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HomeMy WebLinkAbout2026-03-31 Utilities Advisory Commission Summary Minutes Utilities Advisory Commission Summary Minutes – March 31, 2026 Page 1 of 14 UTILITIES ADVISORY COMMISSION MEETING SUMMARY MINUTES OF MARCH 31, 2026 SPECIAL MEETING CALL TO ORDER Chair Scharff called the meeting of the Utilities Advisory Commission (UAC) to order at 6:00 p.m. The clerk called roll with seven present. Present: Chair Scharff, Vice Chair Mauter, Commissioners Croft, Gupta, Metz, Phillips, and Tucher Absent: None AGENDA REVIEW AND REVISIONS None. ORAL COMMUNICATIONS 1. Sven T. asked the Commission to use words like oxides of nitrogen, benzene, and formaldehyde regarding clean energy and air education and encouraged the members to convert to induction. 2. Avroh S. urged the Commission to collaborate with utilities and community organizations to communicate the health risks when using natural gas stoves. 3. Peter D. congratulated the Commission for having influenced BAWSCA. APPROVAL OF THE MINUTES ITEM 1: ACTION: Approval of the Minutes of the Utilities Advisory Commission Meeting Held on March 4, 2026 MOTION: Commissioner Phillips moved, seconded by Commissioner Metz, to approve the minutes of the March 4, 2026 meeting. Utilities Advisory Commission Summary Minutes – March 31, 2026 Page 2 of 14 MOTION PASSED: 7-0 UNFINISHED BUSINESS None. UTILITIES DIRECTOR REPORT Alan Kurotori, Utilities Director described the induction cooktop rebates that are currently active on the portal. The Finance Committee voted unanimously to recommend City Council approve the Wastewater Utility rate increases as presented by Staff at the March 17 meeting. Staff is working on a rate assistance program. It was taken to a UAC subcommittee talking about affordability and will be brought back to City Council as part of the Rules and Regulations update. Staff are evaluating increasing the discount rate from 25 to 35 percent and applying the low income threshold to other programs for the gas utility. Discussions are being held with other departments on the storm drain fee and other fees to see if it can be done across the board. That will be brought back to the UAC for future Council action. A contract amendment with Smart Energy Water went to Council in March. That is the upgrade to the MyCPAU customer portal. That will include a dedicated mobile app. The user interface will be updated. Two new electric supply contracts will be brought to the UAC in the next couple of months for solar and battery projects. Staff can walk the Commission through the power purchase agreement contracts if needed. Commissioner Croft inquired if submittals were requested as an initiating power purchase agreements rather than the other way around. Director Kurotori confirmed this stating the City's standard process is an open procurement with a request for proposals for developers to provide their products. The City works through Northern California Power Agency, a consortium of 16 utilities looking for the same types of projects. Commissioner Croft wanted to know a timeline of when more information would be expected. Director Kurotori replied Staff wants to bring back some terms for the Commission to consider as early as May. Commissioner Tucher wanted to talk about the new solar and storage deal including what is new and how it ties into peak load demands in a bigger context. Director Kurotori responded Staff will be bringing forward the graphs brought in the past showing how these projects may fill those gaps in context of the overall supply. The larger conversation on resources is on the top of their mind. That will be added as a layer as part of the presentation to the UAC. NEW BUSINESS ITEM 2: ACTION: Staff Recommends the Utilities Advisory Commission Recommend that the City Council Adopt a Resolution Approving the Fiscal Year 2027 Gas Utility Financial Forecast, Reserve Transfer, General Fund Transfer, and Amending Rate Schedules G-1 (Residential Gas Service), G-2 (Residential Master-Metered and Commercial Gas Service), and G-3 (Large Commercial Gas Service) ; CEQA Status: Not a project under CEQA Guidelines Section 15378(b)(5) Utilities Advisory Commission Summary Minutes – March 31, 2026 Page 3 of 14 Director Kurotori started the slide presentation including a baseline of the gas utility and rate increases, purpose of rate adjustments, and the value of Utility Services and how funds are used. Eric Wong, Utilities Resource Planner, joined the presentation including gas cost structure and rate design, gas cost and revenue projections, gas bill comparisons for residential and commercial customers, FY 2027 rate increase drivers, gas supply load forecast, gas operations reserve projections, summary of gas rate proposal, residential median bill projections, and recommendation. Commissioner Gupta indicated a summation of forecast tables would be helpful and wanted to know if the forecasts in this Staff report are understating what the expected rate increases might look like because the additional analysis from the consultant is no longer being included. Lisa Bilir, Assistant Utilities Director, confirmed and explained the decommissioning cost has been removed from the forecast. It is characterized as an area of uncertainty. The decommissioning cost will need to be added to the forecast in the future. Commissioner Gupta queried if there is a sense of what percentage impact that had on the forecast. Assistant Director Bilir responded if the gas utility rate is increased by 1 percent, it will result in $700,000 per year. It would take 4 percent one time to recover $3 million every year in the future. Commissioner Gupta asked if money is being spent to maintain something that is actively being studied for decommissioning. Assistant Director Bilir indicated the team was not prepared to answer that question but would convey the information to the team working on that. Director Kurotori stated they are federally regulated to actively manage, invest, and maintain the gas system to provide that service to customers and will continue to do so. The Sustainability and Climate Action team has worked up an initial look at a gas transition study. The distribution models have been updated for the gas utility. More work needs to be done. Looking at the gas transition study, a reduction in terms of the distribution system was not seen until more customers left the system. There are active conversations with Sustainability and Climate Action programs in terms of how fast the customers electrify. The California Public Utilities Commission is looking at potential pilots in the investor-owned utilities. As public-owned utilities, they are monitoring, commenting on, and getting feedback on what the private investor-owned utilities are doing. Commissioner Gupta questioned if obsolescence can be planned if investments are not made required to maintain the system and plan end of life for the system. Chair Scharff thought that was a good question to ask the consultant. Commissioner Tucher observed they were investing more in a business that is in decline and with considerations of decommissioning it. Commissioner Gupta asked for an explanation of CIP salaries and benefits on packet page 15 in the table for projected CIP spending. Assistant Director Bilir explained the City has made a budget decision to move toward splitting out salaries and benefits. It is a fluctuation as a result of the transition. Director Kurotori added it acknowledges there are staff working on capital projects. Utilities Advisory Commission Summary Minutes – March 31, 2026 Page 4 of 14 Commissioner Metz suggested it would be helpful to see all the gas reserves on one chart showing the minimum, maximum, and target levels and queried if the expectation was still for the gas commodity costs to decline 4 percent. Assistant Director Bilir stated that is a combination of the price and quantity. Analysists looking at this information have not seen a large fluctuation for what is expected. Commissioner Metz advised to consider recommending City Council reduce the CPA payout in order to get the target increase more in the 5 to 6 percent range. Chair Scharff thought it would be helpful for Staff to summarize what is driving the different increases and decreases. Assistant Director Bilir said one thing driving the increase is the lower gas quantities of sales that are anticipated relative to the previous forecast. There is a construction year coming up for CIP increasing costs. Commissioner Phillips asked if the assumption in the forecast is that gas unit prices are going down 3 percent and consumption is going down 1 percent so total commodity expenditure is being reduced by 4 percent per year. Assistant Director Bilir replied the sales are forecasted to decline about 4 percent over the total period. The price is expected to decline on average by 2 percent per year. In the recent price spikes seen in the broader markets for gas have not yet affected Palo Alto. What is seen on a national level is not always what is seen in Palo Alto but price projections are monitored for the best forecast. Commissioner Phillips observed the U.S. gas market is detached from the world market. Director Kurotori confirmed that to be correct. Vice Chair Mauter mentioned a grant that represents about 27 percent of annual gas utility expenditure and commented it would not be good to curtail any of the CIP investment. There is a regulatory commitment to maintaining gas safety. These are large gas mains going through the city, not individual service lines to individual houses that are being upgraded. Even if a gas decommissioning plan was to be adopted in the future, the large gas mains in the City will not be decommissioned within the useful lifespan of the infrastructure that is currently being proposed. Director Kurotori stated it is a fair assessment that this grant will be used to replace the aging infrastructure that provides gas service to a bulk of the community. There are not excess reserves in the capital program. They are trying to build those reserves up. The reason for the lumpy changes in terms of the rate requests to the Commission and City Council is because there are not reserves to rely on. Commissioner Tucher asked if taking or safeguarding the $16 million grant has any bearing on that fact they are investing expense and CapEx in this utility that is in decline. Chair Scharff stated it requires them to do the CIP. Vice Chair Mauter explained the typical CIP expenditure is less than $16.5 million a year on average. This is an entire year's worth of CIP expenditure that will have to be done anyway in order to maintain safety of the system. When City Council makes decisions about a gas decommissioning, there will be a separate conversation. Director Kurotori stated grant funding projects are projects that had been submitted and would need to be done in the future anyway. The grants are valuable to the rate payers in terms of that reinvestment. It shows a spike in terms of the revenues. That could be misinterpreted so that Utilities Advisory Commission Summary Minutes – March 31, 2026 Page 5 of 14 bump in increase on the graph is taking that into account. Vice Chair Mauter said it also requires they continue to spend on capital at the same rate which means the rates cannot be decreased. Director Kurotori replied there is a baseline commitment being held to as part of that grant. The grant is on top. It is not a substitute. Vice Chair Mauter queried if the Crossbore inspection program is finished. Aaron Perkins, Principal Engineer – WGW Utilities, responded out of the 995 addresses brought to the UAC in the past, Operations has been going around and inspecting those in-house. About 50 percent have been cleared with operational staff which means any of the remaining ones that required work they were not able to perform will go out to a contract. Vice Chair Mauter asked about the annual cost. Mr. Perkins answered it is in the operating budget. Commissioner Phillips was uncomfortable with the 14.5 percent increase on distribution costs. CIP and reserves are potential levers. The 18 percent should be discussed. The Staff recommendation is so open ended it should not be included in the resolution. Councilmember Lauing wanted feedback on the 18 percent transfer. It is $5 million that cannot be put into other services in the City. If it is put into utilities to keep the rates down, it does not go anywhere else. It is a valid discussion for Council to have. Commissioner Croft asked if the effect of the heat wave on the gas revenue has been taken into account. Assistant Director Bilir replied the most recent information is based on a weather normalized forecast using a statistically adjusted end use model provided by the consultant. The month of March and the impact the heat wave may have had has not been incorporated that in this forecast. Commissioner Croft would rather push people on the prices of the electric side and water than gas. Chair Scharff found the load forecast difficult to process and wanted to see the difference between the weather and how many people are switching broken out. The downward trend on the chart looks made up. Assistant Director Bilir explained weather normalization looks at individual years where the temperature was known and then adjust what the sales would have been for a longer time period. Attaching memos describing the full analytical analysis and regression equation that shows what those coefficients are for each of the things are might be helpful for the next year. Chair Scharff asked about the decline and what drives it. Assistant Director Bilir is about 1.1 percent per year. When working with the consultant, there were two scenarios. One without the high level of electrification and one with. The scenario selected was with the higher level of electrification assumed. Chair Scharff queried if the low level of electrification would change the suggestion on where rates should be for 2026. Assistant Director Bilir replied it would not affect the rate proposal in the short term. The trajectory might change in the more cumulative longer time period. Chair Scharff asked how much lower the rate increase would be if building up the reserves was emphasized less. Assistant Director Bilir pointed out a table on packet page 20 that gives a full picture of the funds available for other purposes. Utilities Advisory Commission Summary Minutes – March 31, 2026 Page 6 of 14 Commissioner Phillips wanted to know what will happen to the rest of the operations reserve that is not moved to the distribution rate stabilization. Assistant Director Bilir answered 2027 is a construction year for CIP. CIP is spread over different years and can be lumpy in terms of the investment. Commissioner Phillips asked how the level of CIP impacts the money in the reserve at the beginning and end of the year. Assistant Director Bilir stated the change in the reserve from the beginning to the end of the year has to do with the amount of revenue and expenses Utility experiences during the year including the revenue and expenses and the investment that Utility makes in capital assets. All of the costs and revenues go through the operations reserve. The CIP reserve requires Council approval to move funds in or out of the reserve. From one year to the next, there is not enough to put into the CIP reserve. It will be spent in 2027. As a cleanup item, there could be a recommendation to transfer some of the operating dollars into the CIP reserve in 2026 and take them out in 2027 for the purpose of CIP. Commissioner Gupta queried how much wiggle room there is on timing of these projects. Vice Director Kurotori stated they have to maintain the same level of commitment to get the $16.5 million. There is no wiggle room past the current commitment which is the current expenditures for the gas main replacement. Mr. Perkins added the GMR 25 original budget was $9.8 million. The grant is specific to GMR 25. The original budget for the original GMR 25 was split in half and applied to GMR 26 and 27. Chair Scharff asked if there was a spike in the general transfer fund last year. Assistant Director Bilir stated it spiked up in 2025 based on the actual revenue in 2023, which was the gas price spike year. Kiely Nose, Assistant City Manager, stated there are general fund transfers from the electric and gas utilities. The gas utility was affirmed by the voters and is based on a gross percentage of revenues. The electric transfer is based on a formula that was established many years ago and ultimately was upheld when we went through the recent litigation that changed the gas transfer. That is a transfer made from the electric utility to the general fund annually. These transfers are about $27 million combined. It is based on asset values, rate of return from other utilities, and available revenues eligible to be transferred under this formula. Commissioner Croft inquired if there is any discretion to change the electric transfer. Assistant City Manager Nose replied the Council can do a change in policy at its pleasure. There is high risk for litigation so they would want to look at that in greater detail before relooking at the structure of that. The structure of the electric one was upheld in recent litigation. Assistant City Manager Nose reminded the Commission that the general fund is looking at about a $15 million deficit this year. As part of the budget proposals, they will come back with service cuts. Any additional reduction in this transfer will mean additional service cuts. Chair Scharff wanted to know why they were not getting rid of the meter reader positions. Assistant City Manager Nose responded AMI is not fully rolled out yet. They are making the eliminations as that transition is being made. Once that is fully rolled out, further staffing adjustments will be made. Director Kurotori added there will still be needs for meter techs so there will still be some staff for that. Utilities Advisory Commission Summary Minutes – March 31, 2026 Page 7 of 14 Commissioner Croft did not support the resolution believing there may be less demand. Commissioner Tucher on the basis that it is a business in decline. Vice Chair Mauter recalled being conscientious about not doing any CIP because commodity charges were peaking over the past couple of years and focused on keeping rates low. Those were charges they did not have control over because they were pass-through charges. They under-invested in reserves and CIP. This is the implication of that and the receipt of an external grant to support this. A transition toward electrification is desirable but not at the expense of safety. Chair Scharff added it is a minor decline. It is not leading to decommissioning or shutting down the utility by 2040. It depends on where it goes beyond that. Commissioner Gupta indicated the City was about to spend hundreds of millions of dollars in order to electrify the City and transition away from gas and ultimately decommission it. There is a lot of work going on in the City on planning around sustainability goals. The $16.5 million tied to the federal grant is fine but would alternatively propose pushing CIP except just one year except for that. The 18 percent transfer is one of the few levers to disincentivize gas and recommended studying reducing transfers from the electric utility further. MOTION: Commissioner Phillips moved, seconded by Vice Chair Mauter, to recommend that the City Council adopt a resolution (Attachment A): 1. Approving the Fiscal Year 2027 Gas Utility Financial Forecast shown in this staff report and attachments, which includes amending the Gas Utility Reserve Management Practices; and 2. Approving the transfer of up to $1.5 million from the Gas Utility Operations Reserve to the Distribution Rate Stabilization Reserve at the end of FY 2026; and 3. Maintain a rate increase of no more than 7% through a combination of reducing the General Fund Transfer and potentially using other levers such as reserve levels; and 4. Amending Rate Schedules (Attachment A, Exhibit 1) effective July 1, 2026 (FY2027) by 7%. a. G-1 (Residential Gas Service) b. G-2 (Residential Master-Metered and Commercial Gas Service) c. G-3 (Large Commercial Gas Service) MOTION PASSED: 4-3, Croft, Gupta, Tucher no ITEM 3: ACTION: Staff Recommends the Utilities Advisory Commission Recommend that the City Council Adopt a Resolution Approving the FY 2027 Electric Financial Forecast, including Approving a Reserve Transfers, and Amending Electric Rate Schedules E-1 (Residential Electric Service), E-1 TOU (Residential Time of Use Electric Service), E-2 (Residential Master-Metered and Small Non-Residential Electric Service), E-2-G (Residential Master-Metered and Small Non- Residential Green Power Electric Service), E-4 (Medium Non-Residential Electric Service), E-4-G (Medium Non-Residential Green Power Electric Service), E-4 TOU (Medium Non-Residential Time of Use Electric Service), E-7 (Large Non-Residential Electric Service), E-7-G (Large Non- Residential Green Power Electric Service), E-7 TOU (Large Non-Residential Time of Use Electric Utilities Advisory Commission Summary Minutes – March 31, 2026 Page 8 of 14 Service), E-14 (Street Lights), E-16 (Unmetered Electric Service), E-EEC-1 (Export Electricity Compensation), and E-NSE-1 (Net Metering Net Surplus Electricity Compensation); CEQA Status: Not a project. under CEQA Guidelines Section 15378(b)(5) Terry Crowley, Utilities Chief Operating Officer, provided a slide presentation including electric utility at a glance, purpose of rate adjustments, and value of utility services and how funds are used. Assistant Director Bilir joined the presentation including electric utility cost structure: Average FY 2024-2025, electric cost and revenue projections, electric bill comparisons, electric operations reserve projection, electric utility CIP spending, electric bill impact, communication and outreach summary, recently implemented cost containment, summary of electric rate proposal, residential median bill projections, and electric recommendation. Chair Scharff asked about determining a median residential customer. Assistant Director Bilir replied it is calculated based on the median usage of all residential customers. Chair Scharff requested to see a breakdown in terms of distribution curve on a chart. Commissioner Croft suggested using a histogram of usage brackets with the effect of the change. Mr. Crowley pointed out table 11 in the staff report that shows residential rates and various usages ranging from 300 kilowatt hours per month. Director Kurotori clarified the request is for a histogram of the distribution of customers. Commissioner Croft wanted to know how hydro versus renewable versus the market rate compares to each other. Lena Perkins, Utilities Strategic Business Manager, replied there is no short answer because hydro variability is basically a market mover across the whole west. In a big hydro year, all of California's electricity is cheaper. About 50 percent of the portfolio is hydro and about 20 percent of California's supply is hydro. That is why the hydro rate stabilization reserve exists. The overall supply, including transmission, is around $95 million a year. If transmission is $35 million of that, then dollars per kilowatt for supply is around six and a half cents currently. Commissioner Croft asked if excluding hydro and looking at renewables versus market was easier to talk about. Ms. Perkins answered renewables are required by the state. They are no longer trying to have a higher renewable percentage than the state but the required renewable percentage is like 52 percent. That requirement drives a price premium for renewables versus market. That is what a renewable can be purchased for on the open market. Commissioner Croft queried if they are required to get the power purchase agreements because of the state requirement. Ms. Perkins stated there is a carbon neutral plan on top of that. Given it is about 50 percent hydro in an average hydro year and sometimes below, eventually renewables will be required to be 60 percent. In a wet year, there is an exemption to go below that. One of the ways that exemption has been preserved is by being a good actor in the renewable space. Hydro overall lowers the cost from market and renewables. The power purchase agreements have a little bit of the investment tax credit baked in and look to be some of the most affordable. There were a number of responses last year. They got a battery but no power. Utilities Advisory Commission Summary Minutes – March 31, 2026 Page 9 of 14 Commissioner Croft asked about the time of use rate increase. Assistant Director Bilir explained there was not a new time of use cost of service analysis. It was increased by the appropriate rate increase. Commissioner Croft asked if the 6 percent increase is warranted. Assistant Director Bilir responded the rate increase for all rates is approached through an across the board rate increase when there is not a cost of service study. The cost of service study was last done in July or August 2025. It will be revisited soon. Director Kurotori added the time of use rates are supposed to be revenue neutral in theory. There is no cross subsidy. It is appropriate to raise them up at the same time as other rates. Commissioner Phillips referred to packet page 130 and asked for explanation of rising administration costs. Director Kurotori said when cost increases are done, they are acknowledging other departments are being used. There is a cost allocation study in terms of the support provided to the utilities. There are significant efficiencies in use of public works for the line clearing program. The same staff manages the tree trimming program for street trees and line clearing. Commissioner Gupta inquired if the City is doing a cost of service type of study on allocated charges for the citywide level. Assistant City Manager Nose will check with the administrative services team. Cost allocation is looked at annually as part of the budget process. Vice Chair Mauter wanted to be cognizant of presenting rates in the absence of presenting inflation. Policies could be changed in order to talk about rate increases relative to the appropriate metric for Santa Clara County. Vice Chair Mauter wanted to be sure there is a way to translate between gas decline and the impact on increase in electric power consumption. Assistant Director Bilir explained when gas regression is forecast, it is not known if those units are one to one because of electrification. In the load forecast for the electric utility, that has been considered and taken into account. Vice Chair Mauter wanted to ensure there is a formalized process for making when looking at declines in gas, the implications of increase in electric are being accounted for. Ms. Perkins clarified because heat pumps get three to one, one unit of gas saved only gets a third of a unit of additional electricity. It is baked in. It is linear at this point in the training period. Vice Chair Mauter observed that recent discussions on data centers and the potential projected new load growth will not significantly increase the marginal cost of power production. These projections are insensitive to what might happen over the next year or two on that front. Commissioner Phillips stated this was discussed in the subcommittee and small increases would not increase the marginal cost and decrease residential rates. Vice Chair Mauter opined they should start with the subcommittee report in the future. Chair Scharff asked if there is a sense of the hydro for next year. Ms. Perkins replied the upcoming year will not be as good as the past year. There has been some load growth. There is instability in the market. Reservoirs have a design storage of a three to five year drought. Some Utilities Advisory Commission Summary Minutes – March 31, 2026 Page 10 of 14 of the worst parts of hydroelectric generation are after three years of a drought when a big reservoir is sitting empty and it is filled instead of releasing anything. Commissioner Gupta had questions about grid mod and debt service. Assistant Director Bilir said the pink and red sections identify the magnitude of the grid modernization debt. Commissioner Gupta queried if they are being targeted on investments on grid mod. Mr. Crowley answered this plan represents what was presented to UAC a month or two ago. It spreads those expenditures out over time and trying to meet the customer's pace for electrification. There is focus on some of the legacy equipment in service right now. One challenge is that while there are plans to do some work, material lead times are planned at three to four years out resulting in a spike in expenditures in 2030. They will continue to revise and optimize this number for cost savings. Commissioners Phillips and Croft covered the subcommittee's discussions about rates in general, data centers, and rebates to relatively low income customers. Vice Chair Mauter asked if there is broad support of the subcommittee for the proposed rate increases. Commissioner Croft supported the 1 year 6 percent increase for 2027. Commissioner Phillips was convinced the 6 percent is right. Commissioner Tucher was in support of the 6 percent but would like more analysis. Commissioner Metz asked for the analysis about the future rate impacts of data centers. Director Kurotori replied a presentation with that information had been brought to this body. There will be more discussions moving forward. Commissioner Metz inquired what happens to rates if the future load is greater than the FY27 expected forecast. Director Kurotori explained industrial or commercial is 80 percent of the service. A larger customer has a benefit to all customers because of where they are sited and capacity of the system. Palo Alto has plans of looking at the costs associated with a data center coming in so there is some insulation with that in existing customers. There are models other cities are using on capacity fees that have been discussed with this Commission to look at. They can also bring in their own energy contracts. This forecast is used for infrastructure. Commissioner Metz wanted to see an analysis of the rate impact at the standard forecast and at the high end of the envelope. Chair Scharff requested agendizing understanding how reserves are done in the City and utilities. Director Kurotori indicated the Policy and Services Committee will hear the report from Baker Tilly on the reserve on April 14th. It will be made public. Assistant City Manager Nose requested the Commission choose someone to represent them at the Finance Committee when these items move forward on April 21. Commissioner Phillips agreed to attend. MOTION: Vice Chair Mauter moved, seconded by Commissioner Croft, to recommend that the City Council adopt a resolution (Attachment A): Utilities Advisory Commission Summary Minutes – March 31, 2026 Page 11 of 14 1. Approving the Fiscal Year 2027 Electric Utility Financial Forecast shown in this staff report and attachments,; and 2. Approving the transfer at the end of FY 2026 of up to $5 million from the Electric Utility Distribution Operations Reserve to the Electric Utility Capital Reserve; and Amending Electric Rate Schedules (Attachment A, Exhibit 1) effective July 1, 2026 (FY 2027): a. E-1 (Residential Electric Service) b. E-1 TOU (Residential Time of Use Electric Service) c. E-2 (Residential Master-Metered and Small Non-Residential Electric Service) d. E-2-G (Residential Master-Metered and Small Non-Residential Green Power Electric Service e. E-4 (Medium Non-Residential Electric Service) f. E-4-G (Medium Non-Residential Green Power Electric Service) g. E-4 TOU (Medium Non-Residential Time of Use Electric Service) h. E-7 (Large Non-Residential Electric Service) i. E-7-G (Large Non-Residential Green Power Electric Service) j. E-7 TOU (Large Non-Residential Time of Use Electric Service) k. E-14 (Street Lights) l. E-EEC-1 (Export Electricity Compensation) to reflect forecasted avoided cost for FY 2027, and m. E-NSE-1 (Net Metering Net Surplus Electricity Compensation) to reflect avoided cost for CY 2025. MOTION PASSED: 6-1, Metz no ITEM 4: DISCUSSION: Preliminary Information on the City of Palo Alto's (City) 2025 Urban Water Management Plan (2025 UWMP) Adriana Artola, Utilities Senior Resources Planner, provided a slide presentation including the purpose and agenda, background, required inputs, long-term water demand projections, historical and projected demand comparisons, water reliability assessment, water use restrictions, recycled water and alternative water supplies, and stakeholder engagement/next steps. Public Comment 1. Peter D. mentioned the SFPUC's design drought, encouraged Palo Alto to create their own table for the five-year dry year sequence and incorporate it into the Urban Water Management Plan, and indicated it is time to move on from the design drought. 2. Dave W. echoed the previous public speaker's comments. The SFPUC, water management representative, and City Council should be pressed to do a risk analysis. Utilities Advisory Commission Summary Minutes – March 31, 2026 Page 12 of 14 Chair Scharff asked what leeway there is in the City doing their own design drought. Assistant Director Bilir understood the code requires them to use the information from SFPUC and Urban Water Management Plan. They may be able to include information from Peter Drekmeier or someone else if Council directs. The information would need to be vetted and brought to the SFPUC to ask them to provide different information. Director Kurotori stated they would create another alternate analysis that would stand alone from the Urban Water Management Plan knowing there are guidelines and thresholds that have to be provided. The other 26 BAWSCA agencies used San Francisco's information in the Urban Water Management Plan. Chair Scharff wanted to understand where alternative scenarios go. Assistant Director Bilir stated there is not staff or knowledge to come up with a different scenario. There would be need to hire a consultant or put together a budget to figure out how to vet the information provided. The next step after vetting would be to bring it to SFPUC to see if they can revise their forecast. Chair Scharff asked if Staff is suggesting recommending the City hire a consultant to vet what Mr. Drekmeier says. Director Kurotori indicated if they were to run the analysis given the provided information by the Yosemite Rivers Alliance, that analysis could be done. It would be separate from the Urban Water Management Plan. Commissioner Phillips and Chair Scharff questioned what feedback is being requested. Ms. Artola said the intention is to provide the opportunity for questions and concerns because this has been a big topic with a lot of public interest. Commissioner Phillips inquired if the Commission could use different assumptions for internal planning. Assistant Director Bilir answered there have historically been integrated water resources plans in the utilities department. Those have been done periodically. Before doing any alternative water supply investments, they would look at an integrated water resources plan in addition to capital planning. The regional level with SFPUC is going through their alternative water supply planning and will be relying on additional analyses in order to do that. Although the Urban Water Management Plans are useful in terms of their statewide requirements and being able to look at information statewide across urban water suppliers, they will not rely on this for any investment type decisions. Commissioner Metz asked if this is viewed as a regulatory requirement or a plan. Ms. Artola replied it is viewed as a regulatory requirement. The Urban Water Management Plan includes the Water Shortage Contingency Plan. It outlines the actions the City will take during different drought stages. The updated plan will be presented at the May meeting. Commissioner Croft commented the forecast seemed reasonable, urged to do the non- functional turf ban in 2027, and asked if it would be reasonable to come up with an alternative design drought. Vice Chair Mauter wanted to see more detail in the new demand study and have it linked in the final packet and wanted to know why the numbers provided by Casey Brown are not being used. Director Kurotori stated there was an update in 2025. The research partner was SFPUC. Chair Scharff requested Staff be familiarized with this before it comes back in May. Utilities Advisory Commission Summary Minutes – March 31, 2026 Page 13 of 14 Vice Chair Mauter wanted to see clear relationship in the demand study to how temperature is changing. It would be helpful to have the rate of demand increase and rebound validated by AMI data specific to Palo Alto and snowmelt data. Vice Chair Mauter wanted to ensure Council and the Commission is being educated about what is happening around the Bay. Commissioner Phillips suggested they could change the tone of the Urban Water Management Plan. A second plan not dependent on the same assumptions is desired looking at the alternatives within the market and region that could ameliorate the risk by using different forecasting methodologies, etc. The Commissioner wanted to see the demand model that was used in detail and run it. Commissioner Gupta thought there is a broad support in developing their own numbers with the help of academics. They should approach SFPUC with the alternative numbers and ask them to show the work on the numbers they have. Commissioner Gupta requested to have the SFPUC's design drought code sent and wanted to know what alternative water supplies are being built by other BAWSC members and if those plans are incorporated in SFPUC's plans. They should be looking at other agencies who are not using SFPUC's plans in their Urban Water Management Plans. The Commissioner wanted to confirm there is no one water planning or alternative water investments being planned or approved through this process. Ms. Artola confirmed that to be correct. Chair Scharff asked about the distinction of non-functional turf and about delaying the non- functional turf ban. Ms. Artola responded it is state law. The City must adopt an updated ordinance by January 1, 2027. The implementation is phased. The City could adopt a more aggressive timeline if directed by Council. Director Kurotori explained there have been a lot of conversations and consistency with state law and the rollout. Government sites are first then commercial and then the HOAs. Going faster than that would require more outreach. They are actively engaging in those conversations with other water retailers. Assistant Director Bilir explained non-functional turf is defined by the state. If used for recreation, it is considered functional. If it is next to certain distance of trees and providing tree health it is considered functional. Chair Scharff asked about Mr. Drekmeier's thoughts on the Urban Water Management Plan. Mr. Drekmeier stated everyone is going to pass their plans. It is an opportunity to make a statement and get answers to their questions. Chair Scharff supported Vice Chair Mauter's point with using Casey Brown and was not in favor of spending huge amounts on a consultant to vet this. Commissioner Tucher was not proposing any outside study. The only constructive thing to do is come up with a plan to persuade SFPUC to come to the table and show its work, share its assumptions, and engage in a more collaborative approach to drought planning. Vice Chair Mauter understood that Casey was the source of a lot of information for SFPUC in those Utilities Advisory Commission Summary Minutes – March 31, 2026 Page 14 of 14 projections. There is documentation they have not been able to review. They can highlight things they disagree with. They could approach SFPUC more collaboratively with specific asks of value judgments baked in and specific questions about technical assumptions that would kickstart constructive dialogue. They need to work collaboratively with SFPUC and BAWCA member agencies to come up with an affordable and resilient water supply plan. NO ACTION TAKEN COMMISSIONER COMMENTS AND REPORTS FROM MEETINGS/EVENTS None. ADJOURNMENT Adjournment: The meeting was adjourned at 10:06 p.m.