HomeMy WebLinkAboutStaff Report 2407-32305.Discussion of Utilities Annual Report for Fiscal Year 2024 (FY24) (DISCUSSION 6:45 PM –
7:00 PM) Staff: Karla Dailey and Dave Yuan
Staff Report: 2311-2209 – Page 1 of 62
Utilities Advisory Commission
Staff Report
From: Dean Batchelor, Director Utilities
Lead Department: Utilities
Meeting Date: November 6, 2024
Staff Report: 2407-3230
TITLE
Discussion of Utilities Annual Report for Fiscal Year 2024 (FY24)
RECOMMENDATION
Staff recommends that the Utilities Advisory Commission review and comment as appropriate.
EXECUTIVE SUMMARY
This report for the Utilities Advisory Commission is an informational update on water, gas, electric, wastewater collection
and fiber utilities, efficiency programs, legislative/regulatory issues, utility-related capital improvement programs,
operations, reliability impact measures and a utility financial summary. This updated report has been prepared to keep
the Utilities Advisory Commission apprised of the major issues that are facing the water, gas, electric, wastewater
collection and fiber utilities. A separate quarterly report on the financial position is prepared consistent with when the
City closes its books.
Items of special interest in this report are summarized below:
Vacancies and Staffing – Appendix B
•The Utilities Department has 37 vacant positions out of 259 authorized positions or a 14% vacancy rate at the end
of June 2024 compared to 49 vacancies or 19% in June 2023.
•Progress has been made in filling vacant Electric Engineering and Operations positions year over year from 27
vacancies in June 2023 to 20 vacancies in June 2024, a decrease of 7 positions and vacancy percentage rate has
decreased from 30% to 22%. In FY24, Utilities has hired a new Electric Engineering Manager, one Principal
Engineer, and two journey level Linesperson.
•Due to HR staffing constraints, Utilities has designated three HR liaisons from Utilities Administration to assist HR
with some of the recruitments. Since then, the number of vacancies has decreased, and the recruitment timeline
has shortened. Due to the success of the HR-Utilities liaison program, the City has rolled out this program to other
departments to acquire new talent.
Electric Utility:
•Improved hydroelectric generation and revenue from Resource Adequacy sales are resulting in a projected net
supply cost of $70.8M for FY 2024, or a 23% decrease compared to budget. (Section 1.1.1)
•A number of construction projects are in progress or have been recently completed. (Section 1.2)
•A summary chart of quarterly electric outages is included in the report. (Section 1.4)
• FY 2024 electric sales volume were 4.3% higher than forecasted. (Section 1.5.1)
Gas Utility:
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•Gas prices have been relatively low and stable.
•Council approved a strategy to collect funds to mitigate the impact of a potential future short-term price spike.
(Section 2.1)
•One gas main replacement project is in progress, and one is in the design stage. (Section 2.2)
•Gas sales in FY 2024 were 8.1% lower than forecasted. (Section 2.5.1)
Water Utility:
•The State Board is completing CEQA review of the Tuolumne River Voluntary Agreement and moving forward with
implementation of the Adopted Phase I Bay Delta Plan.
•Work continues on the One Water Plan. (Section 3.1)
•The turnouts project was completed, and two main replacement projects are in progress. (Section 3.2)
•Water sales at the end of FY 2024 were about 2.0% lower than forecasted and water sales revenues were 4.6%
lower than budgeted. (Section 3.5.1)
Wastewater Utility:
•Funding from Valley Water in an amount of $11.8 million will be applied to Palo Alto’s share of approved RWQCP
projects, directly benefitting Palo Alto customers. (Section 4.1)
•A sewer system rehabilitation replacement project (SSR 31) on El Camino and Page Mill is complete. (Section 4.2)
•Actual wastewater sales revenues have been lower than expected due to low water usage in the commercial sector.
(Section 4.4.1)
Fiber Utility:
•Fiber construction start in the pilot areas is dependent on two critical milestones: the installation of the fiber hut
at Colorado power station and completion of pole-make ready work. Staff is finalizing the fiber hut design, working
with the vendors to provide designs for internal building and fire permit review. The hut is anticipated to be
installed by the end of Q1-2025. Electric pole-make ready work such as pole replacements and hanging messenger
wire is in progress and on track to be completed by Q1-2025. Fiber cable may be strung once electric pole-make
ready work is completed.
•The RFP for the operating support system and business support system (OSS/BSS) software is in progress. Existing
fiber construction and IT networking equipment contracts will be leveraged to build the pilot area. New RFPs will
be issued for the remaining area in Phase 1 next year.
•CPAU has filled the role of Outside Plant Manager to oversee planning, construction, and inspection of the FTTP
infrastructure and new fiber backbones. This position will oversee field technicians and coordinate construction,
installation, and repair activities while adhering to quality and customer service standards.
•In conjunction with the City’s wildfire mitigation plan to underground utility poles in the foothills, CPAU
establishing a dark fiber license agreement to provide customers in the foothills area dark fiber to enhance their
home broadband service.
Customer Programs (Section 6):
•In 2023, the City began offering lower pricing for heat pump water heater (HPWH) replacements through a full
service turnkey program as well as rebates offered for customers who use their own contractor. More than 400
HPWHs have been installed as a result of a wide range of marketing approaches for the program. (Section 6)
•In October 2024, the City launched the emergency water heater replacement pilot program. to help our customers
replace broken gas water heaters with clean and efficient heat pump water heaters within 48 hours.
Staff Report: 2311-2209 – Page 3 of 62
This pilot program is part of the Advanced HPWH Pilot Program in the S/CAP workplan to help meet the City’s
climate goals. So far the program has served two customers, and is expected to expand rapidly as marketing ramps
up.
•23% of all water customers have utilized the City’s new WaterSmart online water management tool, and
preliminary results from the efficiency study show that sending home water reports results in water-savings of
2.1%.
Communications:
•A digest of major outreach efforts is provided in Section 7, with topics including extreme energy prices and high
utilities bills, new EV chargers at Stanford Health Care, and water supply and conservation updates.
Legislative, Regulatory and Industry Activity:
•Major legislative, regulatory and Industry Activity items are summarized in Section 8.
Utilities at a Glance:
For additional context for the data included in this report, please see:
https://www.cityofpaloalto.org/Departments/Utilities/Customer-Service/Utilities-at-a-Glance
Staff Report: 2311-2209 – Page 4 of 62
OVERVIEW
Utilities Annual Report
FY 2024
Fiscal Year 2023
Staff Report: 2311-2209 – Page 5 of 62
1 ELECTRIC UTILITY.....................................................................................................................................................................8
1.1 ELECTRICITY SUPPLY AND TRANSMISSION ...........................................................................................................................................8
1.1.1 Forecasted Supply Costs.......................................................................................................................................................8
1.1.2 Hydroelectric Conditions......................................................................................................................................................9
1.1.3 REC Exchange Program........................................................................................................................................................9
1.1.4 Renewable Energy Procurement..........................................................................................................................................9
1.2 CAPITAL IMPROVEMENT PLAN STATUS ...............................................................................................................................................9
1.3 RATE AND BILL COMPARISONS .......................................................................................................................................................10
1.4 RELIABILITY ................................................................................................................................................................................11
1.5 FINANCIAL HEALTH ......................................................................................................................................................................11
1.5.1 Sales Forecasts vs. Actuals.................................................................................................................................................12
1.5.2 Financial Position...............................................................................................................................................................12
2.1 GAS SUPPLY AND TRANSMISSION ....................................................................................................................................................13
2.1.1 Actual and Forecasted Supply Costs...................................................................................................................................14
2.1.2 Carbon Neutral Gas Program.............................................................................................................................................14
2.1.3 Gas Transmission Line Capacity Valuation.........................................................................................................................15
2.1.4 Gas Prepay Valuation.........................................................................................................................................................15
2.2 CAPITAL IMPROVEMENT PLAN STATUS .............................................................................................................................................16
2.3 RATE AND BILL COMPARISONS .......................................................................................................................................................16
2.4 RELIABILITY ................................................................................................................................................................................16
2.5 FINANCIAL HEALTH ......................................................................................................................................................................17
2.5.1 Sales Forecasts vs. Actuals.................................................................................................................................................17
2.5.2 Financial Position...............................................................................................................................................................18
3.1 WATER SUPPLY AND TRANSMISSION ...............................................................................................................................................19
3.2 CAPITAL IMPROVEMENT PLAN STATUS .............................................................................................................................................21
3.3 RATE AND BILL COMPARISONS .......................................................................................................................................................22
3.4 RELIABILITY ................................................................................................................................................................................22
3.5 FINANCIAL HEALTH ......................................................................................................................................................................22
3.5.1 Sales Forecasts vs. Actuals.................................................................................................................................................22
3.5.2 Financial Position...............................................................................................................................................................23
4.1 WASTEWATER TREATMENT UPDATES AND CAPITAL PLANNING STATUS ..................................................................................................24
4.1.1 Treatment Cost Trends.......................................................................................................................................................24
4.1.2 Regional Water Quality Control Plant Capital Planning Status..........................................................................................25
4.2 COLLECTION SYSTEM CAPITAL IMPROVEMENT PLAN STATUS ................................................................................................................27
4.3 RATE AND BILL COMPARISONS .......................................................................................................................................................27
4.4 FINANCIAL HEALTH ......................................................................................................................................................................27
4.4.1 Sales Forecasts vs. Actuals.................................................................................................................................................27
4.4.2 Financial Position...............................................................................................................................................................28
5.1 FIBER UTILITY STRATEGIC PLANNING ...............................................................................................................................................29
5.2 CAPITAL IMPROVEMENT PLAN STATUS .............................................................................................................................................29
5.3 RELIABILITY ................................................................................................................................................................................30
5.4 FINANCIAL HEALTH ......................................................................................................................................................................30
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5.4.1 Fiber Sales..........................................................................................................................................................................30
5.4.2 Financial Position...............................................................................................................................................................30
6 CUSTOMER PROGRAMS (EFFICIENCY AND SUSTAINABILITY)..................................................................................................31
6.1 CUSTOMER PROGRAMS UPDATES ...................................................................................................................................................31
6.1.1 Energy and Water Efficiency..............................................................................................................................................31
6.1.2 Building Electrification .......................................................................................................................................................35
6.2 INNOVATION AND PILOT PROGRAMS ...............................................................................................................................................39
6.2.1 Academic Collaborations....................................................................................................................................................40
6.2.2 Completed Projects ............................................................................................................................................................40
7 COMMUNICATIONS...............................................................................................................................................................41
8 LEGISLATIVE, REGULATORY AND INDUSTRY ACTIVITY............................................................................................................43
8.1 STATE LEGISLATIVE ACTIVITY ..........................................................................................................................................................43
8.2 STATE REGULATORY ACTIVITY ........................................................................................................................................................44
8.2.1 California Air Resources Board (CARB)...............................................................................................................................44
8.2.2 California Energy Commission (CEC) ..................................................................................................................................45
8.2.3 California Public Utilities Commission................................................................................................................................45
8.2.4 State Water Board..............................................................................................................................................................45
9 APPENDIX A: ENERGY RISK MANAGEMENT PROGRAM..........................................................................................................47
9.1 OVERVIEW OF HEDGING PROGRAMS ...............................................................................................................................................47
9.2 OVERVIEW OF ENERGY RISK MANAGEMENT PROGRAM.......................................................................................................................47
9.3 FORWARD DEALS.........................................................................................................................................................................47
9.4 ELECTRIC MARKET EXPOSURE ........................................................................................................................................................48
9.5 TRANSACTION COMPLIANCE ..........................................................................................................................................................48
10 APPENDIX B: STAFFING AND VACANCIES...............................................................................................................................49
11 APPENDIX C: UTILITIES CUSTOMER PROGRAM DESCRIPTIONS...............................................................................................50
11.1 CUSTOMER PROGRAMS OVERVIEW .................................................................................................................................................50
11.1.1 Energy and Water Efficiency..........................................................................................................................................50
11.1.2 Building Electrification...................................................................................................................................................51
11.1.3 Electric Vehicles .............................................................................................................................................................51
11.1.4 Funding Sources for Emissions Reductions ....................................................................................................................53
12 APPENDIX D: WATER UTILITY ANNUAL INFRASTRUCTURE MAINTENANCE AND REPLACEMENT REPORT................................54
Staff Report: 2311-2209 – Page 7 of 62
Figures
FIGURE 1: FY 2024 FINANCIAL PLAN SUPPLY COST FORECAST VS. ACTUALS ..............................................................................................................8
FIGURE 2: HYDRO GENERATION: FY 2024 - FY 2026 ACTUALS & PROJECTIONS (GWH).............................................................................................9
FIGURE 3: RESIDENTIAL MONTHLY ELECTRIC BILL COMPARISON (EFFECTIVE 7/1/2024, $/MO.) ................................................................................11
FIGURE 4: ELECTRIC OUTAGE RELIABILITY, FY 2019 TO FY 2022..........................................................................................................................11
FIGURE 5: ELECTRIC OUTAGE RELIABILITY, FY 2023 TO FY 2024..........................................................................................................................11
FIGURE 6: ELECTRIC SALES VOLUME (KWH), UP TO FY 2024-Q4..........................................................................................................................12
FIGURE 7: ELECTRIC SALES REVENUE ($), UP TO FY 2024-Q4 ..............................................................................................................................12
FIGURE 8: PALO ALTO GAS COMMODITY RATES .................................................................................................................................................13
FIGURE 9: GAS SUPPLY COSTS ($), ACTUAL VS BUDGET, UP TO FY2024-Q4...........................................................................................................14
FIGURE 10: OFFSET PORTFOLIO COMPOSITION ...................................................................................................................................................14
FIGURE 11: OFFSET PROJECT DESCRIPTIONS ......................................................................................................................................................15
FIGURE 12: RESIDENTIAL NATURAL GAS BILL COMPARISON ($/MONTH).................................................................................................................16
FIGURE 13: GAS SERVICE INTERRUPTIONS, FY 2023 TO FY 2024..........................................................................................................................17
FIGURE 14: GAS SALES VOLUME (THERMS), UP TO FY2024-Q4...........................................................................................................................17
FIGURE 15: GAS SALES REVENUE ($), UP TO FY 2024-Q4...................................................................................................................................18
FIGURE 16: REGIONAL WATER SYSTEM STORAGE ...............................................................................................................................................20
FIGURE 17: SFPUC WATER DELIVERIES ............................................................................................................................................................21
FIGURE 18: RESIDENTIAL WATER BILL COMPARISON ($/MONTH)..........................................................................................................................22
FIGURE 19: WATER SERVICE INTERRUPTIONS, FY 2023 TO FY 2024.....................................................................................................................22
FIGURE 20: WATER SALES VOLUME (CCF), UP TO FY 2024-Q4...........................................................................................................................23
FIGURE 21: WATER SALES REVENUE ($), UP TO FY 2024-Q4...............................................................................................................................23
FIGURE 22: PALO ALTO’S SHARE OF ESTIMATED WASTEWATER TREATMENT EXPENSES (PROJECTION AND PLANNED CIP)................................................25
FIGURE 23: CURRENT RWQCP CAPITAL WORK IN-PROGRESS (BASED ON MARCH 2024 PARTNERS MEETING)..............................................................26
FIGURE 24: RESIDENTIAL WASTEWATER BILL COMPARISON ($/MONTH).................................................................................................................27
FIGURE 25: WASTEWATER SALES REVENUE ($), UP TO FY 2024-Q4.....................................................................................................................28
FIGURE 26: ENERGY EFFICIENCY PROGRAM ENERGY SAVINGS – COMPLETED FY 2024 IN YELLOW ..............................................................................33
FIGURE 27: ENERGY EFFICIENCY PROGRAM ENERGY SAVINGS – AWAITING ASSESSMENTS OR INSTALL ..........................................................................34
FIGURE 29: STATUS TO DATE OF ALL APPLICATIONS TO THE PROGRAM FOR EMERGING TECHNOLOGIES ..........................................................................40
FIGURE 27: GAS DEALS ..................................................................................................................................................................................47
FIGURE 28: ELECTRIC ENERGY DEALS ................................................................................................................................................................48
FIGURE 29: ELECTRIC RESOURCE ADEQUACY DEALS.............................................................................................................................................48
FIGURE 30: ELECTRIC LOAD RESOURCE BALANCE, FY 2024 - 2026.......................................................................................................................48
FIGURE 31: UTILITIES VACANCIES AND RECRUITMENTS BY DIVISION, AS OF YEAR-END FY 2024..................................................................................49
FIGURE 32: POTENTIAL EMISSIONS REDUCTION FUNDING SOURCES .......................................................................................................................53
Staff Report: 2311-2209 – Page 8 of 62
1 Electric Utility
The City’s electric utility serves all residential and non-residential electric demands in Palo Alto at a lower cost than PG&E
in surrounding communities. Its electric supply portfolio is 100% carbon neutral. The City maintains and operates an
electric distribution system but does not operate any transmission lines or any generating capacity on its own. Instead,
the City belongs to Northern California Power Agency (NCPA) which operates its Calaveras hydroelectric generating plant
and provides power scheduling services for its other generating resources. This carbon free power is supplied through
power purchase agreements with various generation operators.
1.1 Electricity Supply and Transmission
Below is an update on electricity supply and transmission services.
1.1.1 Forecasted Supply Costs
With hydroelectric generation conditions improving significantly and market prices coming down over the past year, the
electric net supply cost for FY 2024 is currently projected to be $70.8M, which represents a 23% decrease from the
Adopted Budget level of $91.7M. The cost decrease is primarily driven by the aforementioned improvement in hydro
generation projections, as well as greater than projected revenues from resource adequacy (RA) capacity sales. For FY
2025, electric net supply cost is projected to increase slightly to $77.7M.
Figure 1: FY 2024 Financial Plan Supply Cost Forecast vs. Actuals
Staff Report: 2311-2209 – Page 9 of 62
1.1.2 Hydroelectric Conditions
The City receives power from two hydroelectric projects, the Calaveras project and the Western Base Resource contract
for federal hydropower from the Central Valley Project.1 The watershed for Western hydropower is primarily in the
northern end of California, while the watershed for the Calaveras project is in the Central Sierras.
Following the extremely wet water year of 2022 to 2023, reservoir levels across the state began this water year at above
average levels. With the majority of the rainy months behind us, water year 2023 to 2024 was roughly average from a
precipitation and snowpack perspective, which has resulted in reservoir levels being above average for this time of year.
As of August 26, precipitation in central and northern California is about 10-15% below average for that time of year.
Snowpack levels are as expected for this time. As a result of these relatively favorable conditions, hydro generation levels
are projected to be slightly above average this year and next year, with total output of about 113% of the long-term
average level for FY 2024 through FY 2026.
Figure 2: Hydro Generation: FY 2024 - FY 2026 Actuals & Projections (GWh)
Under the Renewable Energy Credits (REC) Exchange Program, which was approved by Council in August 2020 (Staff
Report #115562), staff has contracted to sell 230 GWh worth of in-state RECs (for $16.5M) and purchased 155 GWh worth
of out-of-state RECs (for $0.7M) in FY 2024, resulting in a net revenue of $15.7M. The price spread between in-state versus
out-of-state RECs has widened significantly since the start of 2023, due to the strong demand for in-state products.
As noted in the previous quarterly report, NCPA recently issued a Request for Proposals (RFP) for new renewable energy
and storage projects to meet NCPA members’ procurement needs which yielded a total of 29 proposals – nine for
standalone solar projects, nine for standalone battery energy storage systems (BESS), and 11 for solar-plus-storage
projects. Utilities staff has evaluated all of these proposals (for total value to the City and ability to meet the City’s
procurement needs) and provided feedback to NCPA on which proposals to pursue further, and NCPA staff has recently
reached out to the proposers of the shortlisted projects to discuss commencing contract negotiations.
1.2 Capital Improvement Plan Status
The following capital projects are currently in progress or have been recently completed:
1 The Calaveras project is a hydropower project located in Calaveras County that is maintained and operated by the Northern California Power Agency
on behalf of the City and other project participants. The City is also one of several public entities with contracts with the Western Area Power
Administration for “Base Resource” electricity, which is the hydroelectric power available from the federal government’s Central Valley Project
(operated by the Bureau of Reclamation) after accounting for power used for Central Valley Project operations and power delivered to certain
“preference” customers.
2 Staff Report #11556: https://www.cityofpaloalto.org/files/assets/public/v/1/agendas-minutes-reports/reports/city-manager-reports-cmrs/year-
archive/2020/id-11556.pdf
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Staff Report: 2311-2209 – Page 10 of 62
EL-17001 (East Meadow Circles 4/12kV Conversion)
•This project is scheduled to be completed in several phases. Phase 1 is completed. Phase 2 engineering design is
in progress and to be completed by December 2024. Phase 2 construction will be completed June 2025.
•This project is in the design phase and scheduled to be completed in Dec 2024. Construction will be completed by
summer 2025.
•This engineering design for this project is currently in progress and is expected to be completed in Dec 2024.
Construction will be completed by summer 2025.
•This project funds the purchase and replacement of both 60kV and 12kV substation circuit breakers that are
reaching the end of their useful life expectancy. In this past quarter, Council approved the purchase request for
the sixteen 12KV circuit breakers. A purchase order has been issued and the breakers are scheduled to be received
in late August 2024. The installation of the breakers will be completed in FY 2025. The project to purchase the
seven 60KV breakers was approved by City Council on May 20, 2024. The engineering design and installation of
the above breakers will occur in FY 2025.
•This project will rebuild the approximately 11 miles of overhead line in Foothills Park, as necessary to mitigate the
possibility of wildfire due to overhead electric lines. Staff has completed 7,000 feet of substructure work and
design which will eliminate the corresponding 26 poles. Substructure for Phase 1 was completed in Spring 2022
and the substructure for Phase 2 was completed in June 2023. Phase 3 substructure installation is currently in
progress and Phase 4 construction is in progress.
•The project scope includes on-going maintenance/technical support of the existing GIS system and
implementation of the new GIS platform, ESRI.
•Engineering design and construction is in progress. 39 (56%) poles out of the 69 targeted for replacement have
been replaced in the Grid Modernization Pilot area, with the remaining 30 poles slated for replacement before
year end 2024. Additionally, 184 (14%) of the 1,290 homes in the Pilot area are ready for electrification, with
another 334 homes inline to be connected to the upgraded infrastructure by the end of August, and the remaining
772 homes to be connected by year end 2024.
1.3 Rate and Bill Comparisons
3 as two wildfire and energy resource
recovery charges expired in June 2024. Santa Clara typically only changes their rates in January and has not adjusted rates
since their 10% increase in January 2024. Figure 3 shows an updated bill comparison based on these updated rates. Staff
estimates that based on these rates the average monthly bill (a full year’s worth of bills divided by 12) for the median
3 PG&E Decreased Residential Rate https://www.pge.com/assets/pge/docs/account/rate-plans/electric-rate-advisory-0724.pdf
Staff Report: 2311-2209 – Page 11 of 62
residential customer is approximately half of what it would be in PG&E territory and about 24% above what it would be
in Silicon Valley Power (City of Santa Clara) territory.
Figure 3: Residential Monthly Electric Bill Comparison (Effective 7/1/2024, $/mo.)
1.4 Reliability
Figure 4: Electric Outage Reliability, FY 2019 to FY 2022
Outage Reliability FY18 FY19 FY20 FY21 FY22
4
5
6
Figure 5: Electric Outage Reliability, FY 2023 to FY 2024
FY 2023
Q1 Q2 Q3 Q4 Annual
4
5
6
FY 2024Outage Reliability Q1 Q2 Q3 Q4 Annual
4
5
6
*Note: Annual data only reflects Q2-Q4 2024 results. Q1 data is currently not available.
1.5 Financial Health
4 System Average Interruption Duration Index (SAIDI) - Measure of the total duration of an interruption for the average customer during a given time
frame. SAIDI = (Sum of Customer Minutes Interrupted) / (Total Customers Served)
5 System Average Interruption Frequency Index (SAIFI) - the average number of times a customer will experience an interruption during a given time
frame. SAIFI = (Total Customers Interrupted) / (Total Customers Served)
6 Customer Average Interruption Duration Index (CAIDI) - the average time to restore service. CAIDI = (Sum of Customer Minutes Interrupted) / (Total
Customers Interrupted)
U P P S
3 6 1 4
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Staff Report: 2311-2209 – Page 12 of 62
1.5.1 Sales Forecasts vs. Actuals
Since the beginning of FY 2024, actual electric sales volumes exceeded forecasts by 4.3%. The increase in sales volume is
attributable to new data center load, in addition to and increasing sales to other medium commercial customers
recovering from the pandemic.
Figure 6: Electric Sales Volume (kWh), up to FY 2024-Q4
Figure 7: Electric Sales Revenue ($), up to FY 2024-Q4
The Electric Operations Reserves ended Q4 FY 2024 at $32.3 million, below the target of $45 million, but above the
minimum guideline of $32 million. At the end of FY 2024, $17 million of funds were transferred into the hydro stabilization
reserve, which will enhance the utility's ability to manage supply cost volatility in the future and prevent drastic rate
changes as experienced after the Covid-19 pandemic and the drought from 2020-2022.
Staff Report: 2311-2209 – Page 13 of 62
2 Gas Utility
The City’s gas utility serves all residential and non-residential gas demand in Palo Alto. The City maintains and operates a
system of low-pressure gas lines for delivering gas but does not operate any transmission lines. Costs for the gas utility
are split approximately two thirds for the operation, maintenance, and capital improvement and one third for the cost of
the gas commodity, PG&E gas transmission, compliance with the State’s Cap and Trade Program and the City’s Carbon
Neutral Gas Program.
2.1 Gas Supply and Transmission
After experiencing a notable price spike during winter 2022-2023, natural gas prices have seen a significant decline,
returning to more typical ranges. This shift can be attributed to several factors, including milder temperatures and above
average gas storage levels nationwide. The combination of these factors has put downward pressure on natural gas prices,
and we do not expect an extreme price spike to occur in the near future. The chart below shows Palo Alto’s gas commodity
rates from July 2021 to June 2024.
Figure 8: Palo Alto Gas Commodity Rates
Long Term Gas Hedging Policy
At its August 19, 2024 meeting, Council adopted a new gas hedging policy effective November 2024 as an alternative to
the capped-price premium which was adopted by Council last year and ends at the end of October 2024. This new policy
includes a tony hinchclife
Staff Report: 2311-2209 – Page 14 of 62
5.5 cents per therm adder in the gas commodity charge for a period of 3 years, aiming to accumulate about $4.5M in a
reserve to mitigate potential short-term price spikes, such as the one experienced in January 2023. This policy also includes
lowering the maximum gas commodity charge from $4 per therm to $3 per therm after 3 years after the reserve is built
up. Based on Council’s adoption of the new policy, the 5.5 cents per therm adder will be included in the Commodity Charge
beginning November 2024.
2.1.1 Actual and Forecasted Supply Costs
Figure 9: Gas Supply Costs ($), Actual vs Budget, up to FY2024-Q4
2.1.2
2.1.32.1.2 Carbon Neutral Gas Program
7 maintaining the Carbon Neutral Natural Gas Plan to achieve carbon
neutrality for the gas supply portfolio using high-quality carbon offsets with a cost cap of $19 per ton CO2e.
Figure 9: Offset Portfolio Composition
7 Resolution #9930 https://www.cityofpaloalto.org/files/assets/public/v/1/city-clerk/resolutions/resolutions-1909-to-present/2020/reso-9930.pdf
Staff Report: 2311-2209 – Page 15 of 62
The following table provides a description of the projects.
Figure 10: Offset Project Descriptions
2.1.42.1.3 Gas Transmission Line Capacity Valuation
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Staff Report: 2311-2209 – Page 16 of 62
2.1.52.1.4 Gas Prepay Valuation
On September 15, 2014, Council adopted Resolution #94518, authorizing the City’s participation in a natural gas purchase
from Municipal Gas Acquisition and Supply Corporation (MuniGas) for the City’s entire retail gas load for a period of at
least 10 years. The MuniGas transaction includes a mechanism for municipal utilities to utilize their tax-exempt status to
achieve a discount on the market price of gas. The program reduced gas commodity costs by about $805K in FY 2024.
2.2 Capital Improvement Plan Status
The following capital projects are currently in progress:
GS-14003 – GMR 24B (Gas Main Replacement 24B)
•The GMR 24B project construction has started. Gas pipelines on University from Webster to Hwy 101 and
surrounding streets, as well as Geng Rd and Town & Country Village, are scheduled to be replaced. Construction
is completed on University from Chaucer Street to Woodland Avenue, Geng Rd area, and Town & Country Village.
Construction is anticipated to be completed in March 2025. The project was not selected to receive a federal grant
award, although the project was “Highly Recommended” and funding was provided to other “Highly
Recommended” projects. The funding source will be the remaining available budget under GS-14003.
GS-15000 – GMR 25 (Gas Main Replacement 25)
•The GMR 25 design drawings are being finalized and will include the replacement of pipes on Ross Road from
Colorado Avenue to East Meadow Drive and surrounding streets, as well as North and Southampton Drive and
surrounding streets, and Walter Hays Drive and surrounding streets. The project is expected to replace
approximately 26,000 linear feet of gas mains as full federal funding was approved. Construction is anticipated to
begin in FY26 due to federal grant funding requirements.
2.3 Rate and Bill Comparisons
The figure below compares the gas bills for residential customers in Palo Alto and PG&E in FY 2024, at various usage levels.
The PG&E bills are based on their Climate Zone X, which includes Menlo Park, Redwood City, Mountain View, Los Altos
and Santa Clara. For the summer season, Palo Alto's median residential bill is estimated to be about 77% more than that
of PG&E. Conversely, during the winter, Palo Alto's median bill drops to about 21% less than PG&E's. On an annual basis,
during FY 2024, the median residential bill for Palo Alto residents was around 1% less than PG&E customers.
8 Resolution #9451 https://www.cityofpaloalto.org/files/assets/public/v/1/city-clerk/resolutions/reso-9451.pdf
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Figure 11: Residential Natural Gas Bill Comparison ($/month)
Season Usage (Therms)Palo Alto PG&E Zone X*% Difference
10 $ 28.21 $ 7.15 294%
(Median) 17 38.14 21.55 77%
30 66.78 52.13 28% Summer
45 103.97 87.41 19%
30 $ 62.98 $ 71.23 (12%)
(Median) 51 97.26 122.77 (21%)
80 164.94 201.98 (18%)Winter
150 353.40 397.56 (11%)
Annual (Median) 31 $ 62.77 $ 63.73 (1%)
*PG&E’s bill estimates include an $85 annual Climate Credit
2.4 Reliability
The City of Palo Alto tracks all gas service interruptions. A summary chart of these interruptions can be found below. Gas
service interruptions are usually due to repairs of broken or damaged gas services and mains. This kind of damage is often
caused by excavation by outside parties digging in the City.
FY 2023 FY 2024
Gas Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Number of Breaks 9 4 3 7 5 1 5 6
Total Minutes 643 330 240 1560 540 120 570 270
Customers Affected 20 5 7 60 51 1 41 14
2.5 Financial Health
Below is a summary of the financial position for the gas utility.
2.5.1 Sales Forecasts vs. Actuals
Actual gas sales volumes in FY 2024 were about 8.1% lower than forecasted, while actual sales revenues were about 12.9%
lower than budgeted in the FY 2024 Financial Plan. After reaching historic highs in 2023, natural gas benchmark prices
sharply declined this year, nearing historic lows. This decline was driven by increased natural gas production, reduced
consumption, and higher inventory levels. Additionally, the unusually mild winter across much of the U.S., which saw the
warmest winter on record according to NOAA, further contributed to the downward pressure on prices.
Staff Report: 2311-2209 – Page 18 of 62
Figure 13: Gas Sales Volume (Therms), up to FY2024-Q4
2.5.2 Financial Position
The FY 2024 ending Operations Reserve balance for the Gas Utility was $4.2 million, below the minimum of $10 million.
Based on the proposed FY 2025 Financial Plan, the Operations Reserve balance dropped below the minimum guideline
level at the end of FY 2024, due to one-time expense items deferred from FY 2023 to FY 2024, such as carbon offset
purchases and Cap and Trade revenue transfer, and due to the effects on reserves of the unprecedented gas price spike
of FY 2023.The FY 2024 ending Operations Reserve balance for the Gas Utility was $4.2 million, which is below the
minimum threshold of $10 million. According to the proposed FY 2025 Financial Plan, the Operations Reserve balance fell
below the minimum guideline at the end of FY 2024 due to one-time expense items deferred from FY 2023 to FY 2024,
such as carbon offset purchases and Cap and Trade revenue transfers, as well as the impact on reserves from the
unprecedented gas price spike in FY 2023. In June 2024, Council approved the FY 2025 Gas Utility Financial Plan9 that
included a 12.5% increase in gas rates to gradually restore reserves to within guideline levels and cover rising costs. Sales
9 Staff Report 2404-2842, Attachment C, Exhibit 1: https://www.cityofpaloalto.org/files/assets/public/v/2/agendas-minutes-reports/reports/city-
manager-reports-cmrs/attachments/2024-rates/gas-financial-plan-fy25.pdf
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revenues in FY 2024 were lower by approximately 12.9% or $7.5 million from last year's projections, attributed to sales
volume reductions of 8.1% lower than last year’s projection as well as lower commodity prices.
Staff Report: 2311-2209 – Page 20 of 62
3 Water Utility
The Water Utility serves water to virtually all Palo Alto residential and non-residential customers. All potable water in the
City is from the San Francisco Public Utilities Commission (SFPUC) Hetch Hetchy Water System. This system delivers high
quality water from the Sierra Nevada and uses no pumping to deliver water to the City. Palo Alto uses a small amount of
recycled water for irrigation of the Municipal Golf Course and a few other sites near the Regional Water Quality Control
Plant. The City also maintains a system of reservoirs and wells that enable Palo Alto to serve water during an interruption
of the Hetch Hetchy system. Costs for the Water Utility are split approximately half for the operation, maintenance and
periodic replacement of Palo Alto’s water system and half for the costs of the water purchased.
3.1 Water Supply and Transmission
On November 10, 2022, Governor Newsom’s senior Water-Policy Officials, the San Francisco Public Utilities Commission
(SFPUC), and the Modesto and Turlock Irrigation Districts reached agreement on a Memorandum of Understanding for
proposed Voluntary Agreements to provide greater water flows and increased habitat for the Tuolumne River. The State
Board has initiated its evaluation of the proposed Tuolumne River Voluntary Agreement as an amendment to the adopted
Bay Delta Plan. The State Board is completing CEQA review of the Tuolumne River Voluntary Agreement. The SWRCB’s
schedule indicates development of the draft Supplemental Scientific Basis Report for the Tuolumne River Voluntary
Agreement in Fall 2024 and response to comments on the draft Scientific Basis Report, including peer review comments,
by late 2024.
Concurrently, the State Board is moving forward with implementation of the Adopted Phase I Bay Delta Plan including
preparing the draft Environmental Impact Report and regulation to implement the updates the State Board adopted in
2018. The Court in the State Board Cases on the litigation on the Adopted Phase I Plan ruled in the State Water Board’s
favor on all 116 claims by the 12 petitioners.
In August 2018, Palo Alto’s City Council voted to support the SWRCB’s Bay-Delta Plan to have 40 percent of natural water
in the Central Valley to enter the Delta from February to June and associated Southern Delta salinity objectives; and send
a letter expressing this policy position to the Bay Area Water Supply and Conservation Agency (BAWSCA), California State
Water Resources Control Board, SFPUC, and other stakeholders.
In order to plan for future reductions to existing water supply from climate change and regulatory uncertainties, the SFPUC
undertook the Alternative Water Supply Plan. This plan is a roadmap to guide water supply planning to help address
projected supply shortfalls through 2045. The SFPUC Commission approved the plan in February 2024 and expects to
update the plan in Fiscal Year 2027.
BAWSCA is a special district created by legislative action (AB 2058) in 2002 to protect the water supply and conservation
interests of wholesale water customers, including Palo Alto. BAWSCA’s goal is to ensure a reliable supply of high-quality
water at a fair price. BAWSCA’s Board approved the contracting and funding to initiate the development of BAWSCA’s
Staff Report: 2311-2209 – Page 21 of 62
Long-Term Reliable Water Supply Strategy 2050. This planning document will enable BAWSCA to identify the highest
priority water supply management activities to achieve its goal.
Figure 15: Regional Water System Storage
Figure 16: SFPUC Water Deliveries
Palo Alto staff is continuing to focus on education and outreach and providing resources to eliminate water waste and
achieve efficient water use. Palo Alto continued work on the WaterSmart Customer Portal and Residential Home Water
Report Program and also continued to work with Waterfluence software to target water efficiency for large landscape
customers. Staff continues to promote water conservation rebate programs and resources through online outreach, bill
inserts, and newsletters.
Palo Alto continued its work on the One Water Plan with the goal of Council adoption of a One Water supply plan which
will identify alternatives for meeting the community’s water needs in the future. In June 2022 the City Council approved
a contract for this work with Carollo Engineers, Inc. In September and December 2022, staff conducted stakeholder
engagement meetings with community members and City staff focusing on One Water community needs and priorities
and water supply and conservation options and draft evaluation criteria. The UAC received a status update in February
2023 (Staff Report #1497410) and initial results in June 2024 (Staff Report #2404-296811). Staff plans to return to the UAC
and go to City Council at the beginning of 2025 to provide the final One Water Plan. The One Water Plan will be adaptable
and staff can use the One Water excel-based tool to evaluate and prioritize water supply and conservation portfolios now
and as future uncertainties are resolved.
3.2 Capital Improvement Plan Status
The following capital projects are currently in progress:
WS-07000 – California Avenue and Page Mill Road Turnouts
•The California Avenue and Page Mill Turnouts project was completed in June 2024. The project upgraded the
California Avenue Turnout and added seismic restraints to the pressure reducing valve at Page Mill Road Turnout.
10 Staff Report #14974 https://recordsportal.paloalto.gov/WebLink/DocView.aspx?id=61414&dbid=0&repo=PaloAlto
11 Staff Report #2404-2968 https://recordsportal.paloalto.gov/WebLink/DocView.aspx?id=61720&dbid=0&repo=PaloAlto
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WS-15002 – WMR 29 (Water Main Replacement 29)
•The WMR 29 project will replace approximately 8,000 linear feet of water main on Park Boulevard from Mariposa
Avenue to Lambert Avenue, on College Avenue from Park Boulevard to El Camino Real, and on Birch Street from
College Avenue to Sherman Avenue. The project started in November 2023 and was substantially completed in
August 2024.
•The WMR 30 project is currently in the design phase and will replace approximately 7,000 linear feet of water main
on Towle Way, on Stanford Avenue and Lambert Avenue from El Camino Real to Park Boulevard, and on Christine
Drive. The anticipated project construction start date is in August 2025.
3.3 Rate and Bill Comparisons
The figure below shows the water bills for single-family residential customers compared to what they would be under
surrounding communities’ rate schedules as of August 2024. CPAU is among the highest monthly bills of the group. Palo
Alto’s water bills at 9 CCF per month are 25% higher than the comparison group average.
Figure 17: Residential Water Bill Comparison ($/month)
4 $58.26 $51.78 $64.16 $52.06 $35.60 $45.17
(Winter median) 7 $88.21 $68.13 $86.27 $68.13 $62.30 $69.59
(Annual median) 9 $113.47 $88.72 $112.31 $88.72 $80.10 $85.87
(Summer median) 14 $176.62 $140.21 $180.22 $140.21 $124.60 $135.87
25 $315.55 $263.76 $340.49 $287.41 $222.50 $245.87
* Indicates city received 100% of water supply from Hetch Hetchy
3.4 Reliability
The City of Palo Alto tracks all water service interruptions. A summary chart of these interruptions can be found below.
Water service interruptions are usually due to repairs of broken or damaged water services and mains.
Figure 18: Water Service Interruptions, FY 2023 to FY 2024
Number of Breaks 10 12 6 2 8 9 8 6
Combined Minutes 1007 1050 690 100 1086 880 1230 475
Customers Affected 46 249 63 19 147 96 164 75
3.5 Financial Health
Below is a summary of the financial position for the water utility.
3.5.1 Sales Forecasts vs. Actuals
Actual water sales volumes in FY 2024 were about 2.0% lower than forecasted, and actual water sales revenues were
about 4.6% lower than budgeted in the FY 2024 Financial Plan, which aligns with the anticipated recovery in water usage
following periods of drought.
Staff Report: 2311-2209 – Page 24 of 62
Figure 19: Water Sales Volume (CCF), up to FY 2024-Q4
3.5.2 Financial Position
At the end of FY 2023, the Water Operations Reserve was stood at $7.9 million, which is within the guideline range, but
below the target of $10.8 million. In June 2024, Council approved the FY 2025 Water Utility Financial Plan,12 including
which includes a transfer of up to $2.07 million in FY 2024 from the Rate Stabilization Reserve to the Operations Reserve
in FY 2024, as well as a 9.5% rate increase to pay for rising costs and cover offset the decreased sales revenues. Based
upon on the proposed FY 2025 Financial Plan, the Operations Reserve is projected to end FY 2024 at $9.2 million. The FY
2025 Financial Plan forecasts additional water rate increases will be needed over the next five years to maintain the
Operations Reserve within the guideline range during each of the next 5 years. Final FY 2024 reserve balances will not be
available until in Fall 2024.
12 Staff Report 2404-2842, Attachment B, Exhibit 1: https://www.cityofpaloalto.org/files/assets/public/v/1/agendas-minutes-reports/reports/city-
manager-reports-cmrs/attachments/2024-rates/water-financial-plan-fy25.pdf
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4 Wastewater Utility
The Wastewater Utility includes the system of sewer pipes that collect and transport wastewater to the Regional Water
Quality Control Plant (RWQCP) operated by the City of Palo Alto under a partnership agreement with several surrounding
communities, as well as Palo Alto’s share of the cost of operating the RWQCP. The RWQCP provides treatment and disposal
of wastewater for Palo Alto. Costs for the Wastewater Utility are split approximately half for the operation, maintenance
and periodic replacement of Palo Alto’s sewer collection system and half for the costs of wastewater treatment at the
RWQCP.
4.1 Wastewater Treatment Updates and Capital Planning Status
The RWQCP is operated by Palo Alto’s Public Works Department and provides wastewater treatment to Palo Alto,
Mountain View, Stanford, Los Altos, East Palo Alto and Los Altos Hills. The Palo Alto Wastewater Collection Utility pays its
share (approximately 32% projected in FY 2025) of the costs for wastewater treatment and disposal. Capital costs for
wastewater treatment are a major driver for cost increases for the Wastewater Treatment Utility and by extension for the
Wastewater Collection Utility. The RWQCP is facing the need for major upgrades in coming years, due to aging equipment
and changing environmental regulations. Rehabilitation and replacement of plant equipment that has been in use for over
40 years is necessary to ensure the City can continue to conduct wastewater treatment operations safely and in
compliance with regulatory requirements for the discharge of treated wastewater 24 hours a day.
4.1.1 Treatment Cost Trends
RWQCP staff project treatment costs paid for by Palo Alto’s Wastewater utility to increase by approximately 5.6% annually
on average from FY 2025 through FY 2034. A key driver of the increases are capital projects, parts, materials and debt. The
treatment capital expenses, including debt service costs, are increasing at an average of about 10% per year from FY 2025
through FY 2034 to keep up with ongoing replacement of aging equipment and complete major upgrades. Larger increases
to capital expenses are expected to begin in FY 2029 in the form of new debt service for major projects to implement the
Plant’s capital program. The figure below shows Palo Alto’s share of each component of estimated treatment costs. Major
upcoming capital projects and estimated years for debt service or other capital cost payments to begin are reflected in
the “Planned Debt Service” bar in the figure below and include:
•Joint Interceptor Sewer Rehabilitation (FY 2024)
•Building Purchase (FY 2025)
•Primary Sedimentation Tank Rehabilitation and Equipment Room Electrical Upgrade (FY 2025)
•Outfall Line Construction (FY 2027)
•Headworks Facility (FY 2029)
•Secondary Treatment Upgrades (FY 2030)
Figure 21: Palo Alto’s Share of Estimated Wastewater Treatment Expenses (Projection and Planned CIP)
The figure above shows the ongoing annual CIP reinvestment (“Recurring/Minor CIP” and “Existing Debt Service”), one
pay-as-you-go project, the Joint Intercepting Sewer in FY 2025, and treatment operations costs. Operations costs make
up the majority of the treatment costs but are not growing as quickly as the planned debt service. Additional factors not
yet included in the budget estimate could increase costs further such as debt expense for cash flow issues associated with
slow State Revolving Fund loan reimbursement, and property expenses for an acquired property. Factors that are
contributing to cost increases for treatment operations are rising salary and benefits costs, sludge hauling services unit
price increases, commodity increases to operate the facility, and Palo Alto’s cost share increased in FY 23 from 32% to
35% based on updated data. RWQCP is updating the Long Range Facilities Plan which includes cost of service analysis and
capital project cost allocation methodology.
In June, the Council approved a Cost-Sharing Agreement with Santa Clara Valley Water District for Guiding Principle 5
grant program funding for future projects at the RWQCP.13 This grant program awards funds to communities like Palo Alto
where property taxpayers pay State Water Project property taxes but receive on average 85% of their water supply from
sources other than Valley Water managed supplies. Guiding Principle 5 awards grants to each community for certain
purposes including wastewater treatment environmental upgrades. In FY 2025, staff will incorporate the estimated grant
funding of $11.8 million into the treatment costs expected for Palo Alto. This funding will be applied to Palo Alto’s share
of approved RWQCP projects which will directly benefit Palo Alto customers. Four of the upcoming projects are eligible
for Guiding Principal 5 program funding:
•Outfall Line Construction
•Headworks Facility Replacement
•12kV Electrical Power Distribution Loop Improvements
•Joint Intercepting Sewer Rehabilitationn
•
4.1.2 Regional Water Quality Control Plant Capital Planning Status
The Long-Range Facilities Plan, completed in 2012, guides the capital plans for the RWQCP. The RWQCP is currently
soliciting consultant proposals to begin an update to the Long-Range Facilities Plan in 2024. The findings from the Long-
13 Staff Report 2404-2877, June 3, 2024 https://recordsportal.paloalto.gov/WebLink/DocView.aspx?id=82864&dbid=0&repo=PaloAlto
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Range Facilities Plan update will direct additional/future CIP. The RWQCP’s current capital work in-progress includes an
estimated $418 – $515 million in projects. The following table summarizes these ongoing projects and provides their status
and costs.
Figure 22: Current RWQCP Capital Work In-Progress (based on March 2024 Partners Meeting)
Project Status Planned Expense
(million $)
Potential Expense
(million $)
Primary Sedimentation Tanks
Rehabilitation and Equipment Room
Electrical Upgrade
12kV Electrical Loop Upgrades
New Outfall Pipeline
Secondary Treatment Upgrades
Advanced Water Purification System
Headworks Facility Replacement
Joint Interceptor Sewer Rehabilitation
Staff Buildings
Long Range Facility Plan Update
Valley Water Purified Drinking Water
Regional Plant at Former Los Altos
Treatment Plant
Staff Report: 2311-2209 – Page 29 of 62
Reclamation’s WaterSMART program, which allocates Title XVI Program funding under the Water Infrastructure
Improvements for the Nation (WIIN) Act, and the City of Mountain View will pay for the remainder of the capital cost.
4.2 Collection System Capital Improvement Plan Status
WC-19001 - SSR 31 (Sanitary Sewer Replacement 31)
•The SSR 31 project was completed in May 2024, earlier than anticipated, to allow Caltrans to start their street
improvement/paving project on El Camino Real within Palo Alto. SSR 31 replaced approximately 11,000 linear feet
of wastewater main, sewer laterals, and manholes on El Camino Real and Page Mill Road.
WC-15002 – Sewer Master Plan Study
•The Master Plan Study will evaluate the City’s existing wastewater collection system, flows, and flow patterns to
determine the adequacy of the system’s hydraulic capacity to meet current and anticipated future wastewater flow
demands. The project kicked off in December 2023 and is anticipated to be completed in March 2025.
WC-20000 - SSR 32 (Sanitary Sewer Replacement 32)
•The WMR 32 project is currently in the design phase and will replace sewer mains, laterals, and manholes on
Middlefield Road and Webster Street between Seale and Oregon Ave. The anticipated project construction start
date is in FY’26.
4.3 Rate and Bill Comparisons
Figure 23: Residential Wastewater Bill Comparison ($/month)
Palo Alto Menlo Park Redwood City Mountain View Los Altos Santa Clara Hayward
4.4 Financial Health
4.4.1 Sales Forecasts vs. Actuals
Staff Report: 2311-2209 – Page 30 of 62
Figure 24: Wastewater Sales Revenue ($), up to FY 2024-Q4
4.4.2 Financial Position
The Wastewater Collection Operations Reserve dropped below guideline range and below zero to negative $0.7 million at
the end of FY 2023. There were several reasons for this including costs higher than forecasted and revenues lower than
forecasted. Additionally, Palo Alto began Sanitary Sewer Replacement project 31 with an increased budget and earlier
start date in FY 2023 instead of FY 2024. Completing this sewer replacement earlier than previously anticipated was
necessary in order to coordinate with Caltrans to limit or avoid digging into newly-paved street on El Camino Real. In June
2024, Council approved the FY 2025 Wastewater Collection Financial Plan14 that included a 15% rate increase in FY 2025
and a short-term loan up to $3 million from the Fiber Optics Fund Reserve for FY 2024 to cover the potential shortfall of
cash in the Wastewater Collection Utility. The Wastewater Collection utility will repay any such loan in FY 2026 (or sooner)
at a rate equal to the City’s portfolio rate plus 0.25%. Staff estimates with the proposed revenues and expense estimates
the Wastewater Collection Utility will be able to cover rising costs, restore the Operations Reserve to within the guideline
range by the end of FY 2026, and accelerate the rate of main replacement by FY 2028. Final FY 2024 reserve balances will
not be available until Fall 2024.
14 Staff Report 2404-2842, Attachment A, Exhibit 1: https://www.cityofpaloalto.org/files/assets/public/v/2/agendas-
minutes-reports/reports/city-manager-reports-cmrs/attachments/2024-rates/wastewater-financial-plan-fy25.pdf
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5 Fiber Utility
The City offers a "Dark" fiber service providing a fiber connection from Palo Alto businesses to the downtown Internet
Exchange. At the exchange, businesses select an internet service provider (ISP) for bandwidth and connection speed.
5.1 Fiber Utility Strategic Planning
Below are highlights and status updates of the Fiber-to-the-Premises (FTTP) Project:
•Staff is reviewing the final design of the fiber hut and backup generator. The fiber hut is a pre-cast concrete building
(11’ x 20’) which will house the networking equipment including electrical system, cable entry, HVAC, lighting, fire
suppression system, alarms, and racks. After the design is finalized, it will take approximately 90-120 days for
construction and delivery.
•Electric pole-make ready work such as pole replacements and hanging messenger wire is in progress and on track to
be completed by Q1-2025. Fiber cable may be strung and lashed after electric pole-make ready work is completed.
•City is evaluating the RFP responses for the operating support system and business support system (OSS/BSS)
software. OSS supports infrastructure and network management by monitoring operations and provisioning service.
BSS supports customer-facing activities such as billing, scheduling, and customer experience.
•CPAU has filled the role of Outside Plant Manager to oversee planning, construction, and inspection of the FTTP
infrastructure and new fiber backbones. This position will oversee field technicians and coordinate design changes,
construction, and installation.
5.2 Capital Improvement Plan Status
The following capital projects are currently in progress:
•FO-16000 – Fiber Optic System Rebuild
o The new fiber backbone will be built in segments in alignment with the phased FTTP. CPAU does not have
resources to construct an entire new fiber backbone along with FTTP. In addition to aligning with FTTP,
CPAU will install new aerial ducts or substructure (conduit and boxes) and fiber backbone cables to
increase capacity in areas that are at or near capacity to meet customer connection requests.
•FO-24000 – Fiber-to-the-Premises
o The pilot area has been identified, which is bounded by Embarcadero Road, Louis Road, Colorado Avenue,
Greer Road and West Bayshore Road, to determine the best approach at integrating FTTP and grid
modernization. Some criteria that will be used to analyze alignment include impact costs, reductions to
community disruptions, internal staffing, and project timelines. Construction of the FTTP pilot is scheduled
to be completed by March 2025.
Staff Report: 2311-2209 – Page 32 of 62
5.3 Reliability
There were no unplanned fiber outages or events to report in Q4 of FY 2024.
Below is a summary of the financial position for the fiber utility.
5.4.1 Fiber Sales
Actual dark fiber licensing sales in FY 2024 were $3.8M and $0.2M or 5% above the revenue forecast. Fiber expenses
were $4.7M and $0.3M or 6% below forecast due to vacancy savings. The Fiber Fund added four new positions in FY 2024
to support FTTP. CPAU recently filled the Outside Plant Manager role and is recruiting for the Product Services and
Marketing Manager. The Assistant Director for Fiber and Senior Network Architect positions are currently on hold as staff
and consultants are collectively performing the work that staff in those roles would perform at this time. As the pilot
progresses, the City will reassess whether these positions will need to be filled in FY 2025 or FY 2026.
5.4.2 Financial Position
The ending FY 2024 Fiber Optic Utility Rate Stabilization Reserve is $8 million and an additional $25.5 million of CIP
commitments and reappropriations. In addition, the Fiber Fund loaned the Wastewater Collection Fund $3 million in FY
2024. The Wastewater Collection utility will repay the short-term loan in FY 2026 (or sooner) at a rate equal to the City’s
portfolio rate plus 0.25%.
Staff Report: 2311-2209 – Page 33 of 62
6 Customer Programs (Efficiency and Sustainability)
The City’s Utilities Department maintains a number of programs to help customers save money, use energy and water
efficiently, and reduce carbon emissions. These programs are funded through a variety of funding sources, some of which
are summarized below.
6.1 Customer Programs Updates
Below is a summary of the City’s energy and water efficiency programs, as well as programs to encourage building
electrification and adoption of electric vehicles. Summary descriptions of Utilities Customer Program are provided in
Appendix D.
6.1.1 Energy and Water Efficiency
Water Efficiency Workshops
The City, in partnership with the Bay Area Water Supply and Conservation Agency (BAWSCA), offers landscape education
classes throughout the year to introduce residents to the concepts of water-efficient and sustainable landscaping.
Workshop topics include rain gardens, how to water trees, steps to take to convert lawns into drought-tolerant
landscapes, and available rebates. Workshops are held in the Spring and Fall every year. During FY 2024, the City held 7
water efficiency workshops on turf conversion, native plants, and laundry graywater systems.
Please visit the BAWSCA website for a complete list of available classes and events at:
https://bawsca.org/conserve/programs/classes. All past Landscape Class Videos are available online at:
https://bawsca.org/conserve/landscaping/videos/. For updates on future events and workshops, please visit
http://www.cityofpaloalto.org/workshops
Residential Energy Efficiency Programs
The Home Efficiency Genie program continues to provide residents with professional advice and information to improve
their home’s efficiency and comfort and lower their energy and water usage and evaluate the need for electric panel
upgrade to accommodate future electrification projects. In addition to phone and email-based advising service, the Home
Efficiency Genie program also offers both in-home and virtual efficiency assessments of energy equipment and the
building envelope (attic, windows, walls), and evaluation of the electric panel to plan for future electrification upgrades.
During FY 2024, the Genie performed 44 comprehensive in-home assessments, and performed 6 virtual assessments.
CPAU’s Residential Energy Assistance Program (REAP) for income-qualified customers continues to reach our most
vulnerable population offering energy and water efficiency improvements at no cost to the customer. In FY 2024, 30
customers participated in the REAP program. Additionally, 7 REAP customers received a heat pump water heater at no
cost, and 27 additional REAP customers completed a site assessment and are awaiting a HPWH installation.
Staff Report: 2311-2209 – Page 34 of 62
Water Conservation Programs for Residents and Businesses
CPAU partners with Valley Water to offer a robust portfolio of water conservation programs and rebates15 for residents
and businesses. On June 25, 2023, the City entered into a new cost-sharing agreement with Valley Water which includes
$1.4M over 7 years to help the City deploy Advanced Water Metering Infrastructure and home water conservation reports.
FY 2024 rebate data is not yet available; the City receives program results once a year from Valley Water in October.
The WaterSmart customer portal, an online water management tool, launched in November 2022. Through this program,
home water reports are sent to around 11,000 single-family customers on a monthly basis. A control group of around
4,000 single-family customers currently do not get the reports. The average open rate of home water report emails is 74%.
As of August 6, 2024, 24% of all single-family customers have accessed the portal which provides information about their
water consumption and personalized water conservation recommendations. Preliminary results from the efficiency study
show that sending home water reports results in water-savings of 2.1%. To date, the City has saved 13.2 MG through the
WaterSmart program. As water supply conditions have improved, CPAU is focusing outreach on water conservation being
a way of life and reducing water waste and continues to encourage participation in rebates and resources.
For the eighth year, the City of Palo Alto is an outreach partner for Bay Area SunShares, a solar and battery storage group-
buy program administered by Business Council on Climate Change (BC3). Palo Alto’s participation as an outreach partner
helps CPAU customers receive information and discounted prices from two prescreened contractors – SolarUnion and
Solar Technologies. As of January 15th 2024, the program is closed for registration. The Bay Area SunShares program will
launch for the next cycle in the Fall of 2024, and CPAU is participating in the evaluation committee for the first time and
will participate as an outreach partner for the ninth time.
As of June 30, 2024, Veolia Sustainable Buildings West Inc., (formally Enovity Inc.) has 22 managed projects for the prior
12-month rolling period (July 2023 – June 2024). During this period, 3 projects were completed. Total savings were
526,055 kWh and 64,000 therms. Additionally, 10 projects are currently in the installation phase. When completed, these
projects are forecasted to realize savings of 887,710 kWh and 36,407 therms. There are nine projects currently in the
assessment stage, expected to identify potential energy conservation measures and generate additional savings. Since
August 2021, the CIEEP program has saved 2,256,891 kWh deriving from completed 14 projects. Staff expects this program
to continue generating energy efficiency and reductions in greenhouse gas emissions.
Key Account Representatives continue to proactively engage customers through email correspondence, phone calls, site
visits, tabling events, and face-to-face meetings. In fiscal year 2024, the Utility Program Services (UPS) Commercial team
hosted two Facility Manager Meetings, with a combination of webinars and in-person meetings. Both events garnered
significant interest with 39 attendees for the November 2023 online webinar and 28 in-person attendees for the April
2024 event. The meetings served as a professional platform to promote CPAU’s commercial energy efficiency programs,
while educating the audiences on a variety of topics, including utility rates, water conservation legislation, AMI meters,
dark fiber services, and electrification case studies. These informational meetings served as a connector to industry leaders
and promotion of the City’s commercial resources, business rebates, and pilot incentive programs.
In addition, the Commercial Team facilitated customer outreach by tabling at sites like VMware, Hewlett Packard, SAP,
and Stanford Research Park. These opportunities provide a platform for staff to engage with sustainability advocates and
showcase the City’s energy efficiency and electrification programs. They also encourage additional interaction with
15 Rebates https://valleywater.dropletportal.com/overview/
Staff Report: 2311-2209 – Page 35 of 62
customers, which aids in the development of potential partnerships. Staff continues to employ account support strategies
to enable corporate sustainability initiatives.
Figure 25: Energy Efficiency Program Energy Savings – Completed FY 2024 in Yellow
Staff Report: 2311-2209 – Page 36 of 62
Figure 27: Energy Efficiency Program Energy Savings – Awaiting Assessments or Install
Business Energy Advisor
This last year was the most successful since the inception of the Business Energy Advisor (BEA) program for small to
medium sized businesses, which was launched in June 2022. Over the last 12 months, 49 site assessments have been
completed. Staff have tried a variety of new outreach and marketing strategies to drive participation, which have proven
to be successful. From January through May 2024, staff ran a limited-time boosted incentive campaign and increased
efficiency rebates by 20% for customers who complete projects by the end of August 2024. Spurred by this initiative, we
more than doubled the number of completed site assessments (36) in the first half of 2024, compared to the 13
assessments completed in the second half of 2023. The number of installations also increased significantly from years
past. Outlined in Figure 28 are the efficiency projects that have been completed through this program and the total rebate
amounts we have paid customers.
Customer Project Type Rebate Amount kWh Savings
Unitarian Universalist
Church of Palo Alto
LED Lighting $568.78 10,342
MidPen Community Media
Center
LED Lighting $65 2,085
The Sobrato Foundation LED Lighting $43.20 654
Unitarian Universalist
Church of Palo Alto
LED Lighting $481.01 9,714
Unitarian Universalist
Church of Palo Alto
Fridge/Freezer
Replacement
$281 355
Calmar Laser LED Lighting $319.29 15,983
Dinah’s Garden Hotel HVAC Replacement $26,154 26,418
United Methodist Church LED Lighting 249.43 9,028
Staff Report: 2311-2209 – Page 37 of 62
Total N/A $28,161.71 74,579
Staff has continued aggressive marketing efforts including bill inserts, direct emails, e-newsletters, call campaigns, flyers,
and in-person outreach. Over the past year, the BEA team has consistently engaged in in-person outreach, visiting
businesses a minimum of one-day per week. Their dedication and effort have resulted in visiting almost 300 businesses
between January through June 2024. Additionally, the team experimented with social media ads through Meta platforms,
which resulted in 1,118 clicks on our program webpage. However, we concluded that most customers learned of our
programs through other channels rather than social media ads. Moving forward, we will continue to prioritize outreach
efforts, especially through in-person visits, webinars, direct email and call campaigns.
In late April, staff hosted its first Commercial Energy Efficiency Webinar attracting 21 participants. The majority of
customers represented small to medium businesses in Palo Alto, but staff also saw attendance from some of our Key
Accounts, including two large property management companies. The presentations, led by industry experts and engineers
from CLEAResult, discussed cutting-edge strategies for making commercial buildings more energy-efficient, particularly
through HVAC and lighting advancements. In July 2024, staff hosted the second commercial webinar focusing on HVAC
efficiency, electrification, and heat pumps. This webinar was well attended with 25 participants. We have received great
feedback from the community regarding commercial webinars and plan to continue offering this service to our businesses
throughout the next year to educate them on energy efficiency and electrification.
6.1.2 Building Electrification
Full-Service Heat Pump Water Heater Program
CPAU launched the Full-Service Heat Pump Water Heater (HPWH) Program in March 2023 that provides an end-to-end
advisory and installation service to homeowners to switch from a gas water heater to a HPWH at a discounted price. The
program also offers an on-bill financing option with 0% interest to lower the upfront cost to customers. The Home
Efficiency Genie team at CLEAResult has been serving as the program concierge, while Synergy is the installer that provides
the project cost estimate and completes the installation. The City has also run traditional and digital marketing campaigns
to drive program leads. As of August 14, 2024, the program has completed the installation of 312 HPWH units ; this
includes 12 units installed through the Residential Energy Assistance Program at no cost to income-qualified households.
80 projects have applied for on-bill financing. With the current pace of new signups, the City currently is on track to do
around 200 installations per year, equivalent to about 20% of the water heaters replaced each year.
On April 15, 2024, City Council approved new pricing for the program after the statewide HPWH incentives through the
TECH Clean program came to an end. This new pricing sets the baseline installation cost for a 65 gallon heat pump water
heater at $2,300. This is the cost for a standard installation, however, most homes will require some additional work like
installing a space saver breaker, penetrating an exterior wall to install electrical conduit, or installing a condensate pump.
The new pricing also includes up to $1000 of subsidy for this type of site preparation work . Several postcard outreach
campaigns to Palo Alto residents in April and July have brought in over 100 new customers signing up and we are confident
that strong participation in the program will continue.
In addition to providing a prescreened contractor to install HPWHs, CPAU also offers the option for customers to choose
their own contractor and apply for a HPWH rebate if the equipment meets the program criteria and has been permitted.
The recent City Council approved new pricing for the Full Service HPWH Program also included an increase of the rebate
from $2,300 to a graduated rebated of 55% of total project cost up to $3,500. During FY 2024, CPAU processed 51 HPWH
rebates. By comparison, the number of HPWH rebates processed in FY 2023 and FY 2022 were 42 and 21.
We are in the process of expanding our HPWH program to include an Emergency Water Heater Replacement Pilot to
support the swift replacement of failed gas water heaters with heat pumps. After completing a formal RFP in Spring 2023,
Staff Report: 2311-2209 – Page 38 of 62
we selected and signed a contract with Larratt Bros Plumbing to meet our goal to restore hot water within 48 hours. In
cases where it might take longer than 48 hours to install a heat pump water heater, the contractor will provide a loaner
gas water heater as a temporary solution. Because most households wait until their water heater fails to replace it, this
pilot program will fill a major gap in our current service. We expect to launch this program in Q1 FY 2025.
th for an electrification expert to support home electrification providing
assistance to customers constructing new homes, and potentially also supporting customers who opt to full electrify their
homes. The expert will also provide assistance to HPWH Program customers that have been disqualified from the program
due to challenging site constraints. In addition to expert guidance, this pilot program will create Home Electrification Plan
templates that can benefit homeowners beyond the initial pilot. We are currently in contract negotiations with a vendor
selected through the RFP process. The pilot is slated to begin before the end of the year.
Business Electrification Technical Assistance Program (BE TAP)
Staff Report: 2311-2209 – Page 39 of 62
There are many reasons we are seeing longer-than-usual project timelines to complete commercial electrification
installations. Some challenges include customers receiving unexpectedly high bids, challenging City permitting
requirements, and insufficient rebate incentives to cover higher than expected project costs. Over the next year staff will
work to address these concerns with a limited-time boosted incentive campaign for the replacement of rooftop gas packs
to heat pump HVAC systems. The intent will be to collect detailed information from each participating customer to help
staff better understand the costs and barriers to transitioning from gas equipment. Staff is also looking into potential
financing options for commercial customers.
Electric Vehicle Programs
Palo Alto continues to facilitate the installation of EV charging infrastructure throughout the City to support mass EV
adoption, with equitable access for multifamily and income-qualified residents, as well as workplaces, public parking lots
and retail areas. Of the 11,000 multifamily households in Palo Alto, 4% currently have access to EV charging. The goal is
to reach 10% of these households with EV charger installations by the end of 2024. CPAU's current programs provide
technical assistance, incentives, and customer education and engagement to support electric vehicle adoption and on-site
charging infrastructure, especially for residents of multifamily properties. In addition to the current program offerings as
detailed below, CPAU is beginning to explore efforts to support EV fast charging mobility hubs and curbside charging
stations that would benefit multifamily residents who do not have access to EV charging on-site.
EV Technical Assistance Program (EVTAP)
The Electric Vehicle Technical Assistance Program (EVTAP) was launched in 2019 with the goal of offering technical
assistance to multifamily properties, nonprofits, schools, and small medium businesses to support the installation of
electric vehicle charging stations. Implemented by CLEAResult, EVTAP is a high touch program that includes a site visit and
assessment, technical evaluation, engineering review, site design, hardware selection support, cost estimates, contractor
bid requests, building permit submission, incentive application assistance, and installation project management. Below is
a diagram of the EVTAP process:
Staff Report: 2311-2209 – Page 40 of 62
To date, CLEAResult has prepared and presented Charging Evaluation Reports (“CER”) to a total of 101 sites. Fifteen of
these sites have already completed EV charging installations (5 multifamily properties, 2 mixed-use properties, 2
nonprofits, 2 faith-based organizations, and 4 schools) totaling 113 charging ports, and an additional 34 sites remain active
(bidding, vendor selection, permitting, and installation phases). In order to support existing EVTAP customers to complete
their projects, CPAU extended its contract with CLEAResult with the goal of having a total of 30 sites operational by the
end of April 2027. Based on the current project pipeline, CPAU estimates that at least 6 EVTAP sites will complete installed
by the end of 2024, leading to the installation of an additional 104 charging ports.
EV Charger Rebate Program
The EV Charger Rebate Program was launched in 2017 to incentivize the installation of EV chargers at nonprofits, schools,
and multifamily properties. Current incentive amounts are $4,000 per Level 1 charging port and $8,000 per Level 2
charging port to a maximum of $80,000. Since the launch of this program, CPAU has facilitated the installation of 323 new
EV charging ports/connectors across 12 multifamily properties (representing 453 residential units) and 19 non-profits
(including 8 schools and 5 medical facilities). The average cost of each port has been $9,100 and projects have averaged
14 months to complete. An additional 19 projects totaling 408 additional charging ports are currently within the
installation process, including 15 multifamily sites (representing 1,021 residential units). Staff predicts that a minimum of
30 multifamily properties will complete installations within the next three years.
California Electric Vehicle Infrastructure Project (CALeVIP)
The City of Palo Alto participated in the California Energy Commission (CEC) run California Electric Vehicle Infrastructure
Project (CALeVIP), providing $1 million to match the $1 million in funding from the CEC to facilitate and incentivize the
installation of EV chargers at commercial sites. During FY24, a total of $1.63M (out of $2M) was reserved by 10 site owners
through CALeVIP, five of which were completed, resulting in an additional 72 Level 2 EV charging ports in Palo Alto.
Program is scheduled to have all funds-reserved projects completed by April 2025 with program close out and remaining
funds returned in September 2025.
Staff Report: 2311-2209 – Page 41 of 62
EV Awareness and Outreach
CPAU’s EV education and outreach efforts are designed to raise awareness about electric modes of transportation.
Utilizing the Support Services Program offered by the Northern California Power Agency (NCPA) and funding from the Low
Carbon Fuel Standard (LCFS) Program, CPAU contracted with Acterra16, EVucation17 and Cool the Earth18 to offer 25 EV
educational events, such as in-person workshop classes, EV expos, webinars, and limited-time EV and eBike Discount
Campaigns. The webinars, workshops and EV expos attracted approximately 2,750 attendees and participants of the EV
Discount Campaigns were able to purchase and save up to $15,500 on a new EV or PHEV and pay below market price on
used EVs through the Pre-owned EV Discount Campaign. .
Qmerit is an online tool for Palo Alto homeowners to receive free online estimates from local, vetted contractors for EV
charger installations. Qmerit also assists with raising customer awareness of embracing grid-friendly options, such as Level
1 and low-voltage Level 2 charging options. Utilizing NCPA’s Support Services Program and LCFS funding, CPAU is
contracted with D+R International to provide reliable installers through the Qmerit19 platform. During FY24, 98 project
estimate requests were submitted, of which 11 projects were completed. CPAU anticipates an increase in program interest
and participation with growing EV adoption and will increase outreach efforts of this program for interested EV owners of
single-family homes.
As of the end of FY24, there are 131 city-owned EV charging ports. Of those, 10 are dedicated to staff and City vehicles,
and 121 are accessible to the public. The chart below displays the increase in utilization (blue line) of the publicly-accessible
EV charging stations by quarter from 2017 through the end of 2023. While there was a dip in utilization of the EV charging
stations during the beginning of the COVID epidemic, utilization has been steadily increasing each quarter since mid-2020.
As more EV chargers have been added to the City (red line), utilization has increased accordingly. Note: one station may
have only one port or may have dual ports.
16 Acterra https://acterra.org/
17 EVucation https://www.evucation.com/
18 Cool the Earth https://cooltheearth.org/
19 Qmerit: https://qmerit.com/utility/cityofpaloalto/
Staff Report: 2311-2209 – Page 42 of 62
Many older properties in Palo Alto, especially multifamily buildings, have limited electric capacity to accommodate EV
chargers and building electrification. The Electric Service Connection Fee Incentive helps to defray the cost of utility
distribution system upgrades, triggered by EV applications, by providing $10,000 per EV charging port, up to a maximum
of $100,000. Currently staff are working with the Kingsley Park HOA to complete their EV charger installation, which
involves a transformer upgrade. This will be the first site to receive an upgrade, and it is anticipated that the chargers will
come online in early fall 2024. While this project has taken a few years to complete, it represents a milestone for CPAU
and has created opportunities for Utilities Engineering, Underground Services, and Urban Forestry to partner together to
design a joint schematic for the EV chargers and improve customer service for the applicant. CPAU estimates that an
additional 12-15 sites in the current EV project pipeline will require new transformers and could benefit from the Electric
Service Connection Fee Incentive.
6.2 Innovation and Pilot Programs
6.2.1 Academic Collaborations
6.2.2 Completed Projects
Figure 26: Status to date of all applications to the Program for Emerging Technologies
Staff Report: 2311-2209 – Page 43 of 62
TOTAL 109 0 80 0 29
Staff Report: 2311-2209 – Page 44 of 62
7 Communications
This section summarizes communications highlights, updates on major campaigns and noteworthy events. Copies of ads
bill inserts, and brochures are available online at www.cityofpaloalto.org/UTLbillinsert
Smart Energy Provider Award: In July 2024, CPAU was awarded the Smart Energy Provider (SEP) designation from the
American Public Power Association (APPA). The SEP designation recognizes public power utilities for demonstrating
leading practices in four key disciplines: smart energy program structure; energy efficiency and distributed energy
programs; environmental and sustainability initiatives; and the customer experience. CPAU will be honored and presented
with the award the at APPA annual Customer Connections conference in October 2024.
System Operational Achievement Recognition (SOAR) Award: In April 2024, CPAU won an award from the American
Public Gas Association (APGA) for excellence in operating our city’s natural gas utility. APGA presented CPAU with the
prestigious System Operational Achievement Recognition (SOAR) award, which was highlighted at the APGA annual
conference in July 2024. Out of approximately 750 APGA members, CPAU was selected for SOAR level Silver by its peers
on the APGA Operations and Safety Committee. The selection was based on demonstrated excellence in the four areas of
system integrity, system improvement, employee safety, and workforce development.
Residential Electric and Water Customer Satisfaction Surveys: In fall 2023, CPAU participated as a member of the
California Municipal Utilities Association (CMUA) in customer satisfaction surveys for residential electric and water utility
customers. CMUA’s contractor, GreatBlue Research, completed a statewide survey of municipal and investor-owned
utilities customers as a method of benchmarking trends of customer satisfaction and program awareness across the state.
CPAU opted to also participate in an “oversample” survey of Palo Alto residents so we can gain greater insight into some
specific areas of interest for Palo Alto residents. CPAU received significantly higher ratings than municipal and investor-
owned utilities in northern California and the State of California for providing consistent and reliable service to customers,
being committed to green, renewable, or carbon free energy, and restoring power in a reasonable amount of time after
an outage. When asked how frequently the City of Palo Alto Utilities meets their expectations, over four-fifths of
customers reported their expectations are met "all" or "most of the time,” ranking higher than other utilities in the State.
Staff presented the key study findings and considerations to the UAC in February 2024 and provided an informational
report to City Council in May 2024.
Customer Notifications for Enhanced Outage Communication: CPAU’s new power Outage Management System now
provides mobile text messaging and phone call notifications to customers about power outages and d status updates. The
online power outage map now also shows neighborhood boundaries of where outages occur. We encourage utility
customers to log into their MyCPAU account20 or contact Customer Service directly to ensure we have current contact
information on file to effectively communicate in the event of an unplanned or planned utilities service disruption. Find
information on outages and notifications at www.cityofpaloalto.org/outages
Advanced Metering Infrastructure (AMI) Project: CPAU continued its deployment of Advanced Metering Infrastructure
(AMI) throughout 2023 and into 2024 and reached the 50 percent installation milestone in July 2024. Full deployment of
AMI for residential customers is estimated to be complete by the end of 2024. Commercial AMI meters are also being
installed in phases for testing assurance and data validation. CPAU is communicating directly with customers who will
20 MyCPAU Account https://mycpau.cityofpaloalto.org/portal/
Staff Report: 2311-2209 – Page 45 of 62
receive the meters to share resources and help with any questions or concerns, and developed a video about AMI to
provide an overview of the benefits to customers and the utility. www.cityofpaloalto.org/ami
Program and Event Support: CPAU communications staff provide ongoing annual, monthly, and daily support for outreach
to residential and non-residential customers about programs for regular operations, maintenance, and capital
improvement projects, sustainability, energy and water efficiency, solar, electric vehicles and eBikes, beneficial
electrification, events and workshops, and more. Comprehensive communication campaigns include website, utility bill
inserts, email newsletters, social media, videos print and digital advertisements, community outreach events, media
relations and public correspondence.
Staff Report: 2311-2209 – Page 46 of 62
8 Legislative, Regulatory and Industry Activity
8.1 State Legislative Activity
During FY 2024, many relevant bills were introduced or chaptered by the California Legislature. Despite the August 31st
deadline to pass bills being only a few weeks away at the time of this writing, a number of impactful bills are going through
the legislative process and are listed below. CPAU worked with several outside groups, including the Northern California
Power Agency (NCPA) and the California Municipal Utilities Association (CMUA), to actively support or oppose bills.
Chaptered Bills
•AB 541 (Wood) | California Safe Drinking Water Act: wildfire aftermath: benzene testing. Requires public water
systems that have experienced wildfire events to test for benzene and take specified actions if it is detected.
•AB 755 (Papan) | Water: public entity: water usage demand analysis. Requires a city or urban water supplier to
conduct a water usage demand analysis, prior to or as part of a cost-of-service-analysis, that identifies the costs
of water service for the highest users and the average annual volume of water delivered to high water users. This
information must be made publicly available in the cost-of-service analysis.
•AB 1373 (Garcia) | Energy. Requires the California Energy Commission (CEC) to assess a capacity payment on each
local publicly owned utility that failed to meet its minimum planning reserve margin for each month that resources
procured through the Electricity Supply Strategic Reliability Reserve Program (ESSRRP) are used.
•AB 1572 (Friedman) | Potable water: nonfunctional turf. Prohibits the use of potable water to irrigate
nonfunctional turf located on commercial, industrial, and institutional properties. Requires public water systems
to revise their ordinances and inform their customers by January 1, 2027.
•AB 1594 (Garcia) | Medium- and heavy-duty zero-emission vehicles: public agency utilities. Provides to public
agency utilities exemptions to the Advanced Clean Fleets regulation to ensure continued reliable service.
•SB 659 (Ashby) | California Water Supply Solutions Act of 2023. Requires future updates of the California Water
Plan to provide actionable recommendations to increase groundwater recharge in both the near and long term.
•SB 745 (Cortese) | The Drought-Resistance Buildings Act. Requires the Department of General Services to research
and propose updates to the California Building Standards Code to reduce potable water usage and consider water
reuse standards in new buildings.
•SB 867 (Allen) | Safe Drinking Water, Wildfire Prevention, Drought Preparedness, and Clean Air Bond Act of 2024.
Puts a $10 billion water, wildfire, resilience, biodiversity, agriculture, and clean air bond on the ballot for the
November 5, 2024 election.
Active Bills
•AB 990 (Grayson) | Water quality: waste discharge requirements: infill housing projects. Requires the San
Francisco Bay regional water board to update the California Regional Water Quality Control Board San Francisco
Bay Region Municipal Regional Stormwater National Pollutant Discharge Elimination System (NPDES) in
consultation with the Association of Bay Area Governments.
•AB 1834 (Garcia) | Resource adequacy: Electricity Supply Strategic Reliability Reserve Program. Requires the CEC
to consider mitigating factors when determining capacity payments.
•AB 2037 (Papan) | Weights and measures: electric vehicle chargers. Authorizes county sealers to test and verify
as correct any electric vehicle charger operated by a public agency or local publicly owned electric utility. Exempts
electric vehicle chargers that are tested every six months to specified requirements.
•AB 2427 (McCarty) | Electric vehicle charging stations: permitting: curbside charging. Requires local agencies to
develop a comprehensive permitting checklist for electric vehicle charging stations within the public right-of-way.
The City of Palo Alto would have to comply by January 1, 2029.
•AB 2557 (Ortega) | Local agencies: contracts for special services and temporary help: performance reports.
Requires local agencies to post online contracts for special services and temporary help and also requires the
board of supervisors to give reasonable written notice to the affected employee representative before beginning
the procurement process for the contract.
Staff Report: 2311-2209 – Page 47 of 62
• AB 2561 (McKinnor) | Local public employees: vacant positions. Requires public agencies with high vacancy rates
of 15% for more than 180 days to meet with the appropriate union, at the request of the union, to come up with
strategies to fill the vacancies.
•AB 2729 (Patterson) | Development projects: permits and other entitlements: fees and charges. Would limit the
utility service fees authorized to be collected at the time of application for utility service to capacity charge
connections.
•SB 366 (Caballero) | The California Water Plan: long-term supply targets. A CMUA-sponsored bill that revises the
California Water Plan to establish a stakeholder advisory committee to coordinate with various California water
agencies in the development of a long-term water supply plan.
•SB 1210 (Skinner) | New housing construction: electrical, gas, sewer, and water service: service connection
information. Requires a utility to post online the estimate fee schedule and timeframes for completion for typical
service connections for new housing constructions.
•SB 1251 (Stern) | Mosquito abatement inspections. Requires an electrical utility to enter a vector control
agreement with a vector control district, upon their request, to allow access to electrical vaults for mosquito
abatement.
•SB 1255 (Durazo) | Public water systems: needs analysis: water rate assistance program. Requires water suppliers
to provide water rate assistance to eligible users and provide an opportunity to other users to voluntary contribute
to the rate assistance program.
8.2 State Regulatory Activity
Much of the relevant state regulatory activity in FY24 has focused on accelerating emissions reductions or improved
emissions reporting. Both the Cap and Trade and Low Carbon Fuel Standard programs are undergoing major overhauls to
hit mandated emissions reduction targets while the Power Content Label program will be moving to hourly, rather than
annual, reporting. Landmark water conservation regulation was also established in the Conservation as a California Way
of Life framework. CPAU has been actively involved in these proceedings, and others, and has weighed-in when prudent.
8.2.1 California Air Resources Board (CARB)
Cap and Trade
As a result of SB 32 and AB 1279 setting stricter emission-reduction targets of 40% by 2030 and 85% by 2045, both relative
to 1990 emission levels, CARB initiated rulemaking to accelerate emissions reduction under Cap and Trade. One proposed,
and likely, method to achieve Cap and Trade goals is to significantly reduce free allowances given to gas utilities, including
CPAU. Additionally, more stringent RPS requirements and updated electricity consumption forecasts will reduce CPAU’s
electric utility free allowances. Depending on how allowance market prices are impacted by the changes, CPAU’s auction
revenue, the proceeds of which go towards emission-reducing programs like the Heat Pump Water Heater program, may
be impacted. CPAU has worked with the Gas Utility Group (GUG) to provide comments regarding CARB’s proposed
methodology for updating the gas allowance allocation. CPAU will continue to closely follow Cap and Trade developments.
Low Carbon Fuel Standard (LCFS)
Similar to Cap and Trade, CARB is in the midst of rulemaking to update the LCFS to accelerate emissions reduction to meet
state goals. The key updates for CPAU are the proposed reductions in the carbon intensity benchmarks and the addition
of an automatic acceleration mechanism, which will trigger additional benchmark reductions if too many credits are
generated. While these changes will reduce the number of credits generated by CPAU, they should also increase the credit
price, which has dropped significantly in recent years. Thus, the financial impact of these changes is unknown. Proceeds
from the credit sales go towards improving EV infrastructure and is CPAU’s the main source funding for EV programs.
Staff Report: 2311-2209 – Page 48 of 62
8.2.2 California Energy Commission (CEC)
SB 1158-related updates to the Power Source Disclosure program
In May 2024, the CEC provided express terms that lay out significant updates to the Power Source Disclosure (PSD)
program. These changes include factoring in transmission and distribution losses by displaying loss-adjusted load and
reporting of hourly data. Reporting hourly data will be an administrative burden but is not required until June 1, 2028.
Regulatory language is not final and CPAU staff will continue to participate in rulemaking.
AB 1373 and Electricity Supply Strategic Reliability Reserve Program (ESSRRP) capacity payments
In May 2024, the CEC held a workshop to discuss how capacity payments would be assessed on publicly owned utilities
(POUs) in the case resources are procured by the ESSRRP to cover electricity shortages in extreme events. POUs would
only have to pay if they are found to be capacity deficient in the month that resources are procured. Several questions
about how payments will be calculated so CPAU staff will follow and engage in all developments.
General Order (GO) 174 update
In July 2024, the CPUC adopted changes to GO 174, which establishes and regulates the Substation Inspection Program.
These changes expanded the scope of the order to include transmission-level substations, which were previously excluded
because they are subject to robust audits from various agencies. CPAU’s transmission-level substations will be subject to
audits and inspections by the CPUC’s Safety Enforcement Division.
Conservation as a California Way of Life
In July 2024, the State Water Board finalized regulations that established permanent water efficiency goals that become
stricter over time, known as Conservation as a California Way of Life. Applying to urban water retailers, the regulation
combines statutory mandates from AB 1668, SB 606, and SB 1157, which require calculation of an urban water retailer’s
water use objective based on residential indoor use, water loss, residential outdoor use, and commercial, industrial, and
institutional (CII) landscapes as well as factoring in population, climate, and agricultural activity. CPAU staff are working to
ensure effective compliance with the regulation.
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Appendices
Staff Report: 2311-2209 – Page 50 of 62
9 Appendix A: Energy Risk Management Program
This appendix provides a quarterly update on the City’s Energy Risk Management Program.
9.1 Overview of Hedging Programs
The City’s Utilities Department maintains a hedging program for its Electric and Gas Utilities. In the Gas Utility the program
protects against short-term (intra-month) price spikes caused by weather or major incidents on the Western gas system.
However, the City does not hedge its gas supply more than one month in advance, choosing instead to protect the Gas
Utility’s financial position by passing gas supply costs through to customers via a charge that varies monthly based on gas
market prices. As a result, the Gas Utility’s only market exposure is the amount by which gas demand deviates from
forecasts within the month. This exposure is relatively small and can be managed using Gas Utility Operating Reserves. A
risk assessment is performed each year as part of the Gas Utility financial planning process to ensure adequate reserves
to cover all risks. The most recent Gas Utility Financial Plan was adopted June 21, 2021 (Staff Report #1224021).
The City has entered into long-term contracts for its Electric Utility to ensure that the City has carbon free electricity
supplies equal to 100% of Palo Alto’s annual electric demand. However, the output from these generating sources does
not match Palo Alto’s electric load. In the summer, the City has a surplus of carbon free energy and it has a deficit in the
winter. This exposes the City to market risk, and staff maintains a hedging program to protect against this risk. In addition,
hydroelectric generators make up approximately half the City’s energy supply. During dry years these resources do not
generate as much energy, creating an additional market exposure that must be hedged. Unlike the gas hedging program,
which is operated by City staff, the electric hedging program is operated by the Northern California Power Agency (NCPA),
a joint powers agency the City formed in partnership with several other California publicly owned electric utilities, with
oversight by City staff.
9.2 Overview of Energy Risk Management Program
The hedging programs described above are conducted in accordance with the City’s Energy Risk Management Program,
which includes a set of Program Policies adopted by the City Council, Guidelines adopted by the City’s Utilities Risk
Oversight Coordinating Committee (UROCC), and Procedures approved by the Utilities Director. In addition, for the electric
hedging program, NCPA maintains its own Risk Management Program. The City is able to provide policy level oversight of
this program through its seat on the NCPA Risk Oversight Committee, which is held by the City’s Risk Manager.
Per the Energy Risk Management Policies, the City Council must receive quarterly reports on the City’s forward contract
purchases, market exposure, credit exposure, counterparty credit ratings, transaction compliance, and other relevant
data.
9.3 Forward Deals
Palo Alto executed the following Electric and Gas transaction in Q4 of FY 2024.
Figure 27: Gas Deals
Delivery Month Deal Type Total Energy
(MMBtu)
Price ($/MMBtu)
May’24-Oct’24 Purchase 856,100 Malin Bidweek + Adder
May’24-Oct’24 Purchase 243,484 2.30
21 Staff Report #12240 https://www.cityofpaloalto.org/files/assets/public/v/3/agendas-minutes-reports/reports/city-manager-reports-cmrs/year-
archive/2021/06-21-21-id-12240.pdf
Staff Report: 2311-2209 – Page 51 of 62
May’24-Oct’24 Sale 243,484 3.15
Figure 288: Electric Energy Deals
Delivery Month Deal Type Total Energy
(MWh)
Price ($/MWh)
Jun’24-Jul’24 Sale 32,640 37.85
Aug’24 Sale 4,320 67.25
Oct’24 Purchase 7,800 53.00
Nov’24-Jan’25 Purchase 55,225 83.95
Figure 299: Electric Resource Adequacy Deals
Delivery Month Deal Type Avg RA
(MW-mo)
Price ($/kW-mo)
Aug’24 Sale 9.5 14.00
Aug’24 Sale 13 41.00
9.4 Electric Market Exposure
The chart below shows the City’s electric supply market exposure and committed purchases and sales to cover exposed
positions. Additional purchases and sales will be executed for FY 2025 and FY 2026 in the coming months.
Figure 30: Electric Load Resource Balance, FY 2024 - 2026
9.5 Transaction Compliance
There are no transaction exceptions or violations to report.
Staff Report: 2311-2209 – Page 52 of 62
Staff Report: 2311-2209 – Page 53 of 62
10 Appendix B: Staffing and Vacancies
As of year-end FY 2024, the Utilities Department has 37 vacant positions out of 259 authorized positions or a 14% vacancy
rate. Below is a breakdown of the vacancies by division. Utilities has designated three HR liaisons from Utilities
Administration to assist HR with some of the recruitments. With the three HR liaisons, CPAU will be able to post positions,
schedule interviews, and make job offers at a faster pace after they are fully trained. CPAU have been attending
engineering career fairs at Sacramento State University, Cal Poly San Luis Obispo, and San Jose State University. Since the
inception of the HR liaison program, Utilities has made steady progress in reducing the number of vacancies from 49 in
Q4 2023 or a 24% decrease.
Figure 31: Utilities Vacancies and Recruitments by Division, as of Year-End FY 2024
A
D
A
F
V
F
A
R V
A 2 1 1 5
C 1 2 3 0 1
F 2 6 6 3 1
R 2 0 0 0
E 6 1 1 2
E 2 4 4 1
W 7 5 5 7
W 2 2 2 8
T 2 3 2 1
1
2
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11 Appendix C: Utilities Customer Program Descriptions
The City’s Utilities Department maintains a number of programs to help customers save money, use energy and water
efficiently, and reduce carbon emissions. These programs are funded through a variety of funding sources, some of which
are summarized below.
11.1 Customer Programs Overview
Below is a summary of the City’s energy and water efficiency programs, as well as programs to encourage building
electrification and adoption of electric vehicles.
11.1.1 Energy and Water Efficiency
Residential Energy Efficiency and Water Conservation Programs
The Home Efficiency Genie program provides residents with professional advice and information to improve their home’s
efficiency and comfort, lower their energy and water usage and get guidance on home electrification options. Even with
the Genie returning to in-home comprehensive and diagnostic assessments in the fall of 2021, the virtual option developed
during COVID continues to be a service that residents are interested in. Both the in-home and virtual versions continue to
help residents evaluate their homes for home electrification upgrades based on their existing electric panel and provide
actionable next steps.
CPAU’s Residential Energy Assistance Program (REAP) for income-qualified customers continues to reach our most
vulnerable population offering energy and water efficiency improvements at no cost to the customer. Residents who are
newly qualified for CPAU’s Rate Assistance Program (RAP) are notified each month of their eligibility for free upgrades
including building envelope improvements, lighting upgrades, replacement of gas water heater with heat pump water
heater, replacement of gas furnace with air source heat pumps, and high-efficiency toilets. These upgrades are installed
by CPAU’s vendor Synergy.
For our multifamily (MF) property owners, CPAU continues to offer the Multi Family Plus (MF+) program which offers free
energy efficiency upgrades installed by our vendor Synergy. These upgrades include lighting upgrades to LEDs and whole
building envelope upgrades. Recently a new measure for high-efficiency toilets (HETs) was added.
CPAU partners with Valley Water to offer a robust portfolio of water conservation programs and rebates22 ranging from
landscape conversion and irrigation controller to rainwater capture projects for residents and businesses.
The WaterSmart customer portal, an online water management tool, provides customers with information about water
consumption and personalized water conservation recommendations. Through WaterSmart home water reports are sent
to single-family customers on a monthly basis.
Commercial Energy Efficiency and Water Conservation Programs
Commercial Energy Efficiency and Water Conservation Programs
The Commercial and Industrial Energy Efficiency Program (CIEEP) offers free energy audits to businesses. These audits help
businesses identify areas where they can save energy, such as improving lighting, controls, occupancy sensors,
refrigeration systems, HVAC systems, and other equipment. Furthermore, CIEEP’s can help provide technical assistance to
22 Rebates https://www.cityofpaloalto.org/waystosave
Staff Report: 2311-2209 – Page 55 of 62
businesses to help them implement energy efficiency measures. This can include suggestions that help customers develop
energy efficiency plans, provide information on energy-efficient technologies, and connecting businesses with contractors.
11.1.2 Building Electrification
Full-Service Heat Pump Water Heater Program
Business Electrification Technical Assistance Program (BE TAP)
11.1.3 Electric Vehicles
Summary of All EV Programs for Multi-family (MF) Properties and Workplaces
•Mission: The EV team’s mission is to facilitate the installation of EV chargers to support increased EV adoption with a
priority on MF properties. To reach 80 by 30 S/CAP goals, it is imperative that there is enough charging infrastructure
for residents, commuters and visitors. For residents, the priority is to close the MF EV access gap, as only 15% of EVs
in Palo Alto are registered at MF buildings, while MF makes up 42% of households.
Staff Report: 2311-2209 – Page 56 of 62
•Goal of EV Programs: Expand EV charging accessibility to 10% of MF households (about 1,100 homes) by 2025.
•Why: Based on data from the 2022 American Community Survey, CPAU estimates that 35% of Palo Alto’s 28,000
households earn below 400% FPL and therefore require the support of equity programs to help transition off of fossil
fuel vehicles. There are approximately 28,000 households in Palo Alto, approximately 11,000 of which are in
multifamily properties. Most middle-income and low to moderate-income residents in Palo Alto live in MF housing.
EVs provide significant lifetime household savings, and yet those who most need those savings have the hardest time
gaining EV charging access due to the challenges associated with installing chargers at MF properties. Private industry
is not adequately serving this market, whereas the City is well-positioned to support this hard to reach and slower to
move customer segment, making meaningful use of available City funding sources for EV promotion.
•Target Customer Segment: MF property owners, Homeowners Associations (HOAs), nonprofits, owners of small
medium businesses and buildings, as well large C&I customers.
•What CPAU can provide:
o Trusted, neutral advisory services (rather than vendor sales services) with a direct connection to internal City
staff to facilitate problems.
o Technical assistance (site evaluation, including electrical capacity, business case development, project design,
obtaining bids, preparing permit packages)
o Incentives (both for charging equipment and distribution upgrades)
•Strategy: Facilitate development of Level 1 and Level 2 chargers, as well as “make-ready” EV infrastructure, in multi-
family buildings. Size electrical infrastructure to enable the building owner to add more EV charging ports in the future.
Encourage sites to consider either the installation of Level 1 or low-power Level 2 chargers when appropriate as a grid-
friendly strategy to increase EV charging options for as many EVs as possible, reducing the need for costly electric
service upgrades as well as preserving electric service capacity for future building electrification efforts.
EV Technical Assistance Program (EVTAP)
•Goal: Facilitate the installation of 180-360 ports @ 60-90 sites (By 2027)
•Offer technical assistance for the installation of EV chargers at Non-Profit and MF properties, involving a series of site
visits, technical evaluations, engineering reviews, and design proposals, culminating in the landlord receiving
contractor bids, followed by assistance submitting a building permit, applying for incentives and project management
of the installation. Completed projects have taken up to 2 years to reach completion.
EV Charger Rebate Program
•Goal: Incentivize the installation of EV chargers at Non-Profits and Multifamily properties. CPAU currently offers up to
$8,000 per Level 2 port / $4,000 per Level 1 port for up to 10 ports ($80,000 maximum incentive).
California Electric Vehicle Infrastructure Project (CALeVIP)
•Goal: Facilitate and incentivize the installation of EV chargers at commercial sites.
EV Awareness and Outreach
•Goal: Raise awareness, answer questions and encourage residents to consider transitioning to electrified modes of
transportation, including electric cars, e-Bikes and other modes of clean transportation.
Qmerit
Goal: Assist residential customers in receiving receive free online estimates from local, vetted contractors for EV
charger installations.
Staff Report: 2311-2209 – Page 57 of 62
City-Owned EV Chargers
•Goal: Install EV Charging Infrastructure for the public as well as City fleet vehicles.
Electrical Service Connection Fee Incentive Program
•Goal: Provide discounts to defray the cost of utility distribution system upgrades triggered by EV
applications―costs that would otherwise be borne by the customers. Offers up to $100K for MF & non-profits
($10K per EV charging port) and up to $10K for Single Family Homes for any in front of the meter customer costs
related to transformer upgrades.
11.1.4 Funding Sources for Emissions Reductions
Energy efficiency and water efficiency programs have traditionally been funded by electric, gas, and water rate revenues.
To fund emissions reduction programs, the City has developed multiple alternative funding sources:
•Low Carbon Fuel Standard (LCFS) Program: The City participates in the California Air Resources Board (CARB) LCFS
program, receiving credits for the provision of low-carbon fuels (such as clean electricity and compressed natural
gas) and must use the revenues from the sale of these credits for programs and other efforts promoting low-
carbon vehicle adoption.
•Cap and Trade Program: The City’s electric and gas utilities are required to participate in the State’s cap and trade
program, but these utilities receive some of the revenue from the auction of allowances for the program. The
revenue must be used for emissions-reducing activities.
•Public Benefits Funds: Locally owned municipal utilities must collect a surcharge from their electric utility
customers under section 385 of the Public Utilities Code (there is a similar requirement for gas utilities) to be used
on cost-effective energy efficiency and conservation, low-income programs, renewable energy, and research and
development.
The amount of revenue currently held in reserve for each revenue source and the projections for future revenue are
shown below.
Figure 302: Potential Emissions Reduction Funding Sources
Projected Revenues
Funding Source
FY 2023 Year-End
Reserves FY2024 FY2025 FY2026
Low Carbon Fuel Standard $6,712 $1,100 $1,120 $1,232
Gas Cap & Trade 6,731 3,163 3,327 $3,612
Public Benefits 5,673 4,779 4,655 4,584
Electric REC Exchange Revenue
(Electric Cap & Trade)
2,231 1,700 1,200 1,100
TOTAL 21,346 10,742 10,302 10,528
Expenditures for each revenue source are as follows:
•LCFS revenues have been used primarily to facilitate the installation of EV chargers in multi-family buildings and
are expected to be used that way in the future unless the City’s priorities shift. Some has been used for general
promotion of EVs.
•Cap and Trade revenues have been used to purchase renewable energy and for the Advanced Heat Pump Water
Heater pilot. More use of these revenues for electrification programs is expected in the future, though no specific
approvals have been sought yet.
Staff Report: 2311-2209 – Page 58 of 62
Public Benefit funds are used for energy efficiency (including low-income programs) and building electrification.
Staff Report: 2311-2209 – Page 59 of 62
12 Appendix D: Water Utility Annual Infrastructure Maintenance and
Replacement Report
Water Utility Overview – Calendar Year 2023
Executive Summary
•The City continues to meet water quality standards and regulatory
requirements
•Water Main Replacement program continues as planned
•Construction of Water Main Replacement Project #28 was
completed
•Construction of Water Main Replacement Project #29 began in
November 2023
•Advanced Metering Infrastructure (AMI) program on-going as
planned
Infrastructure Overview
Key infrastructure replacement efforts in the next five years include:
●Regular mains, services, hydrants, and valve replacement
●Repair and seismic retrofit of Dahl and Park Reservoirs
System Operations and Maintenance
There are 17.2 Total FTE’s working on Water System O&M.
●Water Quality (2.3 FTE):
o *Monitoring: Weekly, monthly, quarterly, annual water quality sampling
o *System Flushing: Regular seasonal flushing of dead end mains in the system to prevent sediment build-up and
disinfection
o Backflow Prevention (BFP) Program: Prevents water from flowing from private water services back into the
How do we achieve those goals?
Perform routine monitoring and
inspections and respond with timely
repairs
Replace or repair assets as they
approach the end of their useful life
Perform hydraulic modeling analysis and
test system performance
Train and implement new techniques,
tools, and procedures to increase
productivity
Water Utility Goals
What are our goals and objectives?
Protect drinking water quality
Minimize system failures
Prevent property damage caused by main
breaks
Protect the health and safety of staff
and the community
Maintain adequate storage for fire flow
and unexpected disruption of water
supply
Meet or exceed Industry Best
Management Practices for maximizing
asset life and minimizing maintenance cost
Meet or exceed regulatory
requirements
Staff Report: 2311-2209 – Page 60 of 62
public water system and protects the public water system from contamination
●*System Monitoring (1 FTE): Remote system controls and device of pumps, tanks, and valving. Control of water
flow and distribution throughout the water network
●System Inspections (1.3 FTE): Periodic field inspections of pump stations and other key system components
●Planned Maintenance (6.4 FTE): Test and maintain distribution system equipment required for operations such as
station mechanical equipment, valves, and meters, and non- emergency repair and replacement of degraded or
damaged assets (e.g. hydrants, valves, mains, and services).
●*Unplanned Maintenance (2.4 FTE): Emergency response and infrastructure repairs and replacements requiring
immediate attention.
●New Construction (3.8 FTE): Installation of new water services, valves, and meters for construction projects.
*Priority programs critical to daily operation Maintenance Status:
●Critical maintenance programs running smoothly
●BFP inspection program meets state requirements, needs evaluations as growth continues.
●AMI program being implemented in the field
Table 1: Status of Drinking Water System Operation and Maintenance Programs
System Operation
or Maintenance
Program
Status
Green = good
Yellow = room
for improvement
Comments
Water quality
monitoring
City has a regular testing program to meet all regulatory requirements.
This includes tests of disinfection effectiveness, water quality, and water
physical characteristics.
System flushing Flushing is performed to prevent stagnation of water in rarely used
outlets like hydrants and blowoff valves. This flushing is done on a
regular seasonal schedule. City is maintaining flushing maintenance
practices.
Backflow
prevention
Backflow Prevention Devices (BFDs) protect water quality by preventing
water in a customer’s system from flowing back into the City system.
The City owns about 400 BFDs which are tested annually. Private BFD
owners are required to test annually and submit results to the City. The
City then reports this data to the State Water Resources Board. The City
continues to work with customers to improve compliance and reporting
rates have increased this year. This program continues to grow as more
water services require backflow prevention, and the City has approved
two new positions starting in FY25 to support this program.
System monitoring The City maintains 24-hour SCADA system monitoring. Sufficient staff
have the experience, training, and certifications required to handle this
function and ensure uninterrupted oversight in the event of an
emergency.
Staff Report: 2311-2209 – Page 61 of 62
Valve Exercise Valves are being operated on a multi-year cycle and broken valves are
repaired as they are discovered. Currently, valve exercising
records are marked and maintained on physical utility grid map
sheets, and records are submitted and digitally recorded in the office
when all valves on a particular grid have been exercised. WGW
Operations is working to improve ESRI interfaces to facilitate digital
collection of data in the field. This will allow for real- time data and
remove the current lags that can occur in data entry.
Meter
Maintenance
Multiple one-time sampling projects have shown that most meters are
in good shape. There are many meters due for replacement, and the
mass replacement of older, small water meters with new advanced
metering infrastructure (AMI) is in preparation. Meter exchanges for
AMI began in 2023. Meter testing was performed by a third-party
contractor.
Unplanned
Maintenance
There are no backlogs of leaks or assets in need of repair. The City
maintains an emergency on-call program to respond to and control
water leaks or other system emergencies at any hour of the day or night.
Table 2: Condition of Drinking Water System Assets
Asset Class Quantity Maintenance Asset Condition
Water Receiving
Stations
(Turnouts)
5 Meter testing (every 2 years)
Annual Maintenance (calibrate
pressure transducer and
analog gauges, exercise
isolation valves and PRV’s,
clean out cover)
Most receiving stations currently require only
minor and routine maintenance and are in
good condition overall. Some minor
improvement projects may be required in the
next few years. California Ave turnout is
scheduled for pipe replacement and
rehabilitation in CY24. Page Mill Turnout valve
restraint work completed in CY23, which has
allowed the completion of some annual
maintenance items that have been deferred
for two years, due to safety concerns.
Booster Stations
/ Pressure
Reducing Stations
7 / 6 Annual maintenance
(calibrate upstream /
downstream pressure
transducer, analog gauges,
check pressure switches,
exercise isolation valves and
PRV’s, cleaning).
Mayfield and El Camino PS have
VFD’s which are maintained by
Tesco.
Weekly monitoring
Most booster stations and pressure reduction
stations require only minor and routine
maintenance and are in good condition
overall. Minor improvement projects may be
required in the next few years.
Staff Report: 2311-2209 – Page 62 of 62
Reservoirs 7 Annual maintenance (climb
tank, take physical reading of
water level, check altitude
valve, check screens, calibrate
tank pressure transducer,
analog gauges)
Dahl and Park Reservoirs are scheduled for
repair and seismic retrofit in CY 2027-2028.
Water quality monitoring
Emergency Wells 8 Annual maintenance,
inspection, and testing of wells
by Tesco, third party
contractor. Routine inspection
and water quality monitoring
and monthly maintenance of
systems performed by staff.
City wells were rehabilitated in 2013, but some
maintenance is needed. Services for a pump
rebuild at El Camino Park Well was solicited in
CY2023.
Water Valves ~6,500
valves
Operate every valve at least
once every five years (1200
valves per year), repair /
replace as needed
Operate 120 critical valves in
foothills annually
Valves are replaced on failure, or proactively
when water mains in the area are replaced.
Water Mains and
Services
~230
miles of
main,
~20,000
services
Repair leaks as identified
Monitor water quality
Water Main Replacement program continues
as planned, prioritizing leaky pipes and
seismically vulnerable pipes. Asbestos-Cement
Pipe testing program is underway to help
update replacement program as needed.
Water Meters ~20,000
small
meters,
380 large
meters
Sample test small meters, test
/ repair large meters annually
Replacement of oldest small water meters
continues, informed by small meter testing.
Large meter testing began in CY2023. Which
helped estimate meter accuracy. AMI meter
upgrade project is currently under way in 2022
to replace many older small water meters.
Fire Hydrants ~2000
public
hydrants
Maintenance Hydrants are replaced upon failure.
APPROVED By:
Dean Batchelor, Director of Utilities
Staff: Tim Denterlein, Resource Planner