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HomeMy WebLinkAbout2026-02-04 Utilities Advisory Commission Summary MinutesUtilities Advisory Commission Minutes Approved on: 3/4/26 Page 1 of 18 UTILITIES ADVISORY COMMISSION MEETING MINUTES OF FEBRUARY 4, 2026 REGULAR MEETING CALL TO ORDER Chair Scharff called the meeting of the Utilities Advisory Commission (UAC) to order at 6:03 p.m. Present: Chair Scharff, Vice Chair Mauter, Commissioners Croft, Gupta, Metz, Phillips (6:06 p.m.), and Tucher (6:49 p.m.) Absent: None AGENDA REVIEW AND REVISIONS None ORAL COMMUNICATIONS None APPROVAL OF THE MINUTES ITEM 1: Approval of the Minutes of the Utilities Advisory Commission Meeting Held on January 7, 2026 Chair Scharff invited comments on the January 7, 2026, UAC draft meeting Minutes. Commissioner Croft stated that she found the January 7, 2026, minutes somewhat difficult to follow for readers who were not present at the meeting. Commissioner Croft recommended several edits to improve context. It was suggested to revise references to “the money” to more clearly reflect that there were 2 separate funding sources. Commissioner Croft recommended replacing “the money” with “spending the full $20M” in one instance and with “not to spend the full budget without an initial look at the pilot results” in another instance to better reflect the prior discussion. Commissioner Croft also requested another sentence be revised to read "Commissioner Croft opined that for the people putting in large systems, communication will be needed about the fact that rates change over time and potential for high costs," and explained that the comment referred to customers installing large solar panel systems who might expect utility rates to remain constant over time. Utilities Advisory Commission Minutes Approved on: 3/4/26 Page 2 of 18 ACTION: Commissioner Croft moved, seconded by Commissioner Gupta, to approve the draft minutes of the January 7, 2026, meeting as amended. Motion approved 6-0. Commissioner Tucher absent. UTILITIES DIRECTOR REPORT Director of Utilities Alan Kurotori reported on recent City Council actions. On January 5, the City Council selected Vice Mayor Vicki Veenker as Mayor and Councilmember Greer Stone as Vice Mayor. Mr. Kurotori reported that the Council held its annual goal-setting session on January 24, during which 4 primary priorities were identified: government efficiency, achieving near- term housing milestones, Cubberley acquisition and renovation funding, and enhancing business vibrancy. There were several utility-related actions undertaken in January, including approval of the updated 2026 Water, Gas, & Wastewater Utility Standards; adoption of applicable state and federal utility guidelines previously reviewed by the UAC; and approval of a professional services contract with Baron Contracting for gas leak survey services. Recruitment is underway for 2026 boards, commissions, and committees, with 10 seats currently open. The application deadline is February 18, and additional information is available on the City website. Interviews with the City Council are expected to occur in March. Commission appointments are anticipated to occur after the appointment process, with the earliest opportunity for Commission action likely in April. Mr. Kurotori reported on the Gas Main Replacement Project (GMR 25), which will replace approximately 5 miles of gas mains and services in the Duveneck/St. Francis, Leland Manor, Midtown, and Palo Verde neighborhoods. The project is part of ongoing efforts to enhance safety and reliability of the gas system and is funded by a $16.5M federal DOT grant. Construction is expected to begin later in the month and continue through summer 2027. Mr. Kurotori discussed that staff participated in legislative advocacy efforts at Capitol Day on January 26, organized by the Northern California Power Agency and the California Municipal Utilities Association. A group of staff met with several state legislators, including Assemblymember Joe Patterson, sponsor of AB 34, which would extend provisions related to large hydroelectric resources. Mr. Kurotori noted that the legislation would benefit Palo Alto and other agencies by helping avoid excess renewable procurement requirements and supporting affordable utility rates. There were also meetings with Assemblymember Berman and staff from Senator Becker’s office, who are co-sponsors of the bill. The legislation is advancing quickly, and staff is hopeful it will be signed by the Governor. Chair Scharff added that the bill passed the Assembly on the same day as the staff’s visit. Mr. Kurotori stated that staff consulted with the City Clerk’s Office regarding the format of UAC minutes and that the current practice may be migrating from summary minutes to action minutes, which typically include the agenda item, motion, vote, and outcome. Meeting recordings are available online to capture full discussion. Mr. Kurotori noted that summary minutes remain in use at present and acknowledged challenges associated with preparing Utilities Advisory Commission Minutes Approved on: 3/4/26 Page 3 of 18 them. Commissioner Phillips questioned what was meant by "migrating," and Mr. Kurotori responded that implementation would be guided by the Clerk’s Office. Commissioner Phillips asked whether action minutes would capture staff commitments made during discussions that were not formally voted on. Mr. Kurotori stated that such items might be included if part of an approved action but that the level of detail would be confirmed with the Clerk’s Office. Chair Scharff expressed concern that action minutes may not adequately capture discussion items that do not require a vote, which could limit City Council’s ability to understand Commission input. Councilmember Lauing indicated that action minutes can be customized to document significant discussions even without formal votes. Chair Scharff emphasized that summary minutes provide a useful overview of Commission deliberations and expressed concern that relying solely on action minutes and recordings would make information less accessible. Commissioner Croft similarly noted difficulty compiling past discussion topics from existing materials and expressed concern that action minutes could further reduce accessibility. Commissioner Phillips suggested that if action minutes are adopted, the Commission may need to vote on more items to ensure its guidance is documented, and Chair Scharff agreed. Commissioners discussed alternatives, including providing transcripts alongside action minutes. Commissioner Mauter suggested that transcripts would allow readers to search and summarize content as needed. Chair Scharff noted that automated transcription services may already be available, and Commissioner Gupta added that AI tools could potentially assist with summarizing recordings efficiently. Mr. Kurotori acknowledged the feedback and stated that staff would follow up with the Clerk’s Office and IT to evaluate available options. Commissioner Croft reported receiving an email indicating that an individual was waiting on Zoom to be admitted to the meeting. Utilities Administrative Assistant Kaylee Burton stated that no attendees were showing in the Zoom waiting room or attempting to join. Chair Scharff suggested responding to the individual by email and noting that public comment on items not on the agenda could be accommodated later in the meeting if they were unable to join initially. Mr. Kurotori requested that the individual attempt to log in again so staff could admit them. Mr. Kurotori reported that the update on the Fiber-to-the-Premises Pilot and associated metrics is currently scheduled for July as part of the 12-month review timeline. The timing may be adjusted based on customer uptake and the rollout progress to ensure the Commission receives meaningful performance data. Councilmember Lauing elaborated on the City Council’s priorities for the year, noting a significant shift from prior years’ framework. Councilmember Lauing explained that previous priorities consisted of broad themes supported by numerous objectives, whereas this year many ongoing long-term initiatives, including climate action, were incorporated into the City’s core values to ensure continued focus without limiting them to annual priority status. This approach allows annual priorities to emphasize shorter-term initiatives, such as the Cubberley project, while long-term efforts remain embedded in the City’s values, with associated objectives functioning as an implementation plan for staff. Councilmember Lauing also discussed the government efficiency priority, emphasizing a strategic approach, and cited the example of improving the City’s 311 system, noting that simply adding personnel would not Utilities Advisory Commission Minutes Approved on: 3/4/26 Page 4 of 18 resolve underlying issues and that a comprehensive cross-departmental evaluation is needed to identify effective solutions. NEW BUSINESS ITEM 2: Background and Discussion on Data Centers in Palo Alto (DISCUSSION 6:50 p.m. – 7:50 p.m.) Staff: Kathryn Fortenberry, Management Fellow Director of Utilities Alan Kurotori introduced staff involved in the data center initiatives and requested that questions be held until the end, noting staff could provide additional detail during discussion. Mr. Kurotori noted that data center development is a significant issue locally and statewide and is currently under review by state entities and utility organizations as expansion accelerates in the Bay Area and other markets. Management Fellow Kathryn Fortenberry presented background on data centers in Palo Alto as part of the UAC’s workplan item on Electric System and Supply. The presentation included an overview of data center types, market trends, and local context, noting rapid growth in electricity demand driven largely by AI and continued expansion in Silicon Valley, including additional planned capacity in nearby cities. Data centers were described as facilities housing servers and supporting infrastructure, with discussion of common facility models and considerations relevant to Palo Alto, including proximity to research institutions and startups. Key site selection factors were summarized, including access to fiber, water, reliable electricity, predictable permitting, skilled labor, and time to market, along with Palo Alto’s advantages such as relatively low costs, clean energy, favorable climate, and proximity to the technology workforce. Ms. Fortenberry discussed the impacts of data centers in Palo Alto to date and the City’s competitiveness for future facilities, noting that data centers have operated locally since the 1990s and have helped stabilize electricity sales, with rates estimated to be approximately 5 percent higher without recent additions. Approximately 10 megawatts of recent data center load growth was reported, with an additional 5 to 10 megawatts anticipated over the next 5 to 10 years, alongside speculative inquiries for much larger facilities. Data centers currently account for about 15 percent of electric sales and are projected to represent roughly half of the City’s electric load growth by 2035, although overall growth is expected to remain modest. Ms. Fortenberry noted that a single large facility could significantly affect demand relative to the City’s average load and contrasted Palo Alto’s trajectory with Santa Clara’s substantially larger system driven by long-term data center expansion, adding that in Santa Clara each additional megawatt contributes significant annual revenue to their General Fund. Ms. Fortenberry outlined potential benefits of integrating data centers, including support for innovation, economic competitiveness, and increased City revenues, and described current zoning that permits data centers primarily in light industrial and research/office park districts near Stanford Research Park and the Highway 101 corridor. Large facilities would connect to the high-voltage system and be responsible for associated infrastructure costs. Palo Alto’s competitive niche is for facilities of 50 megawatts or less. Ms. Fortenberry summarized best Utilities Advisory Commission Minutes Approved on: 3/4/26 Page 5 of 18 practices for integration, including clear interconnection expectations, development of Conditional Use Permit requirements, and cost responsibility for grid expansion, while noting that data centers may also provide grid benefits as large flexible loads. Ms. Fortenberry concluded by requesting Commission input on whether attracting new data centers should be a priority, exploration of Conditional Use Permit policies, and community considerations for projects of varying scale. Public Comment: Herb Borock expressed concerns regarding potential impacts of data centers on Palo Alto’s electric system and community, including infrastructure upgrades, costs, environmental effects, and quality-of-life issues. Mr. Borock questioned whether recent or proposed system improvements could primarily benefit data center development and raised concerns about who would bear associated costs, including potential effects on residential rates. Mr. Borock also cited issues identified in other communities, such as power supply, cooling water use, backup diesel generators, noise, and fiber infrastructure needs. Mr. Borock cautioned that public sentiment may change as awareness increases. Commissioner Phillips asked whether locating data centers in Palo Alto would meaningfully reduce carbon emissions compared to other locations, noting that electricity is delivered through the broader grid. Dr. Perkins responded that Palo Alto Utilities is committed to a 100 percent carbon-free electric portfolio and contributes dispatchable hydro resources that can reduce emissions during high-pollution periods. Dr. Perkins stated that additional load served by Palo Alto would be supplied through carbon-free contracts and could result in lower overall emissions compared to similar facilities served by other utilities. Vice Chair Mauter questioned how much additional load growth Palo Alto Utilities could accommodate while maintaining its carbon-free commitment. Dr. Perkins responded that the utility continually secures new energy contracts to meet its policy of maintaining an hourly, annually balanced carbon-neutral portfolio and intends to uphold that standard unless directed otherwise by the City Council. Dr. Perkins added that staff actively manages procurement and has a strong track record in doing so. Commissioner Phillips asked whether Santa Clara’s lower residential electric rates are attributable to its large concentration of data center load. Mr. Kurotori responded that data centers and other commercial-industrial customers represent a substantial share of Santa Clara’s electric demand and fund a significant portion of system infrastructure and development costs, providing financial benefits to the utility and community. Mr. Kurotori noted that Santa Clara also imposes development-related fees on data center projects and has land use conditions that support large-scale facilities and added that this customer mix provides value to residential customers and contributes to lower rates. Commissioner Gupta thanked staff for the presentation and expressed general agreement with the analysis, supporting consideration of data centers in the 5 to 50 megawatt range while cautioning that very large facilities could significantly affect the electric system and capital costs. Support was expressed for development that stabilizes or reduces rates without Utilities Advisory Commission Minutes Approved on: 3/4/26 Page 6 of 18 increasing costs to existing customers or causing community disruption, with concerns noted regarding noise and water use. Palo Alto’s advantages as a municipal utility with coordinated water and electric oversight and available capacity were highlighted, along with regional competition for such projects. Additional analysis was requested on grid feasibility, potential sites, recruitment strategy, and protective measures such as strict cost responsibility, upfront funding, minimum usage commitments, long-term agreements, and exit provisions. Commissioner Gupta also noted uncertainty in long-term demand projections due to rapid technological change, with the observation that future energy needs may differ from current forecasts. Commissioner Croft expressed general support for data center development while requesting additional information on potential impacts to the City’s power portfolio and rates, particularly if higher volumes of renewable energy procurement are required. Commissioner Croft asked how increased market exposure, reliance on hydro resources, and the hydro rate adjustor could affect customer prices. Dr. Perkins responded that overall electric load in Palo Alto is projected to grow regardless of data centers and that several existing energy contracts are expiring, requiring the utility to procure new supply in any case. It was noted that CPAU competes in a challenging market but benefits from strong credit and existing supplier relationships, and that broader statewide factors such as replacement of Diablo Canyon capacity, potential regulatory changes, and possible extension of the facility could influence market conditions. Dr. Perkins stated that distribution costs represent a significant portion of rates and indicated that staff could provide additional analysis on supply cost impacts, adding that projected growth is not expected to fundamentally change the City’s procurement approach. Commissioner Croft asked whether the City has projections for future power purchase agreement prices and whether costs are trending upward. Dr. Perkins responded that long- term renewable contracts currently carry a price premium of approximately $15 per MWh compared to near-term market prices, driven by factors including replacement of Diablo Canyon capacity, utilities seeking to meet Renewable Portfolio Standard (RPS) requirements, and broader market conditions. Mr. Kurotori added that CPAU actively procures renewable energy through the Northern California Power Agency and participates in joint solicitations for solar and storage projects, noting that increasing state RPS targets will require additional procurement. Mr. Kurotori stated that the utility is well positioned through regional partnerships but that pricing remains highly competitive and uncertain. Commissioner Croft expressed concern that increased demand associated with data center development could contribute to higher future electric rates and asked whether data centers could be served under existing electric rate structures or whether new rates would be required. Dr. Perkins responded that current rates are based on a cost-of-service analysis and could accommodate typical loads, but very large facilities might warrant new rate structures or additional mechanisms, such as capacity reservations or take-or-pay agreements, to ensure the City is protected when making significant infrastructure investments. Commissioner Croft inquired about how data centers use water and what happens to the water after use. Mr. Kurotori explained that cooling approaches vary and involve tradeoffs between Utilities Advisory Commission Minutes Approved on: 3/4/26 Page 7 of 18 water and energy use, noting that many data centers seek to minimize potable water consumption and often use recirculating systems that reduce discharge. Mr. Kurotori stated that recycled water is preferred by data centers where available and that Palo Alto’s wastewater treatment system can supply recycled water in certain locations. Commissioner Croft expressed a preference for smaller data center projects rather than large facilities, indicating that multiple smaller installations would be more compatible with existing customer classes. Commissioner Croft stated that any such data centers should use non-potable water and raised concerns about potential impacts including noise, chemical contamination, light pollution, and broader industrialization, suggesting that appropriate regulations would be important. Commissioner Metz thanked staff for the presentation and stated that the primary consideration should be what is beneficial for Palo Alto Utilities and the City rather than data center competitiveness alone. Concern was expressed that the staff presentation emphasized potential revenues more than costs and recommended that future analysis address both. Commissioner Metz also noted skepticism that technological efficiency gains would significantly reduce computing demand in the near term. In reference to the goal of developing guiding principles for integrating new data centers, Commissioner Metz proposed 4 “what” principles, including ensuring no increase in electricity costs to existing ratepayers, avoiding harm to current retail, commercial, and industrial customers, maintaining system reliability and resilience, and preserving the City’s ability to deliver renewable energy without increasing costs. Concern was expressed that increased demand could raise generation and transmission costs, require significant long-term investments with financial risk if loads decline, and necessitate additional renewable procurement in a competitive market. Commissioner Metz cautioned that terminology regarding carbon neutrality should be communicated carefully to avoid misunderstanding. Commissioner Metz proposed 4 “how” principles for evaluating potential data center development, including taking a holistic approach across generation, transmission, and distribution, conducting in-depth modeling of risks and benefits, aligning financial commitments with customer obligations through hedging principles, and establishing project size thresholds to guide recruitment priorities. Commissioner Phillips discussed whether the Commission’s role should extend beyond providing general input to staff and suggested that 25 to 50 megawatt data center development could help reduce or moderate projected residential rate increases. Commissioner Phillips questioned whether the Commission should recommend that the City Council pursue a more proactive approach, noting that land use, zoning, and community impact issues fall outside the UAC’s purview but could be addressed through collaboration with other commissions, and asked whether a formal message to Council supporting further exploration of data center opportunities would be appropriate. Concerns about negative public perception were also raised, including potential impacts on rates and perceptions of subsidizing large corporations. Utilities Advisory Commission Minutes Approved on: 3/4/26 Page 8 of 18 Chair Scharff agreed with concerns about public perception of data centers and suggested that improved public communication would be beneficial. Chair Scharff expressed general support for pursuing data center opportunities, particularly if they could help stabilize or reduce residential electric rates and support electrification goals, and indicated support for 25 megawatt data centers, while noting that larger projects should provide substantial financial contributions to the City. Chair Scharff noted that the presentation included significant potential revenue figures and stated that additional funds could be beneficial given the City’s budget deficit. Chair Scharff asked about potential effects on energy markets if Diablo Canyon were extended and whether current prices already reflect that uncertainty. Dr. Perkins responded that legislative studies on cost and reliability are underway and that any action could take several years, noting that current procurement decisions would lock in prices regardless of future changes and that major utilities are actively competing for supply. Chair Scharff also asked about the City’s approach to attracting data centers and whether project timelines could align with potential market changes. Mr. Kurotori responded that Palo Alto does receive inquiries about building data centers, noting that there are development timelines with property acquisition, financing, and construction. Mr. Kurotori added that the City expects large customers to fund required infrastructure improvements upfront and is positioned to accommodate potential projects due to planned transmission upgrades that will increase reliability and capacity, while emphasizing that Palo Alto remains competitive relative to other markets with constrained capacity. Vice Chair Mauter thanked staff for the presentation and requested additional analysis for future Commission discussion regarding baseline projections for low growth and expected native load growth from electrification, how those forecasts align with the cost of NCPA procurement, and the marginal cost implications of additional large-load customers. Vice Chair Mauter stated that a follow-up agenda item would be valuable to clarify expected customer rate impacts under different growth scenarios and that the discussion would also benefit from information on water resources, including the capacity, current utilization, and cost structure of the City’s non-potable system if data centers are expected to use it for cooling. Data on existing users and utilization of the system, as well as planned wastewater utility upgrades was requested to better evaluate non-potable water availability and siting considerations. Vice Chair Mauter discussed the importance of understanding data center load shapes, noting that some facilities operate with steady demand while others do not, and requested data to support forecasting. Vice Chair Mauter suggested that flexible or non-steady loads could be preferable, particularly if demand can be reduced during peak hours or emergencies, and recommended prioritizing interconnection for customers willing to curtail usage during these times. Vice Chair Mauter acknowledged that such considerations may not be fully addressed through traditional rate structures but noted that non-rate mechanisms could help manage costs and reliability, emphasizing the need to tailor approaches to Palo Alto’s resource portfolio. Vice Chair Mauter emphasized the importance of maintaining competitiveness for existing commercial customers and suggested that, if an interconnection queue develops, priority should be given to serving current businesses over new entities where legally permissible. Vice Utilities Advisory Commission Minutes Approved on: 3/4/26 Page 9 of 18 Chair Mauter noted the value of reliable, high-quality electric service for local businesses and requested that potential queue management policies be considered as part of future planning. Commissioner Tucher sought clarification on the types of customers interested in locating data centers in Palo Alto and questioned the City’s competitiveness relative to lower-cost regions. Commissioner Tucher asked how many large data center customers the utility currently serves and what information staff has regarding customer demand and requirements. Dr. Perkins responded that the utility currently has 1 customer in the approximately 10-megawatt range and noted that staff has received multiple inquiries from potential developers. Dr. Perkins stated that projected load growth reflects known projects and conservative assumptions and that staff is coordinating with CEC to ensure forecasts are not overstated. Dr. Perkins added that Palo Alto is unlikely to attract very large hyperscale facilities but may be suitable for smaller facilities that require proximity to end users, researchers, or proprietary systems. Mr. Kurotori clarified that data center demand in Palo Alto includes research-oriented computing facilities and laboratory space associated with local technology companies, particularly near Stanford Research Park. Palo Alto’s niche was described as supporting smaller, research- adjacent projects consistent with local land use and economic development goals, noting that very large data centers typically locate near major power resources elsewhere or develop their own generation. Potential community benefits were highlighted, including contributions to the General Fund and rate stability, alongside the need for careful evaluation. Staff is monitoring interest, coordinating with partners, and focusing on locations within existing commercial and industrial areas where such uses would be compatible. Commissioner Tucher asked whether the City is actively conducting market outreach to identify potential data center customers, including engagement with existing commercial customers or prospective businesses, and whether dedicated staff perform that function. Mr. Kurotori responded that interest typically originates from customers contacting the utility, that key account representatives maintain relationships with large customers, and that staff also engage through business events and coordination with the City’s economic development office. Commissioner Tucher recommended establishing a more proactive initiative with dedicated staff to assess market demand, beginning with existing customers and expanding to potential external prospects. Commissioner Metz emphasized the importance of understanding market demand and noted that even mid-sized data centers could represent a substantial increase relative to the City’s average load, stating that more quantitative analysis of both benefits and costs, including projections with and without data center development, is needed to effectively advise the City Council. Concerns were expressed that costs could outweigh benefits and impact existing customers without rigorous evaluation. Dr. Perkins responded that analysis of several large data center customers shows generally flat, high-utilization demand that efficiently uses existing assets and that contractual and policy protections, such as take-or-pay provisions, customer-provided renewable supply, and developer funding of grid expansions, can mitigate financial risk. Commissioner Metz requested detailed cost information, particularly regarding generation and procurement impacts, citing rising infrastructure costs and skepticism that Utilities Advisory Commission Minutes Approved on: 3/4/26 Page 10 of 18 additional energy could be obtained at lower cost without thorough analysis. Mr. Kurotori explained that detailed evaluations are highly site-specific and typically conducted once a prospective customer and location are identified. Infrastructure requirements and timelines can be estimated but broader analysis depends on customer needs and outreach. Mr. Kurotori emphasized the importance of direct engagement to negotiate agreements that protect the community based on prior experience serving large loads. Commissioner Metz stated that projected peak load growth over the next decade underscores the need to understand associated energy costs before making policy recommendations or entering into customer agreements, emphasizing that both demand and supply considerations are necessary for informed decision-making. Dr. Perkins responded that broader statewide growth in electricity demand is already increasing transmission costs regardless of local development and noted that energy procurement decisions often involve paying a premium for price certainty relative to market fluctuations. Dr. Perkins added that contractual mechanisms such as minimum demand or take-or-pay provisions could align customer incentives with utility costs. Mr. Kurotori noted that while Palo Alto contributes to the regional economy, its overall load is relatively small in the context of statewide transmission planning and cautioned against overstating the City’s influence on broader system costs. Vice Chair Mauter asked for additional information on the practice of data centers securing their own generation contracts and how that could affect utility planning, and emphasized the importance of understanding the role of low-cost baseload resources in maintaining affordable rates as overall demand increases. Vice Chair Mauter stated that a simplified model comparing baseload supply, marginal costs, and system expenses would help inform the discussion and suggested that large new loads should pay marginal costs to ensure fairness. Dr. Perkins responded that distribution costs represent a substantial portion of overall expenses and that spreading those costs across greater usage can reduce the cost. Vice Chair Mauter asked whether the referenced distribution costs included both transmission and distribution, and Dr. Perkins clarified that the term referred only to the City’s local distribution system. Vice Chair Mauter reiterated that clearer breakdowns and modeling would be useful for evaluating potential rate effects. Commissioner Phillips stated that the estimate that rates are about 5 percent lower due to an existing data center suggests that staff has done modeling and asked to see that analysis. Commissioner Phillips added that steady, flat load appears beneficial and that reviewing the basis for the estimate would help the Commission evaluate the issue. Commissioner Gupta agreed on the importance of modeling and addressing potential concerns but stated that attracting data centers could be beneficial for Palo Alto if risks are mitigated. Commissioner Gupta expressed support for staff efforts to make the City attractive to such projects, including outreach and clear guidelines for different project sizes, and supported marketing Palo Alto as a secondary location for data center development. Utilities Advisory Commission Minutes Approved on: 3/4/26 Page 11 of 18 Chair Scharff stated that the UAC’s overall message was to mitigate risks while exploring data center opportunities and asked about next steps, including whether staff would pursue outreach, develop a plan, or bring recommendations to the City Council. Mr. Kurotori responded that staff will continue evaluating expectations and community concerns, including noise and aesthetics, and may coordinate with other departments on potential permitting approaches to provide clarity for prospective projects. Mr. Kurotori noted that outreach occurs through existing customer relationships and that interest may increase as awareness of available capacity and new transmission improvements spreads, while acknowledging local constraints such as limited land availability and high costs, and advantages including existing infrastructure and connectivity resources. ITEM 3: Discussion of the Residential Electric and Water Utility Customer Satisfaction Survey Results (DISCUSSION 7:50 p.m. – 8:30 p.m.) Staff: Catherine Elvert, Utilities Communications Manager Director of Utilities Alan Kurotori explained that the survey is part of an oversampling effort conducted in partnership with the California Municipal Utilities Association, which collects customer feedback statewide and provides participating utilities with additional local data. Utilities Communications Manager Catherine Elvert reported that the survey was administered by GreatBlue Research. The utility conducts customer satisfaction surveys annually, alternating between residential and business customers, and the 2025 survey focused on residential electric and water customers. The statewide survey provides benchmarking against other municipal and investor-owned utilities (IOU), while an additional Palo Alto oversample allows for deeper analysis of local issues through customized questions. The results inform identification of strengths, areas for improvement, and strategic planning. The survey was conducted from October through November and assessed customer satisfaction across topics including reliability, rates and affordability, service quality, emergency preparedness, infrastructure, programs, and customer engagement. Ms. Elvert reported that survey results show City of Palo Alto Utilities (CPAU) significantly outperforms statewide municipal and IOUs in both water and electric service across most metrics, indicating strong customer trust and high ratings for reliability, quality, and the utility’s carbon-neutral, community-focused model. Ms. Elvert stated that the survey uses a net positive score, similar to a net promoter score, to measure alignment between customer values and perceived performance, and noted that CPAU received very high marks. Ms. Elvert offered to provide additional detail about those scores, including responses to questions previously submitted by Commissioner Gupta. Ms. Elvert presented a high-level overview of electric and water service performance, reporting that CPAU received an average positive rating of 74.4 percent for electric service, an increase from 2023 and higher than statewide municipal and IOU averages. Top scores were in reliability, outage restoration, and commitment to renewables. Water service received an average positive rating of approximately 80 percent, also higher than 2023 and statewide municipal averages, with particularly strong ratings for infrastructure maintenance, conservation efforts, water quality monitoring, and environmental Utilities Advisory Commission Minutes Approved on: 3/4/26 Page 12 of 18 responsibility. Ms. Elvert explained that organizational characteristics refer to key structural, operational, and cultural attributes that describe how a utility functions and manages risk. Comparative results were presented showing CPAU's performance in 2025 relative to 2023, statewide municipal utilities, IOUs, and national benchmarks, noting that CPAU scored significantly higher on most measures across all comparison groups. Ms. Elvert also stated that the survey results are statistically reliable, with margins of error of approximately plus or minus 4.8 percent at a 95 percent confidence level, and noted that additional demographic details and comparative data are available in supplemental materials. Ms. Elvert reported that key findings for the electric utility showed CPAU scored higher in meeting customer expectations in 2025 than in 2023 and outperformed municipal utilities and IOUs, with improvements in rates, affordability, and customer service, though first-contact resolution declined. Emergency preparedness ratings were slightly higher than in 2023 but lower than IOUs, with fewer respondents expressing confidence, indicating a need for improved communication. Email was the preferred communication method, and digital tools showed improvement from 2023 but remained below municipal utility ratings. Ms. Elvert reported there was strong interest in electrification programs, especially heat pump water heaters and induction cooktops, though upfront costs remain a major barrier. Familiarity with electrification and support for CPAU’s investments have increased since 2023, while interest in electric vehicles has declined and interest in solar and battery storage remains low. Customer service remains strong, but repeat contacts are often driven by billing issues and lower first-contact resolution, suggesting improvements to billing processes, information clarity, and digital tools could reduce inquiries. Respondents across income levels showed willingness to invest in upgrades but respond to different incentives, indicating that income- specific messaging, rebates, guidance, and convenient installation pathways could improve participation, particularly during equipment replacement. Ms. Elvert reported that the 2025 water survey showed consistently high ratings across all organizational characteristics, exceeding 2023 results and municipal utility averages, with about 80 percent positive overall. Customers rated highest the utility’s ability to maintain supply, promote conservation, and monitor water quality, with roughly 9 out of 10 responding positively. Clean water and affordable prices remain top expectations, which CPAU generally meets, though affordability and value ratings were somewhat lower than municipal benchmarks, suggesting an opportunity to better communicate value. Satisfaction with water quality, including clarity, smell, and taste, remains very high, and customers expressed strong trust in the utility to resolve water quality issues. Ms. Elvert reported that survey results indicate an opportunity to improve communication about drought and emergency preparedness, as fewer customers believe CPAU is prepared compared to 2023 and to municipal benchmarks. Respondents generally view infrastructure as being in good condition and support investments to maintain and upgrade systems, even if rates increase. Customer service ratings remain strong, with most respondents rating service as among the best or above average, though satisfaction declined slightly from 2023, likely due to Utilities Advisory Commission Minutes Approved on: 3/4/26 Page 13 of 18 complex billing issues requiring multiple contacts. About 75 percent reported satisfaction with recent service experiences, below municipal averages. Email is the preferred communication method, though many still rely on bill inserts, which are now available to e-bill customers. Customers identified leak detection alerts and no-cost conservation guidance as the most useful efficiency tools and expressed familiarity with conservation programs, while low-income customers showed a preference for upfront rebates for water-efficient fixtures. Ms. Elvert summarized key considerations from the water utility survey, noting that while customer service performance remains strong relative to municipal utilities, satisfaction declined in 2025 compared to 2023. These findings suggest a need to review internal processes, improve billing workflows, clarify information, and strengthen follow-up practices. There was lower customer confidence compared to municipal utilities regarding preparedness for natural disasters and drought, highlighting an opportunity to communicate ongoing efforts such as updates to the water Risk and Resilience Assessment and Emergency Operations Plan. Responses from low-income customers show sensitivity to costs for efficiency upgrades and repairs, suggesting that tailored programs could improve participation while supporting long- term conservation goals. Ms. Elvert noted that the electric and water survey was extensive, with approximately 86 questions, and that her presentation summarized key findings most relevant to the UAC, and highlighted areas of strength as well as opportunities for improvement. Public Comment: None. Commissioner Gupta thanked Ms. Elvert for the presentation, commended overall performance, and asked questions about the survey methodology, including sample size, demographics, collection methods, and whether incentives were provided. Ms. Elvert responded that the survey was conducted online through voluntary participation without incentives, with approximately 400 responses each for electric and water customers. Respondents were predominantly older, male, Caucasian, highly educated homeowners, noting that this indicates a need to improve representation of the broader community. Commissioner Gupta suggested increasing participation from renters and residents of multifamily housing in future surveys. Commissioner Croft asked whether the Commission had received the backup slides. Ms. Elvert responded that the full report was not included in the packet and that staff instead summarized key findings but could provide the full materials upon request. Commissioner Croft stated a preference to receive the complete survey materials and suggested they be made available to the public. Mr. Kurotori stated that staff had followed prior practice but would include the full information in a future packet and would be publicly accessible. Commissioner Phillips asked whether the results reflected raw survey data and commented that the oversample appeared to function as a separate survey. Ms. Elvert explained that the oversample was an additional survey focused specifically on Palo Alto customers, which included the same core questions plus additional Palo Alto-specific items. Mr. Kurotori added Utilities Advisory Commission Minutes Approved on: 3/4/26 Page 14 of 18 that the City also conducts broader residential surveys and uses multiple sources to gauge community perspectives, noting that while survey responses tend to reflect certain demographics, the results are considered statistically significant and informative when evaluated alongside other data. Commissioner Phillips stated that a couple of individuals he knew had difficulty accessing the survey link and asked whether staff had received similar reports. Ms. Elvert acknowledged that some customers reported issues early in the survey period, which were promptly addressed by the contractor, and stated that staff will work to ensure stronger quality assurance and clearer communication about the legitimacy of future surveys. Mr. Kurotori added that staff will also consider broader outreach methods and survey design improvements, noting that lengthy surveys may reduce completion rates, and that future efforts will seek to optimize participation. Commissioner Gupta noted that some survey questions may not reflect Palo Alto’s demographics, citing household income categories as an example, and suggested refining questions to better capture local conditions and ensure representative results. Commissioner Gupta also recommended establishing specific, measurable KPIs, such as targets for reducing repeat billing contacts or improving first-contact resolution, to enable year-to-year tracking of progress. Commissioner Croft expressed appreciation for the utility’s strong performance but emphasized the importance of focusing on areas needing improvement. Commissioner Croft noted that, as a municipal utility serving its own community, even modest dissatisfaction warrants attention and suggested examining responses more critically, including distinctions between stronger and weaker satisfaction levels. Commissioner Croft encouraged staff to use qualitative feedback to identify opportunities for improvement. Commissioner Croft suggested that lower ratings in some areas may stem from insufficient communication rather than poor performance and emphasized the value of improving direct outreach to customers. Commissioner Croft recommended establishing a goal to ensure every customer account includes at least one reliable contact method, either an email address or a phone number, to enable timely alerts about issues like unusually high bills and to share information about services and initiatives. Commissioner Croft stated that improved communication could help reduce dissatisfaction and increase customer confidence in utility services. Mr. Kurotori noted that many survey responses reflected "I don't know," indicating a lack of customer awareness rather than negative perceptions. Mr. Kurotori stated that the biennial survey results are actively reviewed by staff and incorporated into operational improvements, including follow-up discussions with the consultant regarding findings and recommendations. Commissioner Croft reiterated the importance of electronic communication with all customers, noting that email alerts, such as high bill warnings, could help address customer complaints by demonstrating that advance notice was provided. Commissioner Metz asked whether a similar survey is conducted for commercial customers. Ms. Elvert responded that surveys alternate annually between residential and business/key Utilities Advisory Commission Minutes Approved on: 3/4/26 Page 15 of 18 account customers, noting that the business survey was conducted in 2024 and will be repeated in 2026, with results expected to be presented to the Commission in early 2027. Commissioner Metz asked for clarification regarding plans to address customer uncertainty about the utility’s preparedness for natural disasters and drought. Mr. Kurotori stated that staff is considering additional outreach efforts in coordination with the Office of Emergency Services and is reviewing communication materials to provide more information to customers. Mr. Kurotori noted that staff sought the Commission’s input on potential improvements and plans to move forward with several recommendations, including expanded use of bill inserts, website updates, and other public communications, while acknowledging that the survey represents one data point in an every-other-year cycle. Commissioner Metz sought clarification on whether survey responses regarding drought preparedness reflected concern about actual readiness or a lack of public awareness. Mr. Kurotori responded that many responses indicated uncertainty rather than negative perceptions and noted that this highlights an opportunity to reinforce communication about preparedness efforts. Commissioner Tucher stated that, if the survey results are credible, the utility should communicate them to customers, noting that a third-party statewide comparison showing strong performance relative to other utilities could be useful to share publicly. Commissioner Tucher supported Commissioner Gupta's suggestion of developing specific KPIs based on the survey findings and emphasized the importance of analyzing responses more deeply to better understand customer sentiment. Commissioner Tucher noted that some level of dissatisfaction is expected and that such feedback should not overshadow overall positive results. Commissioner Tucher questioned how the UAC fulfills its advisory role to the City Council if major topics result only in presentations and discussion rather than formal recommendations, and invited both staff and fellow Commissioners to reflect on that issue. Vice Chair Mauter responded that the Commission’s role includes asking the types of questions the City Council might ask and identifying key issues and values, noting that discussion itself can be meaningful input even without a formal vote. Mr. Kurotori added that staff prepares informational reports to Council that summarize Commission discussions and feedback and noted that Council recently approved the UAC workplan covering these topics. Mr. Kurotori also stated that the Commission may forward formal recommendations if it chooses. Commissioner Tucher reiterated concern about how Council will understand the Commission’s views on major topics, observing that Council may expect clear feedback rather than relying solely on lengthy meeting recordings. Commissioner Croft requested that Commission feedback be incorporated into the consideration items presented at the end of the slides. Commissioner Croft specifically cited the goal of establishing electronic communication with all utility customers and the need to investigate areas of lower performance and was interested to know if other Commissioners supported this. Councilmember Lauing stated that feedback provided during informational items is used by staff to refine future actions and presentations, noting that topics such as the survey and data Utilities Advisory Commission Minutes Approved on: 3/4/26 Page 16 of 18 centers will return to the Commission for further discussion and potential votes. Councilmember Lauing explained that not all matters require action at the initial meeting and that updates often serve to inform the Commission and guide future decision-making. Commissioner Tucher explained that he was raising a broader process concern about lengthy discussions that do not result in formal advice to the City Council, noting that Council may otherwise rely on videos or minutes to understand the Commission’s views. Commissioner Tucher acknowledged that the information may be useful for future decisions but suggested that items scheduled for upcoming City Council or Finance Committee agendas might have warranted earlier UAC action, and observed that 2 consecutive meetings without votes on significant topics may not represent ideal agenda planning. Commissioner Gupta stated that not every issue discussed by the Commission will result in a formal recommendation to the City Council and described an internal vote as an initial step that could help frame issues before they reach Council. Commissioner Gupta noted that discussion alone can be valuable for topics that are still developing or not yet before Council and suggested there may be a balance between holding internal votes and engaging in informational dialogue, while acknowledging that some matters may proceed to Council without prior Commission action. Commissioner Phillips asked for clarification on the meaning of an internal vote. Commissioner Gupta explained that he was referring to a vote taken by the Commission on matters affecting its own operations or priorities, rather than an item intended for Council action, such as requesting staff to examine specific issues within the existing workplan. Vice Chair Mauter noted that the Commission does not have authority to direct staff work and instead advises the City Council, explaining that formal recommendations would be conveyed to Council for potential direction to staff. Chair Scharff responded that the data center item represented an initial discussion intended to gauge the Commission’s views and provide staff with direction rather than to produce an immediate recommendation to Council. Chair Scharff stated that staff sought input to inform future work and that additional information has been requested before any formal action would be appropriate, noting that a vote at this stage would likely not add value. Regarding the survey item, Chair Scharff indicated that the primary purpose was to understand public feedback and offer suggestions for future surveys, expressing confidence that staff considers and incorporates UAC input over time. Commissioner Metz suggested providing a brief written summary of each major topic to convey the UAC’s views to the City Council, noting that a concise 1- or 2-paragraph overview may be helpful for Councilmembers. Chair Scharff noted that Mayor Vicki Veenker attended the UAC data center discussion and that Councilmember Lauing was also present, stating that Council representatives hear the Utilities Advisory Commission Minutes Approved on: 3/4/26 Page 17 of 18 Commission’s discussions directly and can convey them to the full Council, and expressed confidence that the Council is receiving the Commission’s input. Councilmember Lauing stated that the Council recently reviewed the Commission’s workplan and expressed strong interest in having UAC representatives attend Council meetings on significant agenda items to provide input and expertise. Councilmember Lauing noted that Commissioners would be encouraged to actively share their perspectives at Council meetings rather than simply observe and added that his role as Finance Committee chair provides an additional connection. Councilmember Lauing also indicated that preparing separate summaries of topics not on the Council agenda may not be practical given time constraints, though particularly important matters could be brought forward if requested. Chair Scharff stated that staff should inform the UAC when items previously discussed are scheduled for City Council consideration so that a UAC Commissioner can attend and provide input, noting that Council has expressed support for participation by boards and commissions. Vice Chair Mauter added that the Commission had previously agreed that when items move forward to Council, particularly those involving votes, any Commissioner may volunteer to represent the UAC’s views at City Council meetings. Mr. Kurotori stated that the data center topic represents an initial discussion of a complex issue being considered locally and statewide, and emphasized that the Commission’s input is valuable for staff as work progresses. Mr. Kurotori reiterated that staff will incorporate the discussion into an informational report to the City Council and that the Commission may choose to designate a representative to attend when the item is considered. Mr. Kurotori added that other upcoming matters such as rates and capital projects will return for formal recommendations and votes. Staff will notify the UAC when the data center report is scheduled for Council review and coordinate with any designated representative. Commissioner Tucher cited the One Water report as an example, noting that the Commission discussed concerns during earlier informational meetings but did not provide formal written advice to the City Council until a later stage. Commissioner Tucher suggested that it could be useful to transmit interim feedback on significant topics and expressed uncertainty about how such communication should occur. Commissioner Tucher also referenced upcoming Finance Committee consideration of water and wastewater rates, observing that the UAC will be discussing those items next month also, and questioned how UAC input would be incorporated into that process. Mr. Kurotori explained that the rate-setting process follows a standard sequence in which the UAC reviews and makes recommendations first, after which the item proceeds to the Finance Committee and then to the full City Council. The UAC discussion and input are incorporated into staff reports and, if meeting timing requires, may be provided as supplemental information. Mr. Kurotori noted that this process occurs annually. Commissioner Tucher expressed concern that presentations to the Finance Committee may occur soon after UAC discussions, leaving little time for staff to incorporate UAC feedback into materials. Mr. Kurotori responded that the purpose of the UAC review is to provide input rather than to revise Utilities Advisory Commission Minutes Approved on: 3/4/26 Page 18 of 18 staff presentations and noted that the rate process includes preliminary projections and subcommittee review, emphasizing that the timeline and procedure follow an established annual process. Mr. Kurotori confirmed that the UAC does vote, particularly on rate matters, and provides formal input as part of its primary responsibilities. COMMISSIONER COMMENTS and REPORTS from MEETINGS/EVENTS Commissioner Croft read a brief public comment submitted by an individual who reported being unable to join the meeting by phone. The commentor, Sven T., requested that the UAC recommend that the utility provide information on emissions from natural gas stoves, including benzene and nitrogen oxides, similar to safety information provided regarding natural gas hazards. Commissioner Metz announced upcoming National Academy of Sciences, Engineering, and Medicine events on energy affordability, including a webinar held that day and an upcoming workshop available in person or online. Commissioner Metz also noted that receiving the meeting presentations shortly before the meeting made it difficult to prepare adequately, and Chair Scharff asked staff to take note of this concern. ADJOURNMENT Meeting adjourned at 09:05 p.m.