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HomeMy WebLinkAboutStaff Report 2511-55581.Approval of the Minutes of the Utilities Advisory Commission Meeting Held on November 5, 2025 Item No. 1. Page 1 of 1 Utilities Advisory Commission Staff Report From: Alan Kurotori, Director Utilities Lead Department: Utilities Meeting Date: December 3, 2025 Report #: 2511-5558 TITLE Approval of the Minutes of the Utilities Advisory Commission Meeting Held on November 5, 2025 RECOMMENDATION Staff recommends that the Utilities Advisory Commission review and approve November 5, 2025 minutes. Commissioner ______ moved to approve the draft minutes of the November 5, 2025 meeting as submitted/amended. Commissioner ____ seconded the motion ATTACHMENTS Attachment A: November 5, 2025 Draft Minutes AUTHOR/TITLE: Alan Kurotori, Utilities Director Staff: Rachael Romero, Administrative Associate II Utilities Advisory Commission Minutes Approved on: Page 1 of 22 UTILITIES ADVISORY COMMISSION MEETING MINUTES OF NOVEMBER 5, 2025 REGULAR MEETING CALL TO ORDER Vice Chair Mauter called the meeting of the Utilities Advisory Commission (UAC) to order. Present: Vice Chair Mauter; Commissioners Croft, Gupta, Metz, Phillips, and Tucher Absent: Chair Scharff Vice Chair Mauter may have to leave the meeting and suggested that Commissioner Phillips chair the meeting in her absence. Staff stated a vote was needed. Vice Chair Mauter and Commissioners Croft, Gupta, Metz, Phillips, and Tucher voted yes. AGENDA REVIEW AND REVISIONS Utilities Director Alan Kurotori said there were no agenda changes. The 12-month rolling calendar would be discussed tonight and every other month under Future Topics for Upcoming Meetings. Commissioner Tucher questioned why the 12-month rolling calendar was not discussed every month. Commissioner Tucher thought that commissioners ought to be notified about a commissioner’s absence before the meeting, especially when the Chair would not be present, but the reason for the absence did not need to be disclosed. Mr. Kurotori will address Commissioner Tucher’s question about the 12-month rolling calendar during the discussion of Future Topics for Upcoming Meetings. Vice Chair Mauter was not sure that commissioners sent out attendance publicly in advance of the meeting. Vice Chair Mauter was concerned about publicly highlighting personal issues that sometimes arise at the last minute. Mr. Kurotori added that City Council Members did not notify their fellow Council Members when they would not be present at the meeting. ORAL COMMUNICATIONS None APPROVAL OF THE MINUTES Utilities Advisory Commission Minutes Approved on: Page 2 of 22 1. Approval of the Minutes of the Utilities Advisory Commission Meeting Held on September 3, 2025 Utilities Advisory Commission Minutes Approved on: Page 3 of 22 The motion carried 4-0 with Vice Chair Mauter and Commissioners Croft, Phillips, and Tucher voting yes. Commissioners Gupta and Metz abstained. UTILITIES DIRECTOR REPORT Utilities Advisory Commission Minutes Approved on: Page 4 of 22 perform surveys for various departments that included areas of focus such as sustainability, climate action, or other activities. NEW BUSINESS ITEM 3: ACTION: Recommendation to Approve the Draft 2026 Utilities Legislative Policy Guidelines Update and to Receive the Update on 2025 State and Federal Legislative and Regulatory Activity. CEQA Status: Not a Project. Utilities Advisory Commission Minutes Approved on: Page 5 of 22 staffing shortages presented a risk to CPAU’s operations and if there was anything the City could do to improve the situation. Commissioner Gupta said that the requirement to replace large ICE (internal combustion engine) vehicles with substantially more expensive EVs was one of the contributors to utility rate increases. Packet Page 44 mentioned the rescission of the waiver that cancelled California’s 2035 ban on non-zero emission vehicles, although the legality of this was being challenged by the State. Commissioner Gupta asked if this would impact the City’s flexibility in purchasing options for vehicle replacements. Utilities Advisory Commission Minutes Approved on: Page 6 of 22 Assistant City Manager Kiely Nose added that there was a Citywide retainer contract for legislative lobbying at the local, state, and federal levels at a flat monthly rate, not an hourly charge. Last year was very busy and staff was highly engaged with the contractor. Utilities also leveraged its paid membership with NCPA to have more lobbying power. Over the past year, other projects have been deprioritized in order to dedicate more of Dr. Perkins and Riley Yaylian’s staff time and efforts to managing and tracking these timely issues. ACTION: Commissioner Phillips moved staff’s recommended motion that the UAC: Recommend the Policy and Services Committee recommend the City Council approve the Draft 2026 Utilities Legislative Policy Guidelines Update; and Accept this staff report providing an update on state and federal activities in 2025. Utilities Advisory Commission Minutes Approved on: Page 7 of 22 If there was support from the UAC for Commissioner Gupta’s proposed amendment, Dr. Perkins recommended obtaining a legal opinion of the language of the amendment because Proposition 26 was part of the constitution. Assistant City Attorney Amy Bartell believed Commissioner Gupta’s addendum was fine. These were policy considerations and Proposition 26 would apply either way, so that would always be a consideration regardless if it was written in the guidelines. Commissioner Tucher asked what “beneficiary pays” meant, and if staff thought that Commissioner Gupta’s friendly amendment was a good idea. Dr. Perkins explained that “beneficiary pays” meant cost allocation by cost causation. In the transmission system, the lines were sized by demand but the charges were volumetric, so CPAU was on record for advocating for a demand-based transmission charge. Electrification and decarbonization had been a longstanding emphasis of the UAC and Council, so Dr. Perkins did not anticipate that would change in the next 5 years. Dr. Perkins thought that Commissioner Gupta’s amendment to highlight electrification and decarbonization was not overly prescriptive. Commissioner Croft noted Guidelines 10, 11, and 13 supported the reduction of greenhouse gas emissions as well as promoted electrification and grid modernization, so she wondered how Commissioner Gupta’s amendment was different. Vice Chair Mauter noted that RECs and other monetary instruments account for greenhouse gas emissions and were included in the concept of fair cost allocation. Commissioner Gupta explained that his amendment provided guidance to staff to pursue opportunities in the legislative landscape to modify parts of Propositions 26 and 218, which was not addressed in Guidelines 10, 11, and 13. Commissioner Gupta thought that CPAU would need more flexibility in rate design in order to achieve the City’s decarbonization and greenhouse gas reduction goals but was constrained by the reasonable cost allocation standard in Proposition 26 because the City’s electrification goals could not be a consideration in rate design. For example, G-2 meter costs have fallen under the new rate design but that goes against the City’s electrification goals. ACTION: Commissioner Gupta’s friendly amendment carried 4-2 with Commissioners Croft, Gupta, Metz, and Tucher voting yes. Vice Chair Mauter and Commissioner Phillips voted no. The amended motion carried 6-0 with Vice Chair Mauter and Commissioners Croft, Gupta, Metz, Phillips, and Tucher voting yes. Chair Scharff absent. ITEM 4: Staff Recommends the Utilities Advisory Commission Recommend that the City Council Adopt a Resolution Approving the 2026 Natural Gas Cost of Service Analysis Report, Amending Rate Schedules G- 1 (Residential Gas Service), G-2 (Residential Master-Metered and Commercial Gas Service), G-3 (Large Commercial Gas Service) and Repealing G-10 (Compressed Natural Gas Service) Utilities Advisory Commission Minutes Approved on: Page 8 of 22 Utilities Director Alan Kurotori acknowledged the subcommittee (Chair Scharff and Commissioners Gupta and Phillips) for their support on this item. The staff presentation incorporated the guiding principles that had been through the Finance Committee and were approved by the City Council. ≤220 standard cubic feet per hour (scfh), $94.56 for G-2 Meter Capacity >220 scfh and <4000 scfh, $419.08 for G-2 Meter Capacity ≥4000 scfh, and $1,712.36 for G-3 Large Commercial. For the G-2 Master-Metered Multifamily and Commercial Customer class, the service charges would depend on the meter capacity. Utilities Advisory Commission Minutes Approved on: Page 9 of 22 Ms. Bilir replied the previous study selected a representative meter or middle customer for each customer class. The staff report contained a table that showed which meter was selected. The 2026 COSA used the best available information to tabulate the cost of every customer’s meter. Utilities Advisory Commission Minutes Approved on: Page 10 of 22 Design Principle 3: The impact of any proposed changes on low-income customers should be evaluated in alignment with state law, including, without limitation, Public Utilities Code Sections 890 and 898. Approximately 400 customers participated in the low-income program and the average monthly usage was 30 therms. Most customers would see bill impacts of less than $5 per month. If the City wanted to mitigate the bill impacts of the 2026 report on low-income customers enrolled in the Low-Income Rate Assistance Program or the Low-Income Home Energy Assistance Program, the total cost would be approximately $30,000 per year. Utilities Advisory Commission Minutes Approved on: Page 11 of 22 Public Comment: Hamilton Hitchings noted the 2025 Gas COSA made discretionary accounting changes that significantly lowered cost for small businesses, raised cost for Tier 1 residents by ⅓, and financially discouraged electrification. The 2026 COSA better explained the proposed changes, distributed costs more fairly between rate classes, and supported a residential tiered structure that encouraged electrification as was done in previous years. Mr. Hitchings wanted to see this fiscal year’s total increase instead of only the incremental change since the 5 percent increase earlier this year. Small G-2 commercial customers would see their median bills drop by about 53 percent. The G-2 monthly fixed fee dropped from $170/month to $29/month based on updated data and new accounting methodology choices. Full electrification was one of Palo Alto’s top climate goals but this steep reduction strongly disincentivized electrification and could offset much of the progress made by the Utility’s other electrification programs. Mr. Hitchings believed that a fee higher than $29 would still be reasonable. Mr. Hitchings encouraged the Commission to ask staff if they had plans to propose a rebate for small businesses. This COSA review did not provide comparisons between prior and new costs and how much each of the changes increased each class of customers’ rates, for example, how much of the G-1 rate increase was a result of updated meter calculations. Transparency was needed to prevent legal liability. Mr. Hitchings emphasized that future COSAs should have an open and transparent process. Utilities Advisory Commission Minutes Approved on: Page 12 of 22 Commissioner Phillips had observed that residential electric power was much peakier than commercial because people tend to come home at the same time and turn on the lights and television. Commissioner Phillips would not be surprised if residential gas similarly peaked when people come home and turned up the thermostat and cooked dinner in a gas oven. Utilities Advisory Commission Minutes Approved on: Page 13 of 22 cost was a commonly adopted method for allocating these costs and a weighted measure was considered an improvement over prior methods such as using customer headcount. ACTION: Commissioner Phillips moved that the UAC recommend that the City Council adopt a resolution: Utilities Advisory Commission Minutes Approved on: Page 14 of 22 Commissioner Croft seconded the motion. ITEM 5: Discussion and Update on the Fiscal Year 2027 Preliminary Utilities Financial Forecast and Rate Projections Utilities Advisory Commission Minutes Approved on: Page 15 of 22 for FY 2026, 6 percent for FY 2027, 8 percent for FY 2028, 8 percent for FY 2029, 6 percent for FY 2030, and 6 percent for FY 2031. Utilities Advisory Commission Minutes Approved on: Page 16 of 22 Fund during FY 2026 and needed to consider extending the loan or taking out another loan to keep a positive cash balance. The $2.7 million grant received from Valley Water in FY 2025 offset much of the cost increases from the wastewater treatment plant. The projected wastewater collection rate trajectory was 16 percent for FY 2027, 14 percent for FY 2028, 5 percent for FY 2029, 5 percent for FY 2030, and 5 percent for FY 2031. Utilities Advisory Commission Minutes Approved on: Page 17 of 22 City. Staff was always open to hearing ideas for initiatives from the UAC and the public. Mr. Kurotori shared that it was a constant discussion within the Utilities Department and throughout the City on how to be more efficient and mindful of costs. Cost of living adjustments were different from what CPAU was seeing, for example, the construction cost index throughout the state had been increasing, supply costs had gone up, and tariff impacts. Staff had been working within the Utility and with the Finance Department to pre-purchase materials and getting the best value. CPAU was coordinating with other Utilities to see if resources could be pooled together to get better deals. Utilities Advisory Commission Minutes Approved on: Page 18 of 22 and most efficiently, and what activities did not add value and maybe no longer needed to be conducted. Commissioner Metz echoed the concern about large cumulative rate increases. Utilities Advisory Commission Minutes Approved on: Page 19 of 22 Mr. Kurotori thought that talking about reserve policies and capital would overlap because those were both levers you could pull, so those might be combined in the subcommittee if that was the choice of the UAC. Staff could work with the Chair and Vice Chair on the creation of the subcommittee based on tonight’s comments from the Commission. ACTION: No action required. FUTURE TOPICS FOR UPCOMING MEETINGS Utilities Advisory Commission Minutes Approved on: Page 20 of 22 was in the charter of the UAC to modify its advisory role. Vice Chair Mauter was not sure if it would be a staff-led discussion and thought it would be a committee-led discussion if the UAC chose to have a subcommittee. Utilities Advisory Commission Minutes Approved on: Page 21 of 22 session. Vice Chair Mauter wondered if staff could collect input and then summarize the recommendations or suggestions that commissioners had made. COMMISSIONER COMMENTS AND REPORTS FROM MEETINGS/EVENTS Utilities Advisory Commission Minutes Approved on: Page 22 of 22 ADJOURNMENT Vice Chair Mauter adjourned the meeting.