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HomeMy WebLinkAboutStaff Report 2510-53471.Approval of the Minutes of the Utilities Advisory Commission Meeting Held on September 3, 2025 Item No. 1. Page 1 of 1 Utilities Advisory Commission Staff Report From: Alan Kurotori, Director Utilities Lead Department: Utilities Meeting Date: November 5, 2025 Report #: 2510-5347 TITLE Approval of the Minutes of the Utilities Advisory Commission Meeting Held on September 3, 2025 RECOMMENDATION Staff recommends that the Utilities Advisory Commission review and approve September 3, 2025 minutes. Commissioner ______ moved to approve the draft minutes of the September 3, 2025 meeting as submitted/amended. Commissioner _____ seconded the motion ATTACHMENTS Attachment A: September 3, 2025 Draft Minutes AUTHOR/TITLE: Alan Kurotori, Director of Utilities Staff: Kaylee Burton, Utilities Administrative Assistant Utilities Advisory Commission Minutes Approved on: Page 1 of 13 UTILITIES ADVISORY COMMISSION MEETING MINUTES OF SEPTEMBER 3, 2025 REGULAR MEETING CALL TO ORDER Commissioner Phillips called the meeting of the Utilities Advisory Commission (UAC) to order at 6:00 p.m. Present: Vice Chair Mauter (Remote), Commissioners Croft, Gupta, Metz, and Phillips Absent: Chair Scharff and Commissioner Tucher AGENDA REVIEW AND REVISIONS None ORAL COMMUNICATIONS None APPROVAL OF THE MINUTES ITEM 1: ACTION: Approval of the Minutes of the Utilities Advisory Commission Meeting Held on July 9, 2025 ACTION: Commissioner Gupta moved to approve the draft minutes of the July 9, 2025 meeting as submitted. Commissioner Metz seconded the motion. Commissioner Metz thanked staff for appending his comments on Item 5 related to reliability and resilience studies. Commissioner Phillips inquired if Commissioner Metz’s comments were considered part of the minutes or an addition. Kaylee Burton, Utilities Administrative Assistant, explained that Commissioner Metz’s comments were an addition to the minutes as a supporting document. The motion carried 5-0 with Vice Chair Mauter, and Commissioners Croft, Gupta, Metz, and Phillips voting yes. Utilities Advisory Commission Minutes Approved on: Page 2 of 13 UTILITIES DIRECTOR REPORT Alan Kurotori, Utilities Director, delivered the Director's Report. On August 11, 2025, the City Council approved the amended water supply agreement with the City and County of San Francisco. Staff brought to Council a rate change update due to a clerical error in the rate schedule effective September 1, 2025. The change did not negatively impact customers but was estimated to impact revenues by about $25,800 for rates associated with the net surplus energy compensation package related to solar. The Northern California Power Agency’s legislative tour included Santa Clara and Palo Alto. In August, 30 federal and state legislative staff visited Rivian’s headquarters and stayed overnight in Palo Alto. The Mayor and Vice Mayor spoke to the delegation. One topic of discussion was Palo Alto’s public-private partnership with Tesla to pay a share of the Hanover Substation upgrades. There has been outreach to customers in the foothill areas susceptible to public safety power shut-offs. Undergrounding of all lines serving the foothills in the city limits west of Highway 280 will be completed by the end of 2025. Because of supply chain issues, the pole-mounted voltage regulator will be exchanged in early April but the rest of the lines will be de-energized. Mr. Kurotori read a comment from the Palo Alto Unified School District (PAUSD) expressing their appreciation to City staff. PAUSD commended the electric utility team for their commitment and hard work that enabled the completion of updates to 9 school campuses prior to the beginning of the schoolyear. Social media was being used to notify customers of residential electrification rebates, and that federal tax incentives will be ending at the end of this calendar year. As of September 1, the Utility has approved 76 rebates and applications totaling $280,000 in reserves for Heat Pump Water Heaters. The Utility’s website has information on rebates between $3500 to $7000, depending on income and if the panel and circuits are upgraded. Customers can get tax breaks, rebates from Palo Alto Utilities, and the State’s Tech Clean incentives when using those contractors. Mr. Kurotori mentioned that some staff will be redeployed to work with CPAU customers and their contractors to get their projects moving forward during this great opportunity to electrify their home. A full update on fiber to the premises will be presented at the October UAC meeting. The fiber hut permit was approved. The secured perimeter of that substation will be expanded to include the fiber hut. One of the challenges with AMI was having a strong enough signal to read all the meters remotely, so a new advanced metering infrastructure base station was put on the rooftop of City Hall. The AMI conversion was about 90 percent complete with over 66,000 meters currently on AMI. With the new base station, the conversion rate was anticipated to increase to 95 percent with an additional 4000 meters by the end of 2025. Due to a combination of age, Utilities Advisory Commission Minutes Approved on: Page 3 of 13 condition, difficult location, and having to coordinate with customers, the remaining 5 percent of meters will be converted to AMI in 2026. A CPAU staff member posted a YouTube Shorts video for anyone interested in the new base station and how it was installed. NEW BUSINESS ITEM 2: Discussion of Gas Utility Transition Study Scoping; CEQA Status – Not a Project Utilities Advisory Commission Minutes Approved on: Page 4 of 13 decline enough to enable staff attrition; therefore, the per-unit gas utility cost will increase for remaining customers. Utilities Advisory Commission Minutes Approved on: Page 5 of 13 the importance of having a firm understanding of the legal risks. It was helpful to understand the need for incentives versus unilateral decisions by the City and Utility. The opportunity for avoided infrastructure could help to fund an incentive. Utilities Advisory Commission Minutes Approved on: Page 6 of 13 Commissioner Gupta asked the following questions. What progress has been made toward meeting the goal of 44 percent reduction in single-family residential gas use by 2025 mentioned in a table of electrification scenarios on Page 4 of the 2021 report? Do we capture and use data to see how it might help with costs or is the data sample too small? Will the study provide mapping to depict what blocks might be best to begin electrifying; perhaps color coding the priorities with red, yellow, and green? Is it possible to model the holdout problem? Can we model cost with a sensitivity analysis of 10, 20, 30 percent customers per block refusing transition? There may be a natural disincentive for holdouts because the cost allocation will be greater for the remaining customers as more folks disconnect from the gas system, which should lead to more customers wanting to disconnect. When studies are presented to the Commission and Council, Commissioner Gupta wanted to see an assessment of the social cost or cost avoidance. For example, the EPA estimate of the social cost of carbon is $190 per ton of carbon dioxide emissions. Based on the 2021 report numbers, Commissioner Gupta estimated that electrifying all single-family homes would avoid 9 million therms, which could represent $9 to $11 million per year in avoided social damages. Can the current study’s output metrics include miles of main retired per year, overall cost reductions in maintenance costs, and climate cost avoided? Commissioner Gupta noted Table 4 on Page 8 of the 2021 analysis projected a 17 percent system average rate increase in FY 2025 with a mid-transition bulge, which disproportionately impacted multifamily homes and small businesses. Can the rate impact be modeled by customer class and income level under a few different rate designs to address equity concerns? What is the relationship between this study and our electrification goals, and how does it relate to grid modernization? The 2020 study estimated $30 million to $75 million of electric grid upgrades needed for electrification of single-family residents because several transformers were overcapacity. Will this study inform the approach on grid modernization? Is the core gas network defined as the 86-mile skeletal system modeled in the 2020 report? Does this study relate to Palo Alto’s approaches on building codes and its effect on the City’s electrification goals? For example, even if there are gas appliances, require new constructions or remodels to place 220 volt outlets behind the stove and dryer or for an EV charger. Has staff looked at PG&E’s Gas Asset Analysis tool to see what information was used to build that tool? Ithaca, New York has a Green New Deal initiative aiming for 100 percent electrification. Commissioner Gupta offered to email a list of studies to staff. Mr. Abendschein addressed Commissioner Gupta’s questions. The scenarios on Page 4 of the 2021 report arrived at 44 percent by taking a straight-line approach from 2021 to 2030. The 2021 report was completed before S/CAP developed climate goals. As climate goals were developed, it was understood that instead of a straight line it would be an S-curve with not many early adopters, followed by significant acceleration, and then people at the end who will not get off gas without a big push. Mr. Abendschein did not have the number of current residential gas users with him but recalled 3 percent of homes had no gas, and 6 percent verified but as many as 10 percent have at least 1 major all-electric appliance, which was a significant improvement from the 2020 study where 168 homes had no gas. Mr. Abendschein Utilities Advisory Commission Minutes Approved on: Page 7 of 13 thought the data was not statistically significant yet but was helpful to validate the models in the gas transition study and to provide a base level of information for analyses on the electric side. Knowing the location of all-electric homes in addition to the AMI data for those homes will help with the electric utility’s capacity planning. Utilities Advisory Commission Minutes Approved on: Page 8 of 13 Commissioner Phillips was supportive of the scope of this study but had the following concerns and questions. Imposing increased costs on a smaller set of people will result in a tremendous burden and at some point becomes unviable. Palo Alto was the smallest gas utility in California at 24,000 customers, with the next largest being the City of Long Beach with 500,000 customers. What decisions have to be made and what are the options? Is it technically and economically feasible to have a gas utility with 15,000 customers spread across Palo Alto’s geography or will it require an infusion from the General Fund or other sources of funds? Commissioner Phillips was very concerned about the social justice aspect because the people impacted cannot afford to transition. Is there was a way to combine with PG&E to avoid having a tiny group of customers bear the City’s fixed cost for gas? Has anybody else gone from the scale of Palo Alto’s gas utility to 20 percent or 40 percent over a 5 or 10-year period, and what was their experience? Mr. Abendschein stated the preliminary results of the S/CAP funding study showed electrification was a net benefit for the community overall, which included the loss of gas utility revenue but did not include distribution cost savings within the gas utility. There will be savings from not buying gas commodity from outside the city. Around 60 percent of costs are variable in the gas utility. The gas transition study will assess the scale of the impact from massively declining gas sales. Staff expected that outside funds and a plan was needed on how to handle the cost of abandonment, especially when it starts getting to the tail end. Broader discussion and a policy decision were needed on which groups or if all groups within the community will we hold gas rates steady and for what purposes. The legal and financial dimensions needed to be considered. Early indications from the S/CAP funding study were that there were available resources and potential solutions. Mr. Abendschein did not have examples of shutting down a gas utility but shutting down other utilities and large infrastructure could be looked at as models of a stream of revenue that dried up at a certain point, such as landfill closings and decommissioning nuclear power. Commissioner Phillips said that decommissioning a nuclear reactor was part of a much broader utility system, and every nuclear decommissioning he saw had underestimated costs often by a factor of 2. Commissioner Phillips was concerned about underestimations with regard to gas. Commissioner Phillips offered to talk offline with Mr. Abendschein about other approaches. Mr. Abendschein mentioned that the work plan and S/CAP funding study will include funding sources. There will be sensitivities around the cost estimates. Mr. Kurotori commented that the City was making investments and maintaining the gas system in accordance with all state and federal requirements. The recent CPUC audit of our system was clean. The gas transition study will provide options and alternatives as well as awareness of potential pitfalls. ACTION: No Action Utilities Advisory Commission Minutes Approved on: Page 9 of 13 ITEM 3: Recommend that the City Council Approve Amendment No. 1 to the Memorandum of Agreement Between California Alternative Energy and Advanced Transportation Financing Authority and City of Palo Alto to Extend the Term of the Agreement from Two Years to Five Years and Continue Offering the GoGreen Home Energy Financing Program for Palo Alto Residents Utilities Advisory Commission Minutes Approved on: Page 10 of 13 Mr. Swaminathan replied there were about 100 contractors serving Santa Clara County. ACTION: Commissioner Metz motioned to recommend that the City Council approve Amendment No. 1 to the Memorandum of Agreement between the California Alternative Energy and Advanced Transportation Financing Authority and the City of Palo Alto to extend the term of the agreement from 2 years to 5 years, and continue offering the GoGreen Home Energy Financing Program for Palo Alto residents. FUTURE TOPICS FOR UPCOMING MEETINGS ON October 1, 2025 AND REVIEW OF THE 12- MONTH ROLLING CALENDAR Utilities Advisory Commission Minutes Approved on: Page 11 of 13 November. A fellow working for the City was developing a white paper on data centers, and it will be scheduled as soon as staff is available to review it. The City had a strong process in working with businesses to make sure they pay their fair share of the capacity increases necessary to serve their needs. For example, Tesla funded a lot of the Hanover substation improvements and Tesla partnered with the City on the improvements to the distribution substation serving all customers. The Tesla contract included protections on their ramp rate and use to insulate customers from potential revenue loss or stranded assets. The grid modernization strategy will be scheduled as soon as possible but included looking at our distribution system serving our residential customers, analyzing our 60 kV subtransmission system and capacity needs, substations, the useful life of existing transformers and breakers and standardizing them, and how we can do distribution ties to increase reliability and resiliency. COMMISSIONER COMMENTS and REPORTS from MEETINGS/EVENTS Utilities Advisory Commission Minutes Approved on: Page 12 of 13 discussion. Commissioner Phillips wondered if there was a better process to keep the UAC informed, and to make sure the Finance Committee and City Council had full advantage of the UAC’s recommendations and consultations. Utilities Advisory Commission Minutes Approved on: Page 13 of 13 Commissioner Gupta attended the MSC Open House and reported it was a wonderful and educational event, and highly recommended attending it next year. The MSC Open House offered rides on a line truck and there was free soft serve ice cream. Commissioner Gupta learned about our stormwater management and saw it visually in a model display. Commissioner Phillips did not attend this year’s MSC Open House but attended the 2 previous years and agreed it was a great event. ADJOURNMENT Commissioner Metz moved to adjourn. Vice Chair Mauter seconded the motion. The motion carried 5-0 with Vice Chair Mauter, Commissioners Croft, Gupta, Metz, and Phillips voting yes. Meeting adjourned at 7:55 p.m.