HomeMy WebLinkAboutStaff Report 2509-5160, Staff Report 2512-5629A.Informational Report on the Annual Review of the City’s Renewable Procurement
Plan, Renewable Portfolio Standard Compliance, and Carbon Neutral Electric
Supplies for 2024 At Places Memo
Item No. A. Page 1 of 9
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Utilities Advisory Commission
Staff Report
From: Alan Kurotori, Director Utilities
Lead Department: Utilities
Meeting Date: December 3, 2025
Report #: 2509-5160
TITLE
Informational Report on the Annual Review of the City’s Renewable Procurement Plan,
Renewable Portfolio Standard Compliance, and Carbon Neutral Electric Supplies for 2024
RECOMMENDATION
This is an informational report and no action is requested.
EXECUTIVE SUMMARY
Like all electric utilities in California, Palo Alto is subject to the state’s Renewable Portfolio
Standard (RPS) mandate of 60% by 2030. The City has also adopted a Carbon Neutral Plan, which
led to the achievement of a carbon neutral electric supply portfolio starting in 2013 (and which
was updated by Council in August 2020). In 2011, in compliance with state RPS regulations, the
Council also formally adopted an RPS Procurement Plan and an RPS Enforcement Program that
recognize certain elements of the state’s RPS law applicable to publicly-owned utilities. The RPS
Enforcement Program requires the City Manager, or their designee, the Utilities Director, to
conduct an annual review of the Electric Utility’s compliance with the procurement targets set
forth in the City’s RPS Procurement Plan.
This staff report satisfies the reporting requirements of the City’s RPS Enforcement Program,
while also providing an update on the City’s compliance with the Carbon Neutral Plan. The City
continues to meet both its RPS and Carbon Neutral Plan objectives—even after selling about
162,000 MWh of renewable energy in 2024.
BACKGROUND
The City currently has two independent procurement targets related to renewable and carbon
neutral electricity:
RPS Procurement Plan (60% by 2030): The City’s official renewable electricity goal is
contained in the RPS Procurement Plan that the City adopted pursuant to Section
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399.30(a) of California’s Public Utilities Code. This was adopted in December 2011 (Staff Report
22251, Resolutions 92142 and 92153) and updated in November 2013 (Staff Report 41684,
Resolution 93815), December 2018 (Staff Report 97616, Resolution 98027), and December 2020
(Staff Report 116508, Resolution 99299). The last update to the RPS Procurement Plan brought it
into alignment with the state’s 60% RPS requirement (SB 100), which was signed into law in 2018.
The RPS Procurement Plan and RPS Enforcement Program complement each other: the
Procurement Plan establishes official procurement targets, while the Enforcement Program
specifies the reporting and monitoring that is required of the Utilities Director while working to
achieve those targets.
1 City Council, Staff Report 2225, December 12, 2011, Adoption of Two Resolutions Adopting a Program for
Enforcement of the City’s Renewable Portfolio Standards Program and a Renewable Energy Resources Procurement
Plan: https://www.cityofpaloalto.org/files/assets/public/v/1/from-archive/agendas-minutes-reports/reports/city-
manager-reports-cmrs/2011/final-staff-report-id-2225-renewable-energy-procurement-enforcement-prog-12-12-
11.pdf
2 City Council, Resolution 9214, December 12, 2011: https://www.cityofpaloalto.org/files/assets/public/v/1/city-
clerk/resolutions/reso-9214.pdf
3 City Council, Resolution 9215, December 12, 2011: https://www.cityofpaloalto.org/files/assets/public/v/1/city-
clerk/resolutions/reso-9215.pdf
4 City Council, Staff Report 4168, November 12, 2013, Recommendation that the City Council Adopt a Resolution
Amending the City’s Renewable Energy Resources Procurement Plan in Compliance with the California Energy
Commission's Enforcement Procedures for the Renewables Portfolio Standard for Local Publicly Owned Electric
Utilities: https://www.cityofpaloalto.org/files/assets/public/v/1/agendas-minutes-reports/reports/city-manager-
reports-cmrs/year-archive/2013/final-staff-report-id-4168_rps-procurement-plan-update.pdf
5 City Council, Resolution 9381, November 12, 2013: https://www.cityofpaloalto.org/files/assets/public/v/1/city-
clerk/resolutions/reso-9381.pdf
6 City Council, Staff Report 9761, December 3, 2018, Finance Committee Recommendation that the City Council 1)
Adopt a Resolution Approving the 2018 Electric Integrated Resource Plan (EIRP), Updated Renewable Portfolio
Standard Procurement Plan and Enforcement Program, and 2) Approve Two EIRP Planning Documents:
https://www.cityofpaloalto.org/files/assets/public/v/1/agendas-minutes-reports/reports/city-manager-reports-
cmrs/year-archive/2018/final-staff-report-id9761_approval-of-the-2018-electric-integrated-resource-plan-and-
related-documents.pdf
7 City Council, Resolution 9802, Dec 3, 2018: https://www.cityofpaloalto.org/files/assets/public/v/1/city-
clerk/resolutions/reso-9802.pdf?t=40498.07
8 City Council, Staff Report 11650, December 7, 2020, Adoption of a Resolution Approving the Updated Renewable
Portfolio Standard Procurement Plan and Enforcement Program:
https://www.cityofpaloalto.org/files/assets/public/v/1/agendas-minutes-reports/reports/city-manager-reports-
cmrs/year-archive/2020-2/id-11650.pdf?t=41063.12
9 City Council, Resolution 9929, December 7, 2020: https://www.cityofpaloalto.org/files/assets/public/v/1/city-
clerk/resolutions/resolutions-1909-to-present/2020/reso-9929.pdf
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Carbon Neutral Plan (100% Carbon Neutral Electricity): The Carbon Neutral Plan was
adopted in March 2013 (Staff Report 355019, Resolution 932220) and updated in August
2020 (Staff Report 1155621, Resolution 991322) and requires that the City procure a carbon
neutral electric supply portfolio starting in calendar year (CY) 2013. In general, this goal
has been achieved primarily through purchases made under the City’s long-term
renewable power purchase agreements (PPAs) and output from its hydroelectric
resources. However, when the City Council approved an update to the Carbon Neutral
Plan in August 2020, they also approved a new procurement strategy (the REC Exchange
Program) whereby the City does not keep all of the output of its long-term, in-state PPAs,
but instead exchanges that output for less expensive out-of-state renewable generation.
The Council also directed that a portion of the proceeds from the electric utility’s cap-
and-trade allowance revenues (equivalent to one-third of the net revenue from the REC
Exchange Program) be used for funding local decarbonization programs and the
remainder going toward rate reduction. In December 2022 (Staff Report 1473523), Council
reauthorized the REC Exchange Program, and directed that an amount equal to all of the
net proceeds from the exchanges be utilized from electric cap-and-trade revenues to fund
local decarbonization programs.
ANALYSIS
The City continues to meet its objectives under the RPS Procurement Plan and the Carbon Neutral
Plan, and achieved an RPS level of 45.6% in 2024. This value is slightly above of the state’s 44%
RPS procurement “soft target” for the year. Additionally, the City was compliant with the state
RPS procurement mandate, which is evaluated over a multi-year horizon (2021-2024 in this case).
The City continues to hold more than enough RPS supplies under contract to satisfy the state’s
target levels in the coming years. Below is a summary of CPAU’s progress toward satisfying its
renewable energy and carbon neutral procurement targets.
RPS Procurement Plan Compliance
In CY 2024, the City initially received 479,457 MWh of renewable energy through its long-term
contracts for wind, solar, landfill gas, and small hydro resources (which represents 53.7% of the
19 City Council, Staff Report 3550, March 4, 2013, Finance Committee Recommendation that the City Council Adopt
a Resolution Approving a Carbon Neutral Plan for the Electric Supply Portfolio to Achieve Carbon Neutrality by
2013: https://www.cityofpaloalto.org/files/assets/public/v/1/agendas-minutes-reports/reports/city-manager-
reports-cmrs/year-archive/2013/final-staff-report-id-3550_electric-supply-portfolio-carbon-neutral-plan.pdf
20 City Council, Resolution 9322, March 4, 2013: https://www.cityofpaloalto.org/files/assets/public/v/1/city-
clerk/resolutions/reso-9322-33835.pdf
21 City Council, Staff Report 11556, August 24, 2020, Staff and Utilities Advisory Commission Recommend the City
Council Adopt a Resolution Amending the City's Electric Supply Portfolio Carbon Neutral Plan and Electric Utility
Reserves Management Practices: https://www.cityofpaloalto.org/files/assets/public/v/1/agendas-minutes-
reports/reports/city-manager-reports-cmrs/year-archive/2020-2/id-11566.pdf
22 City Council, Resolution 9913, August 24, 2020: https://www.cityofpaloalto.org/files/assets/public/v/1/city-
clerk/resolutions/reso-9913.pdf?t=40151.26
23 City Council, Staff Report 14735, December 12, 2022, Utilities Advisory Commission Recommend the City Council
Affirm the Continuation of the REC Exchange Program:
https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=82046
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City’s total retail sales for that period). Additionally, the City received 520,149 MWh of large
hydroelectric generation (representing 58.3% of the City’s total retail sales), which is not
classified as eligible renewable generation by the state. Based on the Council’s decision in August
2020 to pursue the “REC Exchange Program” (Staff Report 1155629, Resolution 991330) the City
sold 161,900 MWh of in-state renewable energy supplies, yielding $11.609 million in sales
revenue, while purchasing 160,000 MWh of out-of-state renewable energy31, at a cost of
$750,000. Figure 1 below depicts the City’s load and supply resources for CY 2024, before and
after the REC Exchanges described above. Accounting for these transactions, the City’s net
renewable energy supplies totaled 477,557 MWh, which represents 53.5% of the City’s total
retail sales for 2024. However, under the state’s RPS regulations the majority of the out-of-state
renewable energy purchases were not able to be applied to the City’s RPS requirement, hence
the City’s RPS level under the state’s accounting method was only 45.6%.
29 City Council, Staff Report 11556, August 24, 2020, Staff and Utilities Advisory Commission Recommend the City
Council Adopt a Resolution Amending the City's Electric Supply Portfolio Carbon Neutral Plan and Electric Utility
Reserves Management Practices: https://www.cityofpaloalto.org/files/assets/public/v/1/agendas-minutes-
reports/reports/city-manager-reports-cmrs/year-archive/2020-2/id-11566.pdf
30 City Council, Resolution 9913, August 24, 2020: https://www.cityofpaloalto.org/files/assets/public/v/1/city-
clerk/resolutions/reso-9913.pdf?t=40151.26
31 Not including 30,000 MWh of RECs purchased on behalf of PaloAltoGreen customers.
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Figure 1: CY 2024 Electric Load and Supply Resources, With and Without REC Exchange
Transactions
For CY 2025 to date, the City has contracted to sell 115,000 MWh of in-state renewable
generation and has purchased 180,000 MWh of out-of-state renewable generation. Figure 2
below depicts the City’s projected load and supply resources for CY 2025, before and after the
REC Exchanges described above. Once these transactions are accounted for, they are projected
to yield a total of about $3.2 million in net revenue, and a 46% RPS level under the state’s
accounting method (equal to the state’s RPS soft target for 2025).
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In accordance with the state’s RPS Program requirements, CPAU’s Procurement Plan is intended
to yield a renewable electric supply portfolio that balances environmental goals with system
reliability while maintaining low and stable retail electric rates. The state RPS program requires
retail electricity suppliers like CPAU to procure progressively larger renewable electricity supplies
across a series of separate multi-year Compliance Periods. CPAU’s procurement targets, as well
as its actual/projected procurement volumes and RPS levels, for the first three Compliance
Periods are summarized in Table 1 below.
Table 1: RPS Compliance Period Procurement Targets and Actual Procurement
RPS
Compliance
Period
Years
Retail Sales
(MWh)
Procurement
Target (MWh)
Actual/Projected
Procurement
(MWh)
% of Retail
Sales
1 2011-2013 2,837,773 567,555 607,740 21.4%
2 2014-2016 2,801,056 605,949 826,855 29.5%
3 2017-2020 3,487,686 1,043,426 1,619,303 46.4%
4 2021-2024 3,302,501 1,318,639 1,318,639 39.9%
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TOTALS 12,429,016 3,535,570 4,372,537 35.2%
Carbon Neutral Plan
In CY 2024, CPAU achieved its goal, set forth in the Carbon Neutral Plan, of an electric supply
portfolio with zero net greenhouse (GHG) emissions for the 12th consecutive year. Carbon
neutrality was achieved in CY 2024 through existing hydro and renewable generation (wind, solar,
and landfill gas). As discussed above, due to the Council’s adoption of the REC Exchange Program
in August 2020, the City sold 161,900 MWh of in-state renewable energy supplies, yielding
$11,609,000 in sales revenue, while purchasing 160,000 MWh of out-of-state renewable energy,
at a cost of $750,000Accounting for these transactions, the City’s net renewable energy supplies
totaled 477,557 MWh, which represents 53.5% of the City’s total retail sales for 2024. The
remainder of the City’s needs were supplied by large hydroelectric resources. When the City
Council approved an update to the Carbon Neutral Plan in August 2020, the primary change was
to adopt an hourly carbon accounting methodology as the basis for determining whether the City
has met its carbon neutrality objective. Using an annual accounting approach, the City had an
overall surplus of 72,452 MWh of carbon neutral generation compared to its load (equal to 7.8%
total load) in 2024, and thus substantially exceeded the carbon neutrality standard. Meanwhile,
under the hourly carbon accounting approach,35 the City’s electric supply portfolio also exceeded
the carbon neutrality standard, being responsible for a net negative amount of GHG emissions: -
21,393 metric tonnes of CO2 equivalent. See Figure 3 below for a depiction of the City’s monthly
total net CO2 emissions for 2024, as well as the monthly average emissions intensity for the
California electric grid.
35 The City’s hourly carbon accounting methodology entails calculating the City’s net surplus or deficit carbon
neutral supply position relative to its load in every hour of the year. The grid average electricity emissions intensity
for each hour is then applied to each of these hourly surpluses or deficits to yield a net emissions contribution (or
reduction) that the City’s electric supply portfolio is responsible for in that hour. These hourly emissions totals are
then summed across the entire year to yield the City’s annual emissions total for the year.
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Figure 3: CY 2024 Monthly Net Electric Supply Emissions and CAISO Emissions Intensity
For CY 2025, average hydro conditions are expected to result in about 46% of the City’s electric
supply needs being supplied by hydroelectric resources (compared to a long-term annual average
of about 45%), with the remainder coming from non-hydro renewable energy resources.
This is an informational report that has no fiscal or resource impact to the Utilities Department
or the City. As noted above, the implementation of the REC Exchange Program resulted in net
revenue of $10,859,000 for CY 2024, of which $5,022,000 will be allocated to decarbonization
programs (equivalent to the revenue from CY 2024 electric Cap & Trade auctions). In early
2026, staff will bring the REC Exchange Program to City Council for updates on treatment of
funds in years which proceeds exceed Cap and Invest revenues.
This is an informational report only and no stakeholder engagement is necessary.
The Council’s review of this report does not meet the definition of a “project” pursuant to Public
Resources Code Section 21065, thus California Environmental Quality Act review is not required.
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This is an informational report, and no alternative actions are proposed.
AUTHOR/TITLE:
Item No. A. Page 1 of 1
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Utilities Advisory Commission
At Places Memo
From: Alan Kurotori, Director of Utilities
Meeting Date: December 3, 2025
Item Number: A
Report #:2512-5629
TITLE
SUPPLEMENTAL INFORMATION: Informational Report on the Annual Review of the City’s
Renewable Procurement Plan, Renewable Portfolio Standard Compliance, and Carbon Neutral
Electric Supplies for 2024; Correction to REC Exchange Program Net Revenue Amount
ANALYSIS
This at-places memorandum provides a correction to Report #2509-5160 (“Informational Report
on the Annual Review of the City’s Renewable Procurement Plan, Renewable Portfolio Standard
Compliance, and Carbon Neutral Electric Supplies for 2024”). Specifically, this report corrects the
amount of net revenue attributable to the Renewable Energy Certificate (REC) Exchange Program
in Calendar Year (CY) 2024.
Although the City’s sales of Portfolio Content Category (PCC) 1 RECs and purchases of PCC3 RECs
yielded $11.61M in net revenue for CY 2024, Report #2509-5160 overstated the amount of that
net revenue that was attributable to the REC Exchange Program. The REC Exchange Program was
responsible for only $2.83M of this net, with the remainder ($8.78M) resulting from the sale of
surplus PCC1 RECs that exceeded the City’s load.
Consistent with the Council’s 2022 reauthorization of the REC Exchange Program (Staff Report
#14735, December 12, 2022), $2.83M in revenue from the Electric Utility’s sale of freely-allocated
Cap-and-Trade allowances will be designated for local decarbonization purposes.
ATTACHMENTS: None
APPROVED BY:
Alan Kurotori, Director of Utilities