testing. Since its inception in June 2012, the Innovation Test Bed Program has received 16
applications as of end of July 2013. Of these applications: 3 were accepted and are in various
stages of progress; 7 were declined because the proposals did not meet the program objectives
or the applicant lost interest; and 6 applications are still under consideration.
A partnership agreement is currently in place with Enlighted Inc. to test the company’s
intelligent lighting system at the City Hall Garage at 250 Hamilton. The Enlighted system is
expected to allow the City’s Facility staff control the light levels of existing fluorescent T8
fixtures to optimize light output while reducing energy usage. Installation of the Enlighted
system is expected to be completed by end of September 2013 and will remain in place for a 6
month test period.
Utilities Update for Fourth Quarter of FY 2013
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26
Another partnership agreement is with Siemens Industry, Inc. to test LED lamps from NEXT
Lighting as fluorescent T8 lamp replacements. Over the past two years, LED replacements for
T8 lamps have been met with skepticism by lighting experts. NEXT Lighting has developed a
new generation LED retrofit kit with a simple payback period of under 5 years. For the pilot
project, Siemens will install NEXT Lighting’s LED lamps also in the City Hall garage, and the
lamps will be in place in place for a 6 month test period. Energy usage and light output of the
LED lamps are among the factors that will be evaluated during the pilot period.
Pilot Project for Building Energy Management System in Small/Medium Commercial Buildings
Staff has been coordinating with the Omaha Public Power District to implement an energy
efficiency/demand response pilot program which has been funded by a grant through the
American Public Power Association’s Demonstration of Energy Efficiency Developments (DEED)
Program. The purpose of the pilot program is to gain hands‐on experience and validate the
cost, ease of installation and usability while assessing the energy efficiency savings and demand
response functionalities of building energy management system for small to medium‐sized
commercial buildings. Viconics Technologies, Inc., a subsidiary of Schneider Electric, has been
selected as the vendor to provide equipment that allows building owners to monitor and
control building heating, ventilation and air conditioning (HVAC) equipment through a web‐
based application. Staff is currently working with Viconics to select up to 4 customer buildings
to participate in the pilot. Installation is expected to begin in late 2013.
Assessing Long Term Impact of Electric Vehicles on Electric Distribution System
Staff has yet to see any adverse impact of EV charging on the distribution system. As previously
communicated to the UAC, staff is tracking the location of the homes of registered EV owners
and is monitoring the impact of EV charging on the neighborhood distribution transformers. As
of mid‐2013, an estimated 350 EVs were registered in Palo Alto. As these numbers increase or
when 2 to 3 EVs cluster on a single distribution transformer, any overloaded transformers will
be upgraded. Staff is also monitoring workplace EV charging. CPAU’s distribution feeder lines
have sufficient capacity to handle additional loads related to EVs well into the next decade.
CPAU is participating with other California electric utilities on a study to forecast EV penetration
by 2020 and 2030, and potential impact on the distribution grid. This study, conducted by the
California Electric Transportation Coalition, is expected to be completed by the end of the year
and staff will keep the UAC and Council informed of the study results. Staff also expects to
have the time‐of‐use (TOU) EV charging pilot study results available by the end of next year.
Smart Grid Pilot Projects
Staff is also working on number of smart grid pilot projects.
Residential CustomerConnect Pilot Program
Progress is being made, and meter communication has commenced on the 300‐home
CustomerConnect pilot, where advanced meters and a customer energy portal will be provided
Utilities Update for Fourth Quarter of FY 2013
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27
to the 300 pilot customers. Staff is already successfully remotely reading incremental data for
many of the participants. Customer portals are expected to be activated in December.
Conservation Voltage Regulation
Based on the voltage sensing technology of the advanced electric meters in the 300 homes
participating in the CustomerConnect pilot, staff is also exploring the feasibility of how to
optimally operate the distribution feeders by lowering service voltage to save energy. An intern
helped with a preliminary assessment this summer under an American Public Power Association
DEED grant. Preliminary findings suggest that such conservation potential exists and warrants
further detailed study. A system is being put in place to monitor the voltages at the end of
electrical feeder lines and to monitor them until the end of 2014, which will help develop
implementation and operating strategies to harness this conservation potential.
VII. Legislative and Regulatory Issues
CPAU staff participates on the legislative committees of the California Municipal Utilities
Association (CMUA) and NCPA. This is year one of California’s two‐year 2013‐2014 legislative
session. Friday, September 13 was the final day for the Assembly and Senate floors to pass
legislation for this year. Governor Brown has until October 13 to sign or veto bills. This was a
relatively quiet year for energy and water legislation, and those bills that have made it to the
Governor’s desk this year have little immediate or direct impact to CPAU as a publically owned
utility (POU). However, one bill passed that could have a minor impact on the City’s collection
of the utility user’s tax. Any bills remaining in the Senate or Assembly could become two‐year
bills and be taken up again in 2014. Following is a summary of the bills staff has been following
this year.
Energy Related Bills
Community Solar programs:
SB 43 (Wolk) – Passed and awaiting Governor’s action. SB 43 is the surviving community solar
bill this year. It will require large Investor Owned Utilities (IOUs) with more than 100,000
customers to offer a “green tariff” for their customers to purchase power from large renewable
energy generation facilities (up to 20 MW in size) located in their service territory. The program
sets a statewide limit of 600 MW and is scheduled to sunset on January 1, 2019. The bill
excludes POUs and therefore would not apply to CPAU. However, community solar could
return next year in the form of a bill to expand the mandate to POUs.
Proposition 39 Implementation:
California Proposition 39 (Income Tax Increase for Multistate Businesses) passed in November
2012 and created the Clean Energy Job Creation Fund. The fund will receive $550 million
annually for five years (FY 2014 – FY 2018). A number of bills were introduced this year to
direct the use of these funds. These bills became irrelevant, however, once the Governor and
the Legislature agreed upon a compromise proposal and included it in Budget trailer bills (AB
78/SB 73). Those and the rest of the trailer bills, which together represented the State Budget,
were passed together by the Legislature on June 15th. The Legislature and Governor agreed
Utilities Update for Fourth Quarter of FY 2013
October 2013
28
that Proposition 39 funds should focus on energy efficiency investments in public schools. NCPA
will remain a proactive participant in the implementation of Proposition 39 as the discussion
moves through the regulatory process at the California Energy Commission and California
Department of Education.
AB 327 (Perea) – Passed and awaiting Governor’s action. This bill relates to IOU’s utility rates,
fixed fees, and Net Energy Metering (NEM). Originally AB 327 focused on the frozen Tier I and II
rates of the IOUs and treatment of their low income customers. Towards the end of the session
this bill became the focus of major NEM amendments from the Governor’s office. The
Governor’s language will extend the NEM program, among other things increasing the cap on
the percentage of a utility’s total load that could be met by NEM. However, POUs remain
unaffected as the NEM amendments only apply to large IOUs.
Natural Gas:
AB 1257 (Bocanegra) – Passed and awaiting Governor’s action. This bill would require the CEC,
on or before January 1, 2015, and every four years thereafter, to prepare and submit to the
Governor a report identifying strategies to maximize the benefits obtained from natural gas as
an energy source.
Other Energy Related Bills:
AB 8 (Perea) – Passed and awaiting Governor’s action. This is an alternative‐fuel vehicles
funding program that would extend the sunset dates on various fees collected for statewide
programs that support alternative fuels and vehicles. SB 11 (Pavley) contained similar language
but did not pass this year, remaining in the assembly as a potential 2‐year bill. CMUA has
supported both bills.
AB 792 (Mullin) – Passed and awaiting Governor’s action. This bill creates Utility User Tax
(UUT) exemptions. The original purpose of this bill was to exempt energy use from customer
on‐site solar facilities from UUT. It was then amended to include an exemption for a “clean
energy resource”, commonly understood to include fuel cells that run on natural gas. The
California League of Cities tried to block the inclusion of non‐renewable fuel cells, but failed and
they remained opposed to the bill. CMUA also took an oppose position. Palo Alto already has a
de facto exemption for its net metering customers because the UUT is applied to the net billed
amount, and is not specifically applied to the amount of energy used on‐site and generated by a
particular source. The new language could impact City revenues if a commercial customer
installs a fuel cell that uses natural gas since the electricity supplied by the fuel cell would
supplant electricity purchases from CPAU, which would be charged UUT.
Water Related Bills
Drinking Water:
AB 145 (Perea) – This bill would have transferred the Division of Drinking Water and
Environmental Management of the California Department of Public Health (CDPH) to the State
Resources Control Board (SWRCB). The bill failed passage this year, and so Assembly Member
Perea amended another bill, AB 1393, which would have just moved the Safe Drinking Water
Utilities Update for Fourth Quarter of FY 2013
October 2013
29
State Revolving Fund (SRF) to the SWRCB (an alternative previously supported by CMUA to
more specifically address the identified problems). AB 1393 also failed passage, never moving
out of the Senate Rules Committee. However, the Governor’s office is apparently still set on
moving CDPH as a whole to the SWRCB. Next year, it is possible that the administration will
introduce a generic reorganization bill.
Hydraulic Fracturing:
SB 4 (Pavley) – Passed and awaiting Governor’s action. This is the remaining bill related to
hydraulic fracturing (“fracking”) this year. Late amendments turned it into a more controversial
bill, with major environmental groups pulling their support, and oil interests ceasing their active
lobbying against it. The bill would put the California Department of Conservation’s Division of
Oil, Gas and Geothermal Resources (DOGGR) in charge of regulating fracking, including project
licensing and monitoring of groundwater supplies. The new language requires DOGGR to
conduct one Environmental Impact Report (EIR) on fracking’s impact on the entire state, but
could then approve later fracking projects if they believe the impacts have already been studied
by that statewide review. Environmental groups say this is a free pass from CEQA for oil
companies. Oil companies argue that they are already not subject to CEQA. SB 4 does require
that companies disclose some of the fracking chemicals they use, but it also allows companies
to decline disclosure of others if they can show that it will disclose trade secrets and harm
competiveness.
Water Recycling:
AB 803 (Gomez) – Passed and awaiting Governor’s action. Existing law requires any person who
causes or permits any sewage or other waste, or the effluent of treated sewage or other waste
to be discharged in or on any waters of the state, or where it probably will be discharged in or
on any waters of the state, to immediately notify the local health officer or the director of
environmental health of the discharge. This bill, the Water Recycling Act of 2013, would
provide that this notification requirement does not apply to an unauthorized discharge of
effluent of treated sewage defined as recycled water. The purpose of the bill, according to the
author, is to align existing provisions in law and reduce unnecessary paperwork resulting from
the reporting of incidental run‐off from recycled water projects. AB 803 was supported by
CMUA.
Water Bond:
Potential Two‐Year Bills:
AB 1331(Water Parks and Wildlife Committee) and SB 42 (Wolk) – both these bills would
repeal the existing $11.1 billion water bond (currently scheduled for submission to voters at the
November 2014 statewide general election) and replace it with a new bond issuance. The new
bond amounts would be about $6.5 billion under both bills.
AB 122 (Rendon) – Nonresidential Building Energy Retrofit Financing: Held in the Assembly
Appropriations committee. This bill would enact the Nonresidential Building Energy Retrofit
Financing Act of 2012 and would require the CEC to establish the Nonresidential Building
Energy Retrofit Financing Program to provide (through a third‐party administrator) financial
Utilities Update for Fourth Quarter of FY 2013
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assistance through revenue bonds for owners of eligible buildings to implement energy
efficiency improvements. While this does not create a utility program, possible financing
options will be of interest to CPAU customers.
AB 1258 (Skinner) – This bill would require the CEC to perform a technical analysis of the ability
of existing hydroelectric and pumped storage facilities to provide additional operational
flexibility to integrate intermittent renewables, such as solar and wind. The bill targets the
electrical output of specific facilities, namely units of the State Water Project, for which
electrical generation is a secondary purpose. The bill was strongly opposed by electric and
water utilities.
SB 605 (Lara) – AB 32 Scoping Plan Revision: In‐State Protocols. This bill could resurface in May
2014, but is off the radar for now. CMUA is opposed to any language restricting the location of
offset protocols. CMUA continues to monitor in case the offset component turns up in
amendments to another bill this year.
SB 760 (Wright) – RPS. This bill would “encourage” geothermal as an RPS baseline resource for
IOUs. It would require the CPUC to include in its RPS resource selection criteria, the resources
necessary to maintain the reliability of the electrical grid to meet electrical demand on a 24‐
hour basis and consider the attributes of utilizing geothermal. The bill does not include POUs at
this time but CMUA will continue to watch it.
Federal Legislative Issues
Prior to its August recess, Congress teed up a number of big issues for their return in
September; namely raising the government debt ceiling and the associated bargains over tax
reform and the deficit reduction. NCPA’s focus in this regard remains that any changes do not
impact tax‐exempt financing. Other NCPA priorities are cybersecurity, federal hydropower
regulatory reform, and fixes to the Commodity Futures Trading Commission’s (CFTC) swap
dealer definition. NCPA continues to try to focus attention with the Bureau of Reclamation and
the Western Area Power Administration to urge further progress in resolving the issue of
Central Valley Project power customers paying a disproportionately higher assessment of the
environmental Restoration Fund than intended in the Central Valley Project Improvement Act.
Cybersecurity
In July, Senate Commerce Committee Chairman Jay Rockefeller (D‐WV) and Ranking Republican
John Thune (R‐SD) introduced legislation that builds on the President’s February Executive
Order on cybersecurity. Under the Executive Order, the National Institute of Standards and
Technology (NIST) is to identify best practices and develop voluntary standards for the 18
critical infrastructure sectors. The Senators’ bill, S. 1353, also known as the Cybersecurity Act of
2013, would:
Formalize cybersecurity as one of NIST’s priority areas of focus. It will create a NIST‐
facilitated, industry‐driven process for developing a set of voluntary cybersecurity
standards for critical infrastructure. These standards will not duplicate or conflict with
Utilities Update for Fourth Quarter of FY 2013
October 2013
31
existing cyber requirements or regulatory processes, and they will be non‐regulatory,
non‐prescriptive and technology neutral;
Strengthen cyber research and development. It builds on existing research and
development programs and ensures better coordination across the federal government;
Improve the cyber workforce and cyber education. It will help make sure we train and
prepare the next generation of cyber experts; and,
Increase the public’s awareness of cyber risks and cybersecurity.
Federal Hydropower Regulatory Reform and Efficiency Measures
At the beginning of August the US Senate, by unanimous consent, passed two hydropower bills
aimed at encouraging and expediting the development of small‐scale hydropower. The first bill,
the Hydropower Regulator Efficiency Act (H.R. 267), would raise the current FERC licensing
exemption threshold for small hydropower projects from 5 megawatts (MW) to 40 MW. The
other bill, the Bureau of Reclamation Small Conduit Hydropower Development and Rural Jobs
Act (H.R. 678), would allow hydropower development in existing Bureau of Reclamation water
canals, pipes, and ditches. It is expected that President Obama will sign both bills into law. This
is a culmination of the effort by National Hydropower Association and its members, including
NCPA, to promote hydropower streamlining legislation.
CFTC swap dealer definition
There have been recent developments from the CFTC regarding swaps regulations and the
requirements of the Commodity Exchange Act’s as amended by the Dodd‐Frank Act. Staff will
provide a summary in the next quarterly report.
Power Marketing Administration Recommendations
To provide input for its “roadmap” to 2024, the Western Area Power Administration (Western)
sent out more than 1,000 surveys to its power and transmission customers and another 1,500
surveys to its employees and contractors. In total, 23% of the power and transmission
customers that were contacted responded to the survey. In addition to the survey, Western
conducted in‐depth interviews with about 20 customer representatives throughout its five
regions. In August, Western hosted a webinar to unveil the results of a customer survey, and
provide details on the agency’s efforts to craft a “roadmap” for 2024. Western’s summary of
the initial feedback from the survey was that there was a strong interest from both customers
and employees to maintain a clear focus on the agency’s core mission. They also stated that
the survey and interviews highlighted the need for transmission construction, the inevitability
of markets, and the growing importance of renewables. The first draft of Western’s Roadmap
is expected before the end of the year.
State Electric Regulatory Proceedings
California Air Resources Board (CARB) and AB 32 Implementation
The second phase of the Cap‐and‐Trade regulation that will impact the City’s gas utility is
currently underway. The City’s natural gas utility will be under the cap‐and‐trade regulations
starting in CY 2015, and will be required to obtain carbon emission allowances to cover its retail
Utilities Update for Fourth Quarter of FY 2013
October 2013
32
sales. Palo Alto, along with other gas utility groups, has participated in discussions with CARB
staff regarding the implementation details of the regulation. On September 4, CARB released
proposed language that would allocate free allowances to natural gas distribution utilities.
CARB proposes to require natural gas utilities to consign a portion of their free allowances to
the auction, thereby monetizing the allowance value rather than using all the allowances
directly for compliance. This mechanism is intended to gradually introduce the cost of carbon
to natural gas customers. In CY 2015 Palo Alto would initially have to purchase about 30% of its
allowances to cover the utility’s retail sales, ramping up to over 50% by 2020. Use of the
revenues from the sale of allowances in the CARB auctions faces similar restrictions that are in
place for the City’s electric utility. Staff is developing a proposal for use of the gas utility
allowances and will provide it to the UAC and Council for review and approval.
California Energy Commission Rulemaking on Emission Performance Standards (EPS)
The current CEC proceeding will not address the EPS standard, but there will be a joint
CEC/CPUC proceeding to look into whether the standard should be lowered. No new
developments.
California Energy Commission Renewable Portfolio Standard Enforcement Regulations
On August 28, the state’s Office of Administrative Law (OAL) officially approved the CEC’s
regulations for enforcement procedures for the Renewable Portfolio Standard (RPS) for Local
Publicly Owned Electric Utilities. These regulations set forth the procedures by which the CEC
will enforce the 33% RPS mandated by Senate Bill (SB) X1‐2. The OAL’s action is the last
regulatory milestone in the CEC’s effort to finalize the regulations, and it paves the way for an
October 1 effective date. CPAU will be updating its own RPS enforcement and procurement
programs to reflect any additional requirements in the now final regulations. The 2011 and
2012 reports are now due on October 31.
Utilities Update for Fourth Quarter of FY 2013
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VIII. Utility Financial Summary
Electric Utility
Retail Sales Volume and System Average Retail Rate
Table 3 below shows the Electric Fund’s retail sales volumes and resulting system average retail
rate for FY 2012 and FY 2013. For the period ending June 30, 2013, sales volumes were 6.3%
lower than budget estimates, and the system average retail rate was 0.5% lower. Demand has
been lower across most of the commercial customer groups, but the main driver of the
decrease is a delay in the schedule of a significant load addition for a large customer.
Table 3: Electric Retail Sales and Rate
Electric ‐ Retail FY 2012
Unaudited
Actuals
FY 2013
Adopted
Budget
FY 2013
Unaudited
Actuals
Difference of
Adopted
Budget and
Actuals
%
Variance
to Budget
Jul 11‐Jun 12 Jul 12‐Jun 13 Jul 12‐Jun 13
Sales Units (kWh) 942,561,974 1,010,498,151 946,843,170 (63,654,981) ‐6.3%
System Average
Retail Rate ($/kWh)
0.11558 0.11600 0.11538 ‐0.00062 ‐0.5%
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34
Operating Activity
Table 4 below contains a summary of the Electric Fund’s overall activity for FY 2013.
Table 4: Electric Operating Activity
Electric ‐ Operating Activity All figures in thousands (000’s)
Adjusted
Budget
FY 2013
Unaudited
Actuals
Jul 12‐Jun 13
Variance to
Budget
Electric Supply Fund
Net Sales * $ 70,800 $ 65,806 $ (4,994)
Other revenues 11,925 7,199 (4,725)
Purchase cost to serve retail load (63,364)(59,574)3,791
Other expenses ** (15,067)(13,424) 1,643
Surplus Energy costs (2,828)(1,740)1,089
Surplus Energy revenues 2,289 1,127 (1,163)
Total $ 3,754 $ (606)$ (4,360)
Electric Distribution Fund
Net Sales * $ 47,604 $ 43,551 $ (4,054)
Other revenues 2,930 2,921 (8)
Other expenses ** (49,209) (51,447)(2,238)
Total $ 1,325 $ (4,975)$ (6,300)
* Includes misc. sales, adjustments, discounts, and bad debt
** Includes debt service, reserve transfers, salaries, allocated charges, other misc.
expenses and encumbrances
As of June 2013, the cost of purchases to serve retail load for FY 2013 was $3.8 million lower
than the adjusted budget, primarily due to lower renewables costs related to the delay in the
start of two landfill‐gas‐to‐energy renewable energy projects and lower than projected
transmission rates. Although load was substantially lower than projected in the adopted
budget, this was offset by hydroelectric generation that was lower than forecasted, which
required CPAU to purchase additional energy on the market. Net sales were $5.0 million lower
than expected. Surplus energy sales were down by $1.1 million, and corresponding surplus
energy costs were lower by almost the same amount.
Other revenues were also well below budget, though this was solely due to an accounting entry
reflecting a change in the market value of the City’s investment portfolio, which declined from
the previous year (though on average the City’s investments are still above the original
purchase prices). Since the City’s practice is to hold its investments to maturity, these short
term changes in valuation will zero out over the long term. Staff is considering how to integrate
this phenomenon in to future financial plans to improve the accuracy of future reserves
forecasts.
Utilities Update for Fourth Quarter of FY 2013
October 2013
35
The net effect of these changes is a projected $606,000 reduction in the Electric Supply Rate
Stabilization Reserve (E‐SRSR) rather than the $3.8 million increase projected in the adjusted
budget.
For the Electric Distribution Fund, the net sales are expected to be $4.05 million below the
budget estimates for FY 2013 due to ongoing lower sales trends. Other expenses are higher by
$2.2 million, mainly due to allocations to public benefits funding and encumbrances for capital
improvement projects. The resulting projected drawdown in the Electric Distribution Rate
Stabilization Reserve (E‐DRSR) is $4.975 million as opposed to the funding of $1.3 million in the
adjusted budget. The numbers for all reserve balances are preliminary, and subject to
adjustments per staff and auditor review.
Electric Supply Rate Stabilization Reserve
As a result of the changes in operating activity, the E‐SRSR is expected to have an ending
balance of $65.3 million, which is above the long‐term maximum E‐SRSR reserve guideline level
as shown in Table 5 below.
Table 5: Electric Supply Rate Stabilization Reserve
Estimated Electric Supply Rate Stabilization Reserve
All figures in thousands (000’s)
FY 2013 Adopted Budget Beginning Balance $ 60,702
Changes to FY 2013 Beginning Balance per FY 2012 Accounting $ 5,227
FY 2013 Beginning Balance after accounting changes $ 65,929
Net sum of FY 2013 Unaudited Actuals to date * $ (606)
Current Projected Reserve Balance as of End of FY 2013 $ 65,323
Adopted Budget E‐SRSR Minimum Guideline $ 31,721
Adopted Budget E‐SRSR Maximum Guideline $ 63,442
* Includes Encumbrances for CIP & Operations
Utilities Update for Fourth Quarter of FY 2013
October 2013
36
Electric Distribution Rate Stabilization Reserve
As a result of the changes described above, the E‐DRSR is expected to have an ending balance
of $3.7 million, which is below the E‐DRSR long‐term minimum and reserve guideline level as
shown in Table 6 below. In the short term, staff will monitor spending in the Distribution Fund
and make mid‐year budget adjustments if necessary to fund operations, which would likely
involve a transfer of funds from the E‐SRSR. Such a step is likely unnecessary, though, since
total Distribution Fund assets are adequate to manage short term cash flow.Staff will return
with a financial plan during the next budget season that results in E‐DRSR levels at or above
minimum levels.
Table 6: Electric Distribution Rate Stabilization Reserve
Estimated Electric Distribution Rate Stabilization Reserve
All Figures in thousands (000’s)
FY 2013 Adopted Budget Beginning Balance $ 10,995
Changes to FY 2013 Beginning Balance per FY 2012 Accounting $ (2,275)
FY 2013 Beginning Balance after accounting changes $ 8,680
Net sum of FY 2013 Unaudited Actuals to date * $ (4,975)
Current Projected Reserve Balance as of End of FY 2013 $ 3,705
Adopted Budget E‐SRSR Minimum Guideline $ 6,747
Adopted Budget E‐SRSR Maximum Guideline $ 13,494
* Includes Encumbrances for CIP & Operations
Electric Special Projects (ESP) Reserve
No new projects have been identified for funding from the ESP Reserve. The largest project
being evaluated is a second transmission line that could have the potential of using all or a
significant amount of the ESP Reserve. The estimated balance of the ESP Reserve is $51.8
million as of the end of FY 2013.
Capital Improvement Program (CIP) Reserve
The projected balance of the electric utility CIP reserve at the end of FY 2013 is $14.3 million,
$2.1 million of which was under contract. Table 7 shows the list of active CIP projects, the
remaining budget for each project, and projected future budgets based on the most recent
adopted budget. For detailed project descriptions, see the CIP Budget for the year the project
was adopted, which is indicated by the first two digits of the project number (for example, refer
to the 2013 CIP Budget for the project description for EL‐13004). For status updates, please
refer to the attachments to the staff report associated with the FY 2013 mid‐year Budget
Amendment Ordinance (Staff Report 3442).
Utilities Update for Fourth Quarter of FY 2013
October 2013
37
Table 7: Electric Capital Improvement Project Reserve
Project # Project Name
Reappropriated /
Carried Forward from
Previous Years
Current Year
Funding
Budget
Amendments
Spending,
Current Year
Remaining in
CIP Reserve
Fund Commitments FY 2014 FY 2015 FY 2016 FY 2017 FY 2018
ONE‐TIME PROJECTS
EL‐06001 230 kV Electric Intertie 69,695 100,000 717 (7,889) 162,523 ‐ ‐ ‐ ‐ ‐ ‐
EL‐10009
Street Light System Conversion
Project 1,688,335 1,200,000 72,995 (802,947) 2,158,383 48,433 500,000 ‐ ‐ ‐ ‐
EL‐11014 Smart Grid Technology Installation 486,715 ‐ 1,518 (215,888) 272,345 252,865 1,000,000 500,000 3,000,000 3,000,000 3,000,000
EL‐10008 Advanced Metering Infrastructure 251,401 ‐ 2,942 (49,746) 204,597 84,452 ‐ ‐ ‐ ‐ ‐
EL‐11016
Electric Vehicle Charging
Infrastructure 117,387 ‐ (117,387) ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐
EL‐13002
Relocate Quarry/Hopkins Substation
60kV Line (Lane A&B)‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 100,000 750,000 ‐
EL‐13008 Upgrade Electric Estimating System ‐ 150,000 ‐ ‐ 150,000 ‐ ‐ ‐ ‐ ‐ ‐
Subtotal, One‐time Projects 2,613,533 1,450,000 (39,215) (1,076,470) 2,947,848 385,750 1,500,000 500,000 3,100,000 3,750,000 3,000,000
SYSTEM EXPANSION
EL‐11015
Reconductor 60kV Overhead
Transmission System with ACCR
conductor 1,781,708 1,750,000 (395,531) (1,687,876) 1,448,301 1,057,606 ‐ ‐ ‐ ‐ ‐
EL‐13005
Colorado 20/21‐Transformers
Replacement ‐ 100,000 (100,000) ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐
Subtotal, System Expansion 1,781,708 1,850,000 (495,531) (1,687,876) 1,448,301 1,057,606 ‐ ‐ ‐ ‐ ‐
RELIABILITY
EL‐12002
Hanover 22 ‐ Transformer
Replacement 982,373 200,000 13,077 (1,101,441) 94,009 94,009 ‐ ‐ ‐ ‐ ‐
EL‐13004 Hansen Way/Hanover 12kV Ties ‐ 75,000 ‐ ‐ 75,000 ‐ 200,000 ‐ ‐ ‐ ‐
EL‐13006 Sand Hill / Quarry 12 kV Tie ‐ 50,000 11 (120) 49,891 ‐ 200,000 ‐ ‐ ‐ ‐
EL‐14005 Reconfigure Quarry Feeders ‐ ‐ ‐ ‐ ‐ ‐ 50,000 400,000 ‐ ‐ ‐
Subtotal, Reliability 982,373 325,000 13,088 (1,101,561) 218,900 94,009 450,000 400,000 ‐ ‐ ‐
UNDERGROUNDING
EL‐06002 UG District 45 209,085 ‐ 4,545 (68,774) 144,856 2,961 ‐ ‐ ‐ ‐ ‐
EL‐08001
UG District 42 ‐ Embarcadero
between Emerson & Middlefield ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 150,000 150,000 2,000,000
EL‐11009 UG District 43 ‐ Alma / Embarcadero ‐ ‐ ‐ ‐ ‐ ‐ ‐ 150,000 2,000,000 500,000
EL‐11010
UG District 47 ‐ Middlefield, Homer
Avenue, Webster Street and Addison
Avenue 1,622,520 200,000 2,826 (31,086) 1,794,260 2 ‐ ‐ ‐ ‐ ‐
EL‐12001
UG District 46 ‐ Charleston/El Camino
Real 99,883 ‐ ‐ ‐ 99,883 ‐ ‐ 800,000 150,000 ‐ ‐
Subtotal, Undergrounding 1,931,488 200,000 7,371 (99,860) 2,038,999 2,963 ‐ 800,000 450,000 2,150,000 2,500,000
Utilities Update for Fourth Quarter of FY 2013
October 2013
38
Project # Project Name
Reappropriated /
Carried Forward from
Previous Years
Current Year
Funding
Budget
Amendments
Spending,
Current Year
Remaining in
CIP Reserve
Fund Commitments FY 2014 FY 2015 FY 2016 FY 2017 FY 2018
4/12 KV CONVERSION
EL‐08000 E. Charleston 4/12kV 371,609 ‐ 2,801 (60,295) 314,115 ‐ ‐ ‐ ‐ ‐ ‐
EL‐09002
Middlefield/Colorado 4/12 kV
Conversion 40,078 ‐ (40,078) ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐
EL‐09004
W. Charleston/Wilkie Way to South
City Limit 4/12 kV Conversion 85,000 550,000 ‐ ‐ 635,000 ‐ ‐ ‐ ‐ ‐ ‐
EL‐12003 Hopkins Substation Rebuild ‐ 250,000 (250,000) ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐
EL‐13000 Edgewood/Wildwood 4/12 kV Tie ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 50,000 400,000
EL‐14000
Coleridge/Cowper/Tennyson 4/12 kV
Conversion ‐ ‐ ‐ ‐ ‐ ‐ ‐ 120,000 400,000 ‐ ‐
EL‐14004 Maybell 1&2 4/12 kV Conversion ‐ ‐ ‐ ‐ ‐ ‐ 450,000 ‐ ‐ ‐ ‐
Subtotal, 4/12 kV Conversion 496,687 800,000 (287,277) (60,295) 949,115 ‐ 450,000 120,000 450,000 400,000 ‐
UNDERGROUND REBUILDING
EL‐04010 Foothills System Rebuild 102,802 ‐ 6,453 (73,668) 35,587 ‐ 75,000 ‐ ‐ ‐ ‐
EL‐05000 El Camino Underground Rebuild 147,112 300,000 1,798 (52,623) 396,287 ‐ ‐ ‐ ‐ ‐ ‐
EL‐09000 Middlefield Underground Rebuild 540,824 ‐ 21,771 (604,668) (42,073) ‐ 200,000 ‐ ‐ ‐ ‐
EL‐09003 Rebuild UG Dist 17 (Downtown) 707,515 ‐ 21,850 (244,936) 484,429 ‐ ‐ ‐ ‐ ‐ ‐
EL‐10006 Rebuild UG Dist 24 973,673 ‐ 1,443 (48,235) 926,881 ‐ ‐ ‐ ‐ ‐ ‐
EL‐11001 Torreva Court Rebuild 62,412 ‐ 1,618 (56,835) 7,195 ‐ ‐ ‐ ‐ ‐ ‐
EL‐11003 Rebuild UG Dist 15 69,461 400,000 25 (276) 469,210 ‐ ‐ ‐ ‐ ‐ ‐
EL‐11004
Hewlett Subdivision Rebuild Los
Trancos 567,988 ‐ 13,284 (399,909) 181,363 ‐ ‐ ‐ ‐ ‐ ‐
EL‐11006 Rebuild UG Dist 18 284,975 ‐ 1,452 (43,472) 242,955 ‐ 200,000 ‐ ‐ ‐ ‐
EL‐11007 Rebuild Greenhouse Condo Area 377,289 ‐ 796 (30,701) 347,384 ‐ ‐ ‐ ‐ ‐ ‐
EL‐11008 Rebuild UG Dist 19 106,185 ‐ 130 (1,435) 104,880 ‐ ‐ ‐ ‐ ‐ ‐
EL‐12000 Rebuild UG Dist 12 ‐ 80,000 781 (69,596) 11,185 ‐ 450,000 ‐ ‐ ‐ ‐
EL‐13003 Rebuild UG Dist 16 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 300,000 ‐ ‐
EL‐14002 Rebuild UG Dist 20 ‐ ‐ ‐ ‐ ‐ ‐ ‐ 500,000 500,000 ‐ ‐
Subtotal, Underground Rebuilding 3,940,236 780,000 71,401 (1,626,354) 3,165,283 ‐ 925,000 500,000 800,000 ‐ ‐
ONGOING PROJECTS
EL‐04012 Utility Site Security 383,041 200,000 7,677 (94,722) 495,996 12,981 ‐ 250,000 250,000 ‐ ‐
EL‐13007
Underground distribution
System Security ‐ 300,000 ‐ ‐ 300,000 ‐ ‐ 300,000 300,000 ‐ ‐
EL‐02011 Electric Utility GIS 208,353 ‐ (50,000) (122,461) 35,892 254 225,000 165,000 165,000 165,000 165,000
EL‐02010 SCADA System Upgrade 243,023 50,000 (139,648) (3,877) 149,498 ‐ ‐ 60,000 65,000 270,000 60,000
EL‐89031 Communications System 208,112 125,000 (299,696) (3,345) 30,071 ‐ ‐ 100,000 100,000 100,000 100,000
EL‐89038 Substation Protection Improvements 224,148 260,000 14,453 (188,049) 310,552 87,648 275,000 280,000 290,000 300,000 300,000
EL‐89044 Substation Facility Improvements 18,459 170,000 4,204 (60,458) 132,205 ‐ 180,000 185,000 190,000 195,000 195,000
EL‐98003 Electric System Improvements 1,017,967 2,300,000 57,821 (1,371,436) 2,004,352 176,660 2,400,000 2,450,000 2,500,000 2,550,000 2,600,000
Subtotal, Ongoing 2,303,104 3,405,000 (405,189) (1,844,349) 3,458,566 277,543 3,080,000 3,790,000 3,860,000 3,580,000 3,420,000
Utilities Update for Fourth Quarter of FY 2013
October 2013
39
Project # Project Name
Reappropriated /
Carried Forward from
Previous Years
Current Year
Funding
Budget
Amendments
Spending,
Current Year
Remaining in
CIP Reserve
Fund Commitments FY 2014 FY 2015 FY 2016 FY 2017 FY 2018
CUSTOMER CONNECTIONS (FEE FUNDED)
EL‐89028 Electric Customer Connections 496,113 2,100,000 248,115 (2,733,682) 110,546 283,628 2,200,000 2,300,000 2,400,000 2,500,000 2,600,000
Subtotal, Customer Connections 496,113 2,100,000 248,115 (2,733,682) 110,546 283,628 2,200,000 2,300,000 2,400,000 2,500,000 2,600,000
GRAND TOTAL 14,545,241 10,910,000 (887,237) (10,230,447) 14,337,557 2,101,498 8,605,000 8,410,000 11,060,000 12,380,000 11,520,000
Funding Sources
Connection Fees 900,000 100,000 1,000,000 1,025,000 1,075,000 1,125,000 1,200,000
Other Companies (Phone/CATV Co.) 750,000 ‐ 160,000 570,000 330,000 890,000 950,000
Other Utility Funds (Smart Grid)‐ 1,012 666,667 333,333 2,000,000 2,000,000 2,000,000
Utility Rates 9,260,000 (988,249) 6,778,333 6,481,667 7,655,000 8,365,000 7,370,000
CIP‐RELATED RESERVES DETAIL
6/30/2012
(Actual)
6/30/2013
(Projected)
Reappropriations 9,579,241 12,236,059
Commitments 4,966,000 2,101,498
Utilities Update for Fourth Quarter of FY 2013
October 2013
40
Bill Comparison
The last electric rate adjustment was a 10% increase effective July 1, 2009. Table 8 presents
residential monthly bills for Palo Alto and surrounding cities for a several usage levels for the
summer (May through October) billing period based on published rates as of September 1,
2013. As shown, Palo Alto has the lowest bills for low usage residential customers. For those
using the median amount of electricity, Palo Alto is the lowest for summer bills. For larger
users, Santa Clara customers have the lowest bills with Palo Alto the second lowest. Note that
for the median residential usage, PG&E customers pay 32% more than Palo Alto’s customers in
the summer season. Customers using 650 kWh/month pay 72% more in PG&E’s territory.
Table 8: Residential Electric Bill Comparison
Residential Monthly Electric Bill
As of May 1, 2013
Season Usage (KWh/mo) Palo Alto PG&E Santa Clara Roseville
Summer
(May‐Oct)
300 $ 28.57 $ 39.69 $ 30.33 $ 47.56
(Median) 365 $ 37.04 $ 49.18 $ 37.15 $ 54.87
650 $ 76.33 $ 131.25 $ 67.07 $ 93.83
1200 $ 172.03 $ 324.38 $ 124.79 $ 181.01
Table 9 presents monthly electric bills for commercial customers for various usage levels. Note
that Palo Alto commercial customer bills are significantly lower than PG&E’s and comparable to
those in Santa Clara and Roseville.
Table 9: Commercial Electric Bill Comparison
Commercial Monthly Electric Bill
As of May 1, 2013
Usage (KWh/mo) Palo Alto PG&E Santa Clara Roseville
1,000 $ 140 $ 233 $ 156 $ 153
160,000 $ 21,290 $ 28,552 $ 17,754 $ 23,174
500,000 $ 61,395 $ 84,320 $ 54,352 $ 73,025
2,000,000 $ 213,070 $ 290,252 $ 210,129 $ 245,985
Utilities Update for Fourth Quarter of FY 2013
October 2013
41
Gas Utility
Retail Sales Volume and System Average Retail Rate
Table 10 below shows the Gas Fund’s retail sales volume and system average retail rate for FY
2012 and FY 2013. For FY 2013, as of the end of June 2013, sales have been lower than
budgeted by 5.2%. Note that the system average rate for the gas utility reflects market rates
for the commodity portion for all natural gas customers, which have been lower than budget
estimates. The overall system average rate for FY 2013 was 15% below what it was in FY 2012.
Table 10: Gas Retail Sales and Rate
Gas – Retail FY 2012
Unaudited
Actuals
FY 2013
Adopted
Budget
FY 2013
Unaudited
Actuals
Difference of
Adopted Budget
and Actuals
%
Variance
to Budget
Jul 11‐Jun 12 Jul 12‐Jun 13 Jul 12‐Jun 13
Sales Units (Therms) 29,983,129 30,477,253 28,900,835 (1,576,418) ‐5.2%
System Average Rate
($/Therm)
1.389 1.244 1.178 (0.067) ‐5.3%
Operating Activity
Table 11 below contains a summary of the Gas Fund’s overall activity for FY 2013.
Table 11: Gas Operating Activity
Gas ‐ Operating Activity All figures in thousands $ (000’s)
Adjusted
Budget
FY 2013
Unaudited
Actuals
Jul 12‐Jun 13
Variance to
Budget
Gas Supply Fund
Net Sales * $ 15,592 $ 12,961 $ (2,631)
Other revenues 237 (226)(464)
Purchase costs (15,572)(13,455)2,117
Other expenses ** (860)(606)254
Total $ (603)$ (1,326)$ (723)
Gas Distribution Fund
Net Sales * $ 21,824 $ 20,798 (1,025)
Other revenues 1,531 792 (739)
Other expenses ** (25,418) (24,939)479
Total $ (2,063)$ (3,348)(1,285)
* Includes misc. sales, adjustments, discounts, and bad debt
** Includes reserve transfers, salaries, allocated charges, other misc. expenses and
encumbrances
For the Gas Supply Fund, the variance of $2.6 million in net sales is due to the lower than
expected market rates for gas. This is also reflected in lower purchase costs of $2.1 million.
Utilities Update for Fourth Quarter of FY 2013
October 2013
42
PG&E’s transportation rates to Palo Alto were budgeted to increase this year but as of
November the expected increase in PG&E transportation rates had not materialized. Council
reduced the transportation rates charged to customers effective January 1, 2013. However,
PG&E recently informed the California Public Utilities Commission (CPUC) of its intention to
raise the transportation rate, but no final decision has been made by the CPUC as to what PG&E
will be allowed to collect. Other revenues were lower than budgeted, but this was due to
adjustments to the market value of the City’s investment portfolio, as discussed previously for
the Electric Utility (see page 34). Other expenses, primarily admin costs, were lower by
$254,000. The net effect is a projected $1.6 million drawdown of the Gas Supply Rate
Stabilization Reserves (G‐SRSR).
For the Gas Distribution Fund, lower sales resulted in $1.025 million lower revenues. Other
revenues were primarily impacted due to unrealized losses on investments of $774,000, and
other expenses were marginally lower by $479,000. This results in a drawdown of $3.35 million
from the Gas Distribution Rate Stabilization Reserve (G‐DRSR) instead of the $2.1 million
drawdown in the adjusted budget.
Gas Supply Rate Stabilization Reserve
As shown in Table 12 below, based on activity to date and projections for the fiscal year, the G‐
SRSR is expected to have an ending balance of $6.3 million, which is within the long‐term
minimum and maximum G‐SRSR guideline levels.
Table 12: Gas Supply Rate Stabilization Reserve
Estimated Gas Supply Rate Stabilization Reserve
All Figures in thousands (000’s)
FY 2013 Adopted Budget Beginning Balance $ 6,630
Changes to FY 2013 Beginning Balance per FY 2012 Accounting $ 988
FY 2013 Beginning Balance after accounting changes $ 7,618
Net sum of FY 2013 Unaudited Actuals to date * $ (1,326)
Current Projected Reserve Balance as of End of FY 2013 $ 6,292
Adopted Budget G‐SRSR Minimum Guideline $ 4,072
Adopted Budget G‐SRSR Maximum Guideline $ 8,144
* Includes Encumbrances for CIP & Operations
Utilities Update for Fourth Quarter of FY 2013
October 2013
43
Gas Distribution Rate Stabilization Reserve
As shown in Table 13 below, the G‐DRSR is expected to have an ending balance of $5.0 million,
which is between the long‐term minimum and maximum G‐DRSR guideline levels.
Table 13: Gas Distribution Rate Stabilization Reserve
Estimated Gas Distribution Rate Stabilization Reserve
All Figures in thousands (000’s)
FY 2013 Adopted Budget Beginning Balance $ 7,299
Changes to FY 2013 Beginning Balance per FY 2012 Accounting $ 1,075
FY 2013 Beginning Balance after accounting changes $ 8,374
Net sum of FY 2013 Unaudited Actuals to date * $ (3,348)
Current Projected Reserve Balance as of End of FY 2013 $ 5,026
Adopted Budget G‐DRSR Minimum Guideline $ 3,339
Adopted Budget G‐DRSR Maximum Guideline $ 6,678
* Includes Encumbrances for CIP & Operations
Capital Improvement Program (CIP) Reserve
The balance of the gas utility CIP Reserve at the end of FY 2013 was $17.5 million, $12.6 million
of which was already under contract. Table 14 shows the list of active CIP projects and the
remaining budget for each project. For detailed project descriptions, see the CIP Budget for the
year the project was adopted, which is indicated by the first two digits of the project number
(for example, refer to the 2013 CIP Budget for the project description for GS‐13002). For status
updates, please refer to the attachments to the staff report associated with the FY 2013 mid‐
year Budget Amendment Ordinance (Staff Report 3442).
Utilities Update for Fourth Quarter of FY 2013
October 2013
44
Table 14: Gas Capital Improvement Project Reserve
Project # Project Name
Reappropriated /
Carried Forward from
Previous Years
Current Year
Funding
Budget
Amendments
Spending,
Current Year
Remaining in
CIP Reserve
Fund Commitments FY 2014 FY 2015 FY 2016 FY 2017 FY 2018
ONE TIME PROJECTS
GS‐09000 Gas Station 1 Rebuild 57,286 ‐ ‐ (50,656) 6,630 ‐ ‐ ‐ ‐ ‐ ‐
GS‐08000 Gas Station 2 Rebuild 60,679 ‐ ‐ (50,656) 10,023 ‐ ‐ ‐ ‐ ‐ ‐
GS‐10000 Gas Station 3 Rebuild 60,411 ‐ ‐ (51,922) 8,489 ‐ ‐ ‐ ‐ ‐ ‐
GS‐11001 Gas Station 4 Rebuild 100,656 ‐ ‐ (83,758) 16,898 ‐ ‐ ‐ ‐ ‐ ‐
GS‐13003 COBUG emissions equipment ‐ ‐ 315,000 ‐ 315,000 ‐ ‐ ‐ ‐ ‐ ‐
GS‐15001 Security at Gas Receiving
Stations
‐ ‐ ‐ ‐ ‐ ‐ ‐ 150,000 ‐ ‐ ‐
Subtotal, One‐time Projects 279,031 ‐ 315,000 (236,991) 357,040 ‐ ‐ 150,000 ‐ ‐ ‐
GAS MAIN REPLACEMENT PROGRAM
GS‐07002 Gas Main Replacements ‐
Project 17
18,963 ‐ (18,334) (577) 52 ‐ ‐ ‐ ‐ ‐ ‐
GS‐08011 Gas Main Replacements ‐
Project 18
1,399,219 ‐ (184,476) (964,488) 250,254 138,254 ‐ ‐ ‐ ‐ ‐
GS‐09002 Gas Main Replacements ‐
Project 19
5,485,203 ‐ (469) (2,767,259) 2,717,475 1,826,516 ‐ ‐ ‐ ‐ ‐
GS‐10001 Gas Main Replacements ‐
Project 20
6,586,509 ‐ ‐ (66,667) 6,519,842 5,417,474 ‐ ‐ ‐ ‐ ‐
GS‐11000 Gas Main Replacements ‐
Project 21
447,486 6,150,000 59,527 (786,481) 5,870,532 5,136,184 ‐ ‐ ‐ ‐ ‐
GS‐12001 Gas Main Replacements ‐
Project 22
468,000 ‐ (467,906) (94) ‐ ‐ ‐ 468,000 3,200,000 ‐ ‐
GS‐13001 Gas Main Replacements ‐
Project 23
‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 482,000 3,300,000 ‐
GS‐14003 Gas Main Replacements ‐
Project 24
‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 492,000 3,465,000
GS‐15000 Gas Main Replacements ‐
Project 25
‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 542,000
Subtotal, Gas Main Replacement Program 14,405,380 6,150,000 (611,658) (4,585,566) 15,358,156 12,518,429 ‐ 468,000 3,682,000 3,792,000 4,007,000
TOOLS AND EQUIPMENT
GS‐13002 General Shop Equipment/Tools ‐ 50,000 ‐ ‐ 50,000 ‐ ‐ 52,000 ‐ 54,000 ‐
GS‐01019 Global Positioning System 82,448 ‐ ‐ ‐ 82,448 2,810 ‐ ‐ ‐ ‐ ‐
GS‐02013 Directional Boring Machine 475,764 45,000 ‐ ‐ 520,764 ‐ ‐ ‐ 46,350 ‐ 257,500
GS‐03007 Directional Boring Equipment 135,252 64,000 ‐ ‐ 199,252 22,729 ‐ 68,000 ‐ 70,040 ‐
GS‐03008 Polyethylene Fusion Equipment
Replacement
43,754 34,000 2,187 (43,544) 36,397 (22) ‐ 36,100 ‐ 37,183 ‐
GS‐14004 Gas Distribution System Model ‐ ‐ ‐ ‐ ‐ ‐ 150,000 ‐ ‐ ‐ ‐
Subtotal, Tools and Equipment 737,218 193,000 2,187 (43,544) 888,861 25,517 150,000 156,100 46,350 161,223 257,500
Utilities Update for Fourth Quarter of FY 2013
October 2013
45
Project # Project Name
Reappropriated /
Carried Forward from
Previous Years
Current Year
Funding
Budget
Amendments
Spending,
Current Year
Remaining in
CIP Reserve
Fund Commitments FY 2014 FY 2015 FY 2016 FY 2017 FY 2018
ONGOING PROJECTS
GS‐11002 Gas System Improvements 101,836 206,000 4,978 (92,054) 220,760 20,760 212,000 218,600 229,530 236,416 243,508
GS‐03009 System Extensions ‐
Unreimbursed
175,641 172,000 8,258 (90,838) 265,061 ‐ 178,000 183,500 192,675 198,500 204,455
GS‐80019 Gas Meters and Regulators 74,335 315,000 2,332 (25,652) 366,015 ‐ 325,000 335,000 351,750 362,303 373,172
Subtotal, Ongoing Projects 351,812 693,000 15,568 (208,544) 851,836 20,760 715,000 737,100 773,955 797,219 821,135
CUSTOMER CONNECTIONS (FEE FUNDED)
GS‐80017 Gas System Extensions 243,085 720,000 84,731 (958,264) 89,552 ‐ 730,000 752,000 789,600 812,000 836,360
Subtotal, Customer Connections 243,085 720,000 84,731 (958,264) 89,552 ‐ 730,000 752,000 789,600 812,000 836,360
GRAND TOTAL 16,016,525 7,756,000 (194,172) (6,032,908) 17,545,445 12,564,706 1,595,000 2,263,200 5,291,905 5,562,442 5,921,995
Funding Sources
Connection Fees 720,000 84,731 580,000 602,000 639,600 662,000 686,360
Utility Rates 7,036,000 (278,903) 865,000 1,511,200 4,502,305 4,750,442 5,085,635
CIP‐RELATED RESERVES DETAIL
6/30/2012
(Actual)
6/30/2013
(Projected)
Reappropriations 13,619,525 4,980,739
Commitments 2,397,000 12,564,706
Utilities Update for Fourth Quarter of FY 2013
October 2013
46
Bill Comparison
Table 15 presents residential monthly bills for Palo Alto and surrounding cities for several usage
levels for the summer (April through October) billing period based on published rates as of
September 1, 2013. As Palo Alto’s gas commodity rates now fluctuate monthly with short‐term
market prices, bills have decreased and are comparable to PG&E’s for all usage levels. For the
median usage level, PG&E customer bills are 26% lower than Palo Alto customer’s bills in
September, but only 7.7% for FY 2013.
Table 15: Residential Natural Gas Bill Comparison
Residential Monthly Natural Gas Bill
As of September 1, 2013
Season
Usage
(therms) Palo Alto
Menlo Park, Redwood City,
Mountain View, Los Altos, and
Santa Clara (PG&E Zone X)
Roseville
(PG&E
Zone S)
Summer
(Apr‐Oct)
15 $ 22.47 $ 15.34 $ 15.72
(Median) 18 $ 24.98 $ 18.50 $ 19.74
30 $ 40.21 $ 34.57 $ 35.81
45 $ 60.52 $ 54.67 $ 55.90
Table 16 below presents monthly gas bills for commercial customers for various usage levels.
Note that bills for Palo Alto customers are slightly higher than for PG&E customers for smaller
commercial customers, but bills are significantly higher for larger commercial customers due to
higher distribution costs.
Table 16: Commercial Natural Gas Bill Comparison
Commercial Monthly Natural Gas Bill
As of May 1, 2013
Usage (therms/mo) Palo Alto PG&E
500 $ 582 $ 428
5,000 $ 5,148 $ 3,681
10,000 $ 10,431 $ 6,747
50,000 $ 50,711 $ 30,452
Utilities Update for Fourth Quarter of FY 2013
October 2013
47
Water Utility
Retail Sales Volume and System Average Retail Rates
Table 17 below shows the Water Fund’s retail sales volume and the system average retail rate
for FY 2012 and FY 2013. For FY 2013, sales have been 2.0% higher than the adopted budget.
Table 17: Water Retail Sales and Rate
Water – Retail FY 2012
Unaudited
Actuals
FY 2013
Adopted
Budget
FY 2013
Unaudited
Actuals
Difference of
Adopted
Budget and
Actuals
%
Variance
to Budget
Jul 11‐Jun 12 Jul 12‐Jun 13 Jul 12‐Jun13
Sales Units (CCF) 5,062,873 4,996,902 5,097,429 100,527 2.0%
System Average Rate ($/CCF) 5.859 7.094 7.127 0.033 0.5%
Operating Activity
Table 18 below contains a summary of the Water Fund’s overall activity for FY 2013. Water
sales were up slightly during the last quarter of the year, as discussed above, though the
additional revenue was offset by purchase costs that were $665,000 higher than expected due
to lower than average precipitation. Other revenues were higher primarily due to greater than
expected service connection charges and capacity fees, offset by unrealized losses on
investments of $858,000. This was due to adjustments to the market value of the City’s
investment portfolio, as discussed previously for the Electric Utility (see page 34). Expenses
were lower than budgeted, which impacted the change in reserves, but the most significant
change to FY 2013 expenses was related to CIP project funds. There were a variety of mid‐year
and year‐end changes to the City’s CIP investment plan, as well as changes to the plan for the
use of bond proceeds from the 2009 Water Revenue Bond, in part due to project costs for the
bond‐funded El Camino reservoir project coming in under budget. The net effect of these and
other costs resulted in $6 million lower net expenses, and the projected change to the Water
Rate Stabilization Reserve (W‐RSR) is a $9.276 million addition as opposed to the $2.9 million
addition that was in the adjusted budget.
Utilities Update for Fourth Quarter of FY 2013
October 2013
48
Table 18: Water Operating Activity
Water ‐ Operating
Activity
All figures in thousands (000’s)
Adjusted
Budget
FY 2013
Unaudited
Actuals
Jul 12‐Jun 13
Variance to
Budget
Net Sales to date * $ 35,963 $ 36,062 $ 99
Other revenues to date 2,751 3,612 861
Purchase costs to date (15,940)(16,605)(665)
Other expenses to date **(19,849)(13,793)6,057
Total $ 2,924 $ 9,276 $ 6,352
* Includes misc. sales, adjustments, discounts, and bad debt
** Includes reserve transfers, salaries, allocated charges, other misc. expenses, and
encumbrances
Water Rate Stabilization Reserve
As shown in Table 19, the addition of $9.3 million to the W‐RSR results in a projected ending
balance of $17.3 million, which is well above the maximum guideline level. Staff will present
options for the use of these funds in the next financial forecast. In addition, the topic of the use
of excess reserves will be discussed when staff brings its Financial Policy to the UAC in
November.
Table 19: Water Rate Stabilization Reserve
Estimated Water Rate Stabilization Reserve
All Figures in thousands (000’s)
FY 2013 Adopted Budget Beginning Balance $ 9,488
Changes to FY 2013 Beginning Balance per FY 2012 Accounting $ (1,492)
FY 2013 Beginning Balance after accounting changes $ 7,996
Net sum of FY 2013 Unaudited Actuals to date * $ 9,276
Current Projected Reserve Balance as of End of FY 2013 $ 17,272
Adopted Budget W‐RSR Minimum Guideline $ 5,427
Adopted Budget W‐RSR Maximum Guideline $ 10,854
* Includes Encumbrances for CIP & Operations, bond related debt removed
Capital Improvement Program (CIP) Reserve
The balance of the water utility CIP reserve at the end of FY 2013 was $15.4 million, $5.0 million
of which was under contract. Table 20 shows the list of active CIP projects and the remaining
budget for each project. For detailed project descriptions, see the CIP Budget for the year the
project was adopted, which is indicated by the first two digits of the project number (for
example, refer to the 2013 CIP Budget for the project description for WS‐13002). For status
updates, please refer to the attachments to the staff report associated with the FY 2013 mid‐
year Budget Amendment Ordinance (Staff Report 3442).
Utilities Update for Fourth Quarter of FY 2013
October 2013
49
Table 20: Water Capital Improvement Project Reserve
Project # Project Name
Reappropriated /
Carried Forward from
Previous Years
Current Year
Funding
Budget
Amendments
Spending,
Current Year
Remaining in
CIP Reserve
Fund Commitments FY 2014 FY 2015 FY 2016 FY 2017 FY 2018
ONE TIME PROJECTS
WS‐07000
Water Regulation Station
Improvements 341,036 ‐ 24 (33,465) 307,595 10,795 ‐ ‐ ‐ ‐ ‐
WS‐07001 Water Recycling Facities 605,246 ‐ (199,417) (11,310) 394,519 193,914 ‐ ‐ ‐ ‐ ‐
WS‐08001 Water Reservoir Coating 1,835,637 500,000 ‐ (63,483) 2,272,154 20,639 ‐ ‐ ‐ ‐ ‐
WS‐09000 Seismic Water System 3,474,000 600,400 ‐ (7,727) 4,066,673 2,512 ‐ ‐ ‐ ‐ ‐
WS‐11001
Vacuum Excavation
Equipment 275,000 ‐ (275,000) ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐
WS‐13003 GPS Equipment Upgrade ‐ 200,000 ‐ ‐ 200,000 ‐ ‐ ‐ ‐ ‐ ‐
WS‐13004
Asset Management Mobile
Deployment ‐ 100,000 ‐ ‐ 100,000 ‐ ‐ ‐ ‐ ‐ ‐
WS‐13006
Water Meter Shop
Renovations ‐ 115,000 ‐ (27,852) 87,148 ‐ 200,000 ‐ ‐ ‐ ‐
Subtotal, One‐time Projects 6,530,919 1,515,400 (474,393) (143,837) 7,428,089 227,860 200,000 ‐ ‐ ‐ ‐
WATER MAIN REPLACEMENT PROGRAM
WS‐08017
Water Main Replacement ‐
Project 22 141,638 ‐ (141,638) ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐
WS‐09001
Water Main Replacement ‐
Project 23 1,993,583 ‐ 2,216 (1,871,110) 124,689 124,689 ‐ ‐ ‐ ‐ ‐
WS‐10001
Water Main Replacement‐
Project 24 3,052,948 ‐ (194,230) (2,461,993) 396,726 301,171 ‐ ‐ ‐ ‐ ‐
WS‐11000
Water Main Replacement‐
Project 25 284,906 3,152,000 (2,736,544) (3,984) 696,378 ‐ 2,736,906 ‐ ‐ ‐ ‐
WS‐12001
Water Main Replacement‐
Project 26 305,000 ‐ (305,000) ‐ ‐ ‐ 505,000 2,975,000 ‐ ‐ ‐
WS‐13001
Water Main Replacement ‐
Project 27 ‐ ‐ ‐ ‐ ‐ ‐ ‐ 514,000 2,895,000 ‐ ‐
WS‐13001
Water Main Replacement ‐
Project 28 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 324,000 3,445,000 ‐
WS‐15002
Water Main Replacement ‐
Project 29 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 334,000 3,550,000
WS‐16001
Water Main Replacement ‐
Project 30 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 344,020
Subtotal, Water Main Replacement Prog. 5,778,075 3,152,000 (3,375,196) (4,337,087) 1,217,793 425,860 3,241,906 3,489,000 3,219,000 3,779,000 3,894,020
Utilities Update for Fourth Quarter of FY 2013
October 2013
50
Project # Project Name
Reappropriated /
Carried Forward from
Previous Years
Current Year
Funding
Budget
Amendments
Spending,
Current Year
Remaining in
CIP Reserve
Fund Commitments FY 2014 FY 2015 FY 2016 FY 2017 FY 2018
ONGOING PROJECTS
WS‐80014
Service and Hydrant
Replacements 148,286 222,000 5,049 (359,994) 15,341 ‐ 229,000 236,000 243,080 250,400 263,000
WS‐80015 Water Meters 215,445 222,000 380 (4,183) 433,642 5 379,000 386,000 393,080 400,372 407,000
WS‐02014 W‐G‐W Utility GIS Data 216,431 100,000 8,095 (266,562) 57,964 904 275,000 275,000 275,000 275,000 275,000
WS‐13002 Equipment Tools ‐ 50,000 2,187 (24,055) 28,132 ‐ ‐ 53,000 ‐ 56,180 ‐
WS‐11003
Water Distribution System
Improvements 212,336 212,000 8,945 (98,398) 334,883 5,000 218,000 225,000 232,000 239,000 247,000
WS‐11004
Water Supply System
Improvements 218,968 212,000 6,965 (90,969) 346,964 42,517 218,000 225,000 232,000 239,000 247,000
Subtotal, Ongoing Projects 1,011,466 1,018,000 31,621 (844,161) 1,216,926 48,426 1,319,000 1,400,000 1,375,160 1,459,952 1,439,000
CUSTOMER CONNECTIONS (FEE FUNDED)
WS‐80013 Water System Extensions 61,762 430,000 45,999 (528,788) 8,973 ‐ 440,000 450,000 460,000 473,000 486,000
Subtotal, Customer Connections 61,762 430,000 45,999 (528,788) 8,973 ‐ 440,000 450,000 460,000 473,000 486,000
BOND FUNDED (THROUGH FY 2013)*
WS‐08002
Emergency Water Suppy
Project 14,702,829 ‐ (963,895) (8,211,486) 5,527,448 4,274,003 ‐ ‐ ‐ ‐ ‐
Subtotal, Bond‐Funded Projects 14,702,829 ‐ (963,895) (8,211,486) 5,527,448 4,274,003 ‐ ‐ ‐ ‐ ‐
GRAND TOTAL 28,085,051 6,115,400 (4,735,864) (14,065,359) 15,399,228 4,976,148 5,200,906 5,339,000 5,054,160 5,711,952 5,819,020
Funding Sources
Connection/Capacity Fees 709,000 (963,895) 868,000 878,000 899,840 921,000 943,000
Other Utility Funds (Asset Mgmt, GIS Systems) 292,000 183,334 183,334 183,334 183,334 183,334
Utility Rates 6,115,400 (3,771,969) 5,200,906 5,339,000 5,054,160 5,711,952 5,819,020
CIP‐RELATED RESERVES DETAIL
6/30/2012
(Actual)
6/30/2013
(Projected)
Reappropriations (excl. Bond Funded) 8,355,222 10,423,080
Commitments (excl. Bond Funded) 5,027,000 4,976,148
*Because June 2103 was the deadline for using bond proceeds, expenditures in this project after FY 2013 will be funded by utility rates.
Utilities Update for Fourth Quarter of FY 2013
October 2013
51
Bill Comparison
Palo Alto’s overall water rates increased on July 1, 2013 by 7%. Table 21 presents monthly
residential bills for Palo Alto and surrounding cities for various usage levels based on published
rates as of September 1, 2013. All public agencies presented had rate increases for FY 2014.
Table 21: Residential Water Bill Comparison
Residential Monthly Water Bill ($/month)
As of September 1, 2013
Usage CCF/mo Palo Alto
Menlo
Park
Redwood
City
Mountain
View
Los
Altos
Santa
Clara Hayward
4 34.63 36.45 36.78 26.14 26.73 13.56 28.20
(Winter median) 7 52.19 53.28 48.08 40.30 36.83 23.73 43.35
(Annual median) 9 67.35 64.50 56.18 49.74 43.55 30.51 53.45
(Summer median) 14 105.25 93.77 80.30 73.34 61.21 47.46 80.50
25 188.63 158.86 153.23 153.56 100.52 84.75 149.25
Based on the FY 2011 BAWSCA survey, the fraction of SFPUC as source of potable water supply was
100% for Palo Alto, 90% for Menlo Park, 100% for Redwood City, 86% for Mountain View, 12% for Santa
Clara and 100% for Hayward.
Wastewater Collection Utility
Operating Activity
Table 22 contains a summary of the Wastewater Collection Fund’s overall activity for FY 2013.
Sales are very stable for the Wastewater Collection fund as 53% is from residential customers,
whose rate consists of fixed monthly service charges. A component of business sales revenues
is based on winter water use levels which are rather stable as well.
Table 22: Wastewater Operating Activity
Wastewater Collection
‐ Operating Activity
All figures in thousands (000’s)
Adjusted
Budget
FY 2013
Unaudited
Actuals
Jul 12‐Jun 13
Variance to
Budget
Net Sales to date * $ 14,980 $ 15,019 $ 39
Other revenues to date 1,519 1,979 460
Treatment costs to date (8,556)(6,976)1,580
Other expenses to date ** (9,104)(9,331)(227)
Total $ (1,162)$ 691 $ 1,853
* Includes misc. sales, adjustments, discounts, and bad debt
** Includes reserve transfers, salaries, allocated charges, other misc. expenses, and
encumbrances
Utilities Update for Fourth Quarter of FY 2013
October 2013
52
Palo Alto’s share of treatment costs were $1.6 million lower than budgeted, and other revenues
were $460,000 higher, mainly due to larger than expected connection and capacity fees. These
have been offset by large unrealized losses in investments, present in all funds this year, of
$580,000. This was due to adjustments to the market value of the City’s investment portfolio,
as discussed previously for the Electric Utility (see page 34). These adjustments resulted in
addition to the Wastewater Collection Rate Stabilization Reserve (WD‐RSR) of $691,000 instead
of the budgeted drawdown from reserves of $1.162 million.
Wastewater Collection Rate Stabilization Reserve
As shown in Table 23, the estimated balance of the WC‐RSR as of the end of FY 2013 is $5.4
million, which is above the long‐term maximum reserve guideline level.
Table 23: Wastewater Collection Rate Stabilization Reserve
Estimated Wastewater Collection Rate Stabilization Reserve
All Figures in thousands (000’s)
FY 2013 Adopted Budget Beginning Balance $ 6,579
Changes to FY 2013 Beginning Balance per FY 2012 Accounting $ (1,828)
FY 2013 Beginning Balance after accounting changes $ 4,751
Net sum of FY 2013 Unaudited Actuals to date * $ 691
Current Projected Reserve Balance as of End of FY 2013 $ 4,751
Adopted Budget WC‐RSR Minimum Guideline $ 2,253
Adopted Budget WC‐RSR Maximum Guideline $ 4,506
* Includes Encumbrances for CIP & Operations, bond related debt removed
Capital Improvement Program (CIP) Reserve
The balance of the wastewater utility CIP reserve at the end of FY 2013 was $11.2 million, $2.7
million of which was under contract. Table 24 shows the list of active CIP projects and the
remaining budget for each project. For detailed project descriptions, see the CIP Budget for the
year the project was adopted, which is indicated by the first two digits of the project number
(for example, refer to the 2013 CIP Budget for the project description for WC‐13002). For
status updates, please refer to the attachments to the staff report associated with the FY 2013
mid‐year Budget Amendment Ordinance (Staff Report 3442).
Utilities Update for Fourth Quarter of FY 2013
October 2013
53
Table 24: Wastewater Capital Improvement Project Reserve
Project # Project Name
Reappropriated /
Carried Forward from
Previous Years
Current Year
Funding
Budget
Amendments
Spending,
Current Year
Remaining in
CIP Reserve
Fund Commitments FY 2014 FY 2015 FY 2016 FY 2017 FY 2018
WC‐07004
Sewer System Rehabilitation /
Augmentation ‐ Project 20 470,838 ‐ (133,305) (241,489) 96,044 50,764 ‐ ‐ ‐ ‐ ‐
WC‐08012
Sewer System Rehabilitation /
Augmentation ‐ Project 21 239,866 ‐ (79,595) 28,539 188,810 ‐ ‐ ‐ ‐ ‐ ‐
WC‐09001
Sewer System Rehabilitation /
Augmentation ‐ Project 22 2,401,304 ‐ 39,049 (1,506,801) 933,552 908,555 ‐ ‐ ‐ ‐ ‐
WC‐10002
Sewer System Rehabilitation /
Augmentation ‐ Project 23 3,029,301 ‐ 251 (658,357) 2,371,195 1,750,137 ‐ ‐ ‐ ‐ ‐
WC‐11000
Sewer System Rehabilitation /
Augmentation ‐ Project 24 3,119,500 ‐ 309 (175,393) 2,944,416 ‐ ‐ ‐ ‐ ‐ ‐
WC‐12001
Sewer System Rehabilitation /
Augmentation ‐ Project 25 300,000 2,912,000 ‐ (68,199) 3,143,801 17,301 ‐ ‐ ‐ ‐ ‐
WC‐13001
Sewer System Rehabilitation /
Augmentation ‐ Project 26 ‐ 310,000 (310,000) ‐ ‐ ‐ 310,000 3,000,000 ‐ ‐ ‐
WC‐14001
Sewer System Rehabilitation /
Augmentation ‐ Project 27 ‐ ‐ ‐ ‐ ‐ ‐ ‐ 320,000 3,090,000 ‐ ‐
WC‐15001
Sewer System Rehabilitation /
Augmentation ‐ Project 28 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 330,000 3,183,000 ‐
WC‐16001
Sewer System Rehabilitation /
Augmentation ‐ Project 29 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 340,000 3,270,000
Subtotal, Sewer Rehab./Augmentation 9,560,809 3,222,000 (483,291) (2,621,701) 9,677,818 2,726,757 310,000 3,320,000 3,420,000 3,523,000 3,270,000
ONGOING PROJECTS
WC‐13002
Fusion and General Equipment
/ Tools ‐ 50,000 2,187 (24,055) 28,132 ‐ ‐ 51,500 ‐ 53,000 ‐
WC‐15002
Wastewater System
Improvements 55,870 212,000 ‐ (23,621) 244,249 ‐ 218,000 225,000 232,000 239,000 246,000
WC‐99013
Sewer / Manhole
Rehabilitation 1,193,120 570,000 100 (620,649) 1,142,571 (0) 100,000 100,000 100,000 100,000 100,000
Subtotal, Ongoing Projects 1,248,990 832,000 2,287 (668,325) 1,414,952 (0) 318,000 376,500 332,000 392,000 346,000
WASTEWATER SYSTEM REHABILITATION
AND AUGMENTATION PROGRAM
Utilities Update for Fourth Quarter of FY 2013
October 2013
54
Project # Project Name
Reappropriated /
Carried Forward from
Previous Years
Current Year
Funding
Budget
Amendments
Spending,
Current Year
Remaining in
CIP Reserve
Fund Commitments FY 2014 FY 2015 FY 2016 FY 2017 FY 2018
CUSTOMER CONNECTIONS (FEE FUNDED)
WC‐80020 Sewer System Extensions 134,286 350,000 37,922 (445,570) 76,638 ‐ 361,000 372,000 383,000 394,000 405,000
Subtotal, Customer Connections 134,286 350,000 37,922 (445,570) 76,638 ‐ 361,000 372,000 383,000 394,000 405,000
GRAND TOTAL 10,944,086 4,404,000 (443,082) (3,735,596) 11,169,408 2,726,756 989,000 4,068,500 4,135,000 4,309,000 4,021,000
Funding Sources
Connection/Capacity Fees 750,000 37,922 861,000 871,000 894,000 917,000 940,000
Funded by Rates and Other Revenue 4,054,000 (481,004) 628,000 3,696,500 3,752,000 3,915,000 3,616,000
CIP‐RELATED RESERVES DETAIL
6/30/2012
(Actual)
6/30/2013
(Projected)
Reappropriations 9,849,086 8,442,651
Commitments 1,095,000 2,726,756
Utilities Update for Fourth Quarter of FY 2013
October 2013
55
Bill Comparison
Palo Alto’s wastewater collection rates changed on July 1, 2012. The rate change resulted in a
5% increase in overall revenues. Table 25 presents typical monthly residential bills for Palo Alto
and surrounding cities based on published rates as of September 1, 2013. The bill for a Palo
Alto customer is currently just 70% of the average of the bills for the six comparator cities.
Table 25: Residential Wastewater Collection (Sewer) Bill Comparison
Residential Monthly Wastewater Collection Bill
As of September 1, 2013
Palo Alto Menlo Park Redwood City Mountain View Los Altos Santa Clara Hayward
29.31 68.33 63.09 26.10 32.36 33.00 27.27
Fiber Optic Utility
Operating Activity
Table 24 contains a summary of the Fiber Fund’s overall activity for end of FY 2013.
Table 24: Fiber Operating Activity
Fiber – Operating
Activity
All figures in thousands $ (000’s)
Adjusted
Budget
FY 2013
Unaudited
Actuals
FY 2013
Variance to
Budget
Net Sales to date * 3,575 4,382 806
Other revenues to date 303 **(91) (392)
Other expenses to date*** (1,789)(1,471)320
Total 2,089 2,820 734
* Includes miscellaneous sales, adjustments, discounts, bad debt.
** Includes “Gasb31 reversal” (i.e. the change in unrealized gains; recording the paper
gain or loss in market value from year to year. For FY 2013, there was a decline of
$91,079). This was due to adjustments to the market value of the City’s investment
portfolio, as discussed previously for the Electric Utility (see page 34).
*** Includes reserve transfers, salaries, allocated charges, other misc. expenses, and
encumbrances.
Fiber Rate Stabilization Reserve
Actual and projected sales and expenses for dark fiber service connections indicate a positive
variance of approximately $734,000, as compared to FY 2013 budget projections. The Fiber
Optics Fund has encumbered $429,000 and $270,000 from prior year budgets for customer
connections and network system improvements, respectively. As shown in Table 26, the Fiber
Optics Rate Stabilization Reserve (F‐RSR) is projected to be $15.3 million as of the end of FY
2013. This is above the F‐RSR long‐term maximum guideline level of $1.8 million for FY 2013.
Utilities Update for Fourth Quarter of FY 2013
October 2013
56
Table 26: Fiber Rate Stabilization Reserve
Estimated Fiber Rate Stabilization Reserve
All Figures in thousands (000’s)
FY 2013 Adopted Budget Beginning Balance $ 11,729
Changes to FY 2013 Beginning Balance per FY 2012 Accounting $ 741
FY 2013 Beginning Balance after accounting changes $ 12,470
Net sum of FY 2013 Unaudited Actuals to date * $2,820
Current Projected Reserve Balance as of End of FY 2013 $ 15,290
Adopted Budget F‐RSR Maximum Guideline $ 1,788
* Includes Encumbrances for CIP and Operations
Utility Reserves Summary
A summary of fiscal year beginning and expected ending reserve balances along with minimum
and maximum guidelines is provided for each Utility reserve in Table 27.
Utilities Update for Fourth Quarter of FY 2013
October 2013
57
Table 27: Utilities Reserves Summary
Beginning
Reserve
Balance as
of 6/30/12
FY 2012
(ASD)
Current
Projected
Reserve
Balance as
of 6/30/13
FY 2013
(ASD)
Current
Projected
Reserve
Balance for
06/30/13
FY 2013
(Util)
Projected
Reserve
Balance
(based on
Budget) for
FY 2013
Minimum Maximum
Electricity
Supply/Commodity 65,929$ 65,323$ 65,323$ 31,721$ 63,442$ 57,560$
Distribution 8,680 3,705 3,705 6,747 13,494 10,717
CIP 14,545 14,337 N/A
Public Benefit 1,149 2,197 2,197 1,261
ESP 50,320 51,838 51,838 50,320
All Others 6,679 5,884 N/A
Sub total Cash Reserves 147,302 143,284 N/A
Net Capital Investment 166,085 171,976 N/A
Total 313,387$ 315,260$ N/A
Gas
Supply/Commodity 7,618 6,292$ 6,292$ 4,072$ 8,142$ 5,726$
Distribution 8,374 5,026 5,026 3,339 6,678 4,819
CIP 16,017 17,546 N/A
All Others 4,999 3,828 1,804 1,804
Sub total Cash Reserves 37,008 32,692 N/A
Net Capital Investment 76,606 82,210 N/A
Total 113,614$ 114,902$ N/A
Water
Distribution 7,996$ 17,272$ 17,272$ 5,427$ 10,854$ 7,833$
CIP 13,382$ 15,399 N/A
All Others 4,939$ 4,227 4,225 4,225
Sub total Cash Reserves 26,317 36,898 N/A
Net Capital Investment 70,454$ 66,696 N/A
Total 96,771$ 103,594$ N/A
Fiber Optic
Distribution 12,470$ 15,290$ 15,290$ 715$ 1,788$ 13,818$
CIP 697 699 N/A
All Others 1,084 1,026 1,000 1,000
Sub total Cash Reserves 14,251 17,015 N/A
Net Capital Investment 7,226 7,312 N/A
Total 21,477$ 24,327$ N/A
Wastewater Collection
Distribution 4,751$ 5,442$ 5,442$ 2,253$ 4,506$ 4,899$
CIP 10,944 11,169 N/A
All Others 1,100 1,058 1,000 1,000$
Sub total Cash Reserves 16,795 17,669 N/A
Net Capital Investment 67,677 70,640 N/A
Total 84,472$ 88,309$ 6,442$
Budgeted Reserve
Guideline Range for
FY 2013
City Of Palo Alto
Utility Fund Reserve
Quarterly Projections - Unaudited
As of 6/30/2013 - UNAUDITED
(in thousands)
Utilities Update for Fourth Quarter of FY 2013
October 2013
58
IX. Operations
Reliability Impact Measures
The reliability impact measures for FY 2013 are displayed in the following figures. This type of
data is used to develop long‐term CIP plans as well as prioritization of CPAU’s repair and
rehabilitation projects.
Electric
1. FY 2013 Electric Distribution System Service Reliability Indices and Definitions (Figure
22)
Gas
1. Gas System O&M – Service Installations (Figure 23)
2. Gas Main Leaks By Type of Pipe (Figure 24)
3. Gas System O&M Mainline Break Repairs (Figure 25)
4. Gas Main Shutdowns and Customers Affected (Figure 26)
5. Gas Service Disruptions by Cause (Figure 27)
Water
1. Water Main Leaks by Type of Pipe (Figure 28)
2. Unplanned Water Service Disruption (Figure 29)
Utilities Update for Fourth Quarter of FY 2013
October 2013
59
Figure 22: FY 2013 Electric Distribution System Service Reliability Indices and Definitions
See next page for definitions of terms used in this chart.
Utilities Update for Fourth Quarter of FY 2013
October 2013
60
Utilities Update for Fourth Quarter of FY 2013
October 2013
61
Figure 23: Gas System O&M – Service Installations
* All installations taking longer than 38 days were due to customer requested delays.
Utilities Update for Fourth Quarter of FY 2013
October 2013
62
Figure 24: Gas Main Leaks By Type of Pipe
Utilities Update for Fourth Quarter of FY 2013
October 2013
63
Figure 25: Gas System O&M Mainline Break Repairs
Utilities Update for Fourth Quarter of FY 2013
October 2013
64
Figure 26: Gas Main Shutdowns and Customers Affected
Utilities Update for Fourth Quarter of FY 2013
October 2013
65
Figure 27: Gas Service Disruptions by Cause
Utilities Update for Fourth Quarter of FY 2013
October 2013
66
Figure 28: Water Main Leaks by Type of Pipe
Utilities Update for Fourth Quarter of FY 2013
October 2013
67
Figure 29: Unplanned Water Service Disruption