Silicon Valley Clean Energy Board of Directors
August 12, 2026

Staff Report – Item 2j
Item 2j: Receive Executive Committee Report
To: Silicon Valley Clean Energy Board of Directors
Prepared by: Pat Showalter, Executive Committee Chair
Date: 8/12/2026
The Silicon Valley Clean Energy (SVCE) Executive Committee (Committee) met June 26, 2026 with five out of six members present and considered the following: 1) the Integrated Decarbonization Roadmap, and 2) 2026 SVCE and Electrification Awareness Residential Customer Survey Results.

Zoe Elizabeth, Director of Decarbonization Policy and Community Strategies, presented an overview of the Integrated Decarbonization Roadmap with a request for input from the Committee to develop SVCE’s 2045 vision statement and role in achieving that vision. The Committee discussed the values identified by staff (comprehensive and exclusive, safer and healthier, affordable and accessible, community-centered, and people-focused) and transition phases. Staff noted a study session incorporating the feedback provided would be planned for a future Board meeting.

Pamela Leonard, Deputy Director of Marketing and Communications, and Shawn Orgel-Olson, Programs Marketing Manager, presented an informational item on the 2025 annual residential customer survey results and key takeaways. These results will also be shared with the Board of Directors at the August 12, 2026 Board of Directors meeting.

Materials from this meeting can be found on SVCE’s website: SVCE Executive Committee Meeting, June 26, 2026
The next meeting of the Executive Committee will be held August 28, 2026 at 10:00 a.m.; materials will be posted no later than 72 hours in advance of the meeting.

Item 2j

Staff Report – Item 2k
Item 2k: Receive 2026 Legislative Ad Hoc Committee Report To: Silicon Valley Clean Energy Board of Directors
Prepared by: Pat Showalter, Committee Chair
Date: 8/12/2026
The 2026 Legislative Ad Hoc Committee (Committee) met virtually Monday, July 20, 2026 with four members present:

Committee Chair Pat Showalter
Committee Vice Chair Zach Hilton
Director Bryan Mekechuk
Alternate Director Tina Walia
Director Yvonne Martinez Beltran and Director Barbadillo were absent.

The Committee received information from staff on the state and federal legislative landscape and priority legislation aligned with SVCE’s 2026 Legislative Policy Platform and focus areas.

The next meeting of the Committee is expected to take place in October and will be scheduled based on member availability.

Item 2k

Staff Report – Item 2l

Item 2l: Receive Additional Committees Report
To: Silicon Valley Clean Energy Board of Directors
Prepared by: Andrea Pizano, Sr. Executive Assistant and Board Clerk Date: 8/12/2026
There is no report for the Finance and Administration Committee and Audit Committee, as they have not met since the last report. The Finance and Administration Committee will meet in August 2026, and the Audit Committee will meet in September/October 2026, based on member availability.

Materials for these meetings will be posted 72 hours in advance of the meeting date.

Item 2k

Staff Report – Item 2m
Item 2m: Receive California Community Power Report
To: Silicon Valley Clean Energy Board of Directors
From: Monica Padilla, CEO
Date: 8/12/2026
Per direction from the Silicon Valley Clean Energy (SVCE) Board of Directors (Board) on December 9, 2020 for the Chief Executive Officer to provide a report of the ongoing activities of California Community Power (CC Power) after each of its meetings, this is to report CC Power’s June 17 and July 18, 2026 meetings were canceled.

On June 18, 2026, CC Power hosted a ribbon-cutting event in Rosamond, CA celebrating the Tumbleweed Energy Storage project. The project is the first eight-hour utility-scale battery energy storage system in California.

Select staff and Chair Klein represented SVCE at the event; other participating CC Power members include CleanPowerSF, Redwood Coast Energy Authority, San Jose Clean Energy, Sonoma Clean Power, Valley Clean Energy, and Westlight Energy (formerly Peninsula Clean Energy).

The next meeting of the CC Power board will be August 19, 2026 at 1:00 p.m.; meeting materials can be found on the CC Power website: https://cacommunitypower.org/meetings/ Item 2m

Staff Report – Item 2n
Item 2n: Receive California Community Choice Financing Authority Report To: Silicon Valley Clean Energy Board of Directors
From: Monica Padilla, CEO
Date: 8/12/2026
The California Community Choice Financing Authority (CCCFA) is a Joint Powers Authority established to reduce the cost of power purchases for CCAs through pre-payment structures. Silicon Valley Clean Energy (SVCE) was a founding member in 2021, along with Central Coast Community Energy, Clean Power Alliance, Ava Community Energy (formerly East Bay Community Energy), and Marin Clean Energy. This report is intended to provide an update on the monthly meetings of the CCCFA Board.

The CCCFA held a regular board meeting on Thursday, June 25, 2026 and addressed the following:
• Approval of a resolution authorizing the amendment of certain existing energy prepayment transaction documents;
• Ava bond issuance authorization;
• Approval of a resolution authorizing the issuance of one or more series of clean energy project revenue bonds in an aggregate principal amount not to exceed $900,000,000 to finance the acquisition of a long-term supply of electricity for Desert Community Energy and Redwood Coast Energy Authority and other matters relating thereto;
• Revenue options for CCCFA fees; and
• An update from the General Manager’s Working Group.

Materials from this meeting can be found on CCCFA’s website: CCCFA Meeting, 6/25/26 This is the first report to the SVCE Board on CCCFA activities. Going forward, staff will provide monthly updates to the Board as part of the consent agenda. The next meeting of the CCCFA board will be August 27, 2026 at 1:00 p.m.; meeting materials can be found on the CCCFA website: https://www.cccfa.org/board-meetings.html Item 2n

Staff Report – Item 2o
Item 2o: Authorize the Chief Executive Officer to Amend the Agreement with SERA Design and Architecture Inc. for Planning, Architecture, & Design Services for Silicon Valley Clean Energy Headquarters and Increase the Not-to-Exceed Amount from $660,000 to $726,000
From: Monica Padilla, CEO
Prepared by: Zoe Elizabeth, Director of Decarbonization Policy & Community Strategy Date: 8/12/2026

RECOMMENDATION
Staff requests the Silicon Valley Clean Energy (SVCE) Board of Directors (Board) authorize the Chief Executive Officer (CEO) to negotiate, execute, and administer amendments to the contract with SERA Design and Architecture Inc. (“SERA”) for Planning, Architecture, and Design Services for a total not-to-exceed of $726,000, an increase of $66,000.

The Board had previously authorized the CEO to execute an agreement for such services in an amount not to exceed $660,000 with a 10% contingency. Staff reviewed the authority and misread the approval to be $660,000 plus a 10% contingency. Under this misinterpretation, staff issued a contract amendment with SERA, bringing the contract NTE to $698,855. While staff has not yet paid out invoices in excess of the authorized $660,000, staff needs the increased dollar authority to complete the new building renovation project.

BACKGROUND
At the June 2025 SVCE Board meeting, the SVCE Board delegated authority to the CEO to “negotiate, execute and administer changes to a contract for Planning, Architecture, and Design Services with a vendor to-be-determined in an amount not-to-exceed (NTE) $660,000, inclusive of a ten percent (10%) contingency to support the development of SVCE’s new headquarters at 298 S. Sunnyvale Avenue.” (Item 5).

Through a competitive solicitation process that included interviewing six firms, SVCE contracted with SERA.

The firm developed project plans, supported the permitting process, and is providing ongoing design oversight throughout construction. The scope of service increased to include furniture and art design oversight, the construction timeline is extended until September (originally scheduled for June 30), and several non-essential elements (e.g., sound insulation and art installation) will not be finalized until later in the fall, after SVCE staff has moved in. The coordination with the builders and modifications to the project has required more time than previously anticipated from the architect team. For these reasons, the expected expenditures will exceed the original $660,000 originally approved, but no more than $726,000.

ANALYSIS & DISCUSSION
Under the delegated authority, SVCE contracted SERA for a limited scope for a NTE amount of $490,543. As the work progressed, it became clear that more services were needed to fully support the intent of the project. Staff amended the contract to add $135,032, increasing the NTE to $625,575 in October 2025. As construction delays increased in June 2026, SERA’s role became more critical to get the construction timeline on track and to provide additional detailed oversight to the construction team, particularly critical path lighting Item 2o
Agenda Item: 2o Agenda Date: 8/12/2026

design and installation. On July 22, staff executed a second amendment for $73,280, increasing the NTE to $698,855. As noted above, this was inadvertently in excess of the existing Board delegated authority. SVCE has not yet paid any invoices in excess of the authorized amount. To date, staff have approved $619,000 in invoices. Given project delays that will bring staff’s move-in date to September and full completion of peripheral design work later into the fall and the critical role that SERA is playing in overseeing many elements of construction including adherence to design plans, the additional $66,000 in delegated spending authority is necessary to complete the project.

STRATEGIC PLAN
Expanding the new office space falls under SVCE’s Strategic Focus Area 5 to Attract & Retain Employees.

ALTERNATIVE
Staff can cease work with SERA and halt spending. Staff does not recommend this alternative given that SERA is leading several critical activities that are needed to ensure the building is operational by the anticipated September move-in date.

FISCAL IMPACT
The Board of Directors established the Building Fund and allocated $20 million to support the purchase and development of SVCE’s new headquarters in the March 2024 Board of Directors meeting (SVCE Board of Directors meeting, March 13, 2025, Item 4). The Board subsequently approved an additional $5.5 million to be added to the Building Fund at the December 2025 Board of Directors meeting (SVCE Board of Directors meeting, December 10, 2025, Item 5). SERA’s contract, including this additional request, is within the overall Building Fund and approved Fiscal Year 2025-2026 Operating Budget.

Item 2o

Staff Report – Item 3
Item 3: CEO Report
To: Silicon Valley Clean Energy Board of Directors
Prepared by: Monica Padilla, CEO
Date: 8/12/2026
REPORT
Staff Update
Silicon Valley Clean Energy (SVCE) welcomed three summer interns in June:

Cheyenne Lippe
Cheyenne joined SVCE as a Community Engagement Intern.

Chris Ndungu
Chris will be supporting the Customer Success team as a Demand Flexibility Analytics Intern.

Sonia LeMonier
Sonia will be working on SVCE’s programs team this summer as a Decarb Programs Intern.

In addition to SVCE’s summer interns, two additional full-time employees joined:

Alon Robbins
Alon Robbins started July 20, 2026 as SVCE’s Associate Power Settlements Analyst. Alon is a familiar face, as he was first introduced to SVCE as an intern on SVCE’s programs team in 2025 Summer cohort. He recently completed his master’s degree in Environmental Science and Management at Bren School at UC Santa Barbara, specializing in Energy & Climate and Business & Sustainability.

Tatiana Makoni
Tatiana Makoni joined SVCE August 4, 2026, as Senior Administrative Assistant. Tatiana previously served as the Senior Records Clerk with the Oakland California Temple and holds a B.A. in Political Science and Economics. She is currently pursuing a Master of Archives and Records Administration (MARA) at San Jose State University and is completing an internship with the City of Brisbane as the City Clerk Records Manager Intern this summer.

Promotions
Marvin Jiang has been promoted from an Associate Finance, Data, and Risk Analyst to Finance, Data, and Risk Analyst in the Finance and Data team. In his new position, Marvin will continue supporting the same variety of activities in which he has demonstrated strong capability, while also taking on additional duties related to financial operations.

Personnel Officer Update
Vacancies & Recruitment
Item 3
Agenda Item: 3 Agenda Date: 8/12/2026

Vacancies
SVCE has two positions under review for a backfill of the Senior Finance and Data Analyst and Manager of Finance positions. SVCE also carries one part-time headcount that is not currently active.

Recruitment
SVCE is currently recruiting for three full-time roles: Key Accounts Manager (final stages), Manager of Decarbonization Planning and Strategy (interview stage), and Manager of IT (application stage).

SVCE is also interviewing for two fellowships with SEI for the 2026/2027 Cohort (final stages): Decarbonization Data Analyst in the Finance Analytics and Data Department, and Community Engagement Coordinator in the Customer Success Department.

Job postings for positions in the application stage can be found on SVCE’s website: Current Job Openings Power Resources & Clean Energy Update
Current expected clean percentage for SVCE in 2026 is 104%. For 2027 SVCE is expected to be 101% clean. For 2028, the expected clean position is 90%.

Aratina [80/50MW solar+storage] project did reach commercial operation on Wednesday 7/22/2026. The resource will contribute 6-7% of SVCE Renewable Portfolio Standard. SVCE now has sixteen long-term clean contracts in operation.

As part of the CAISO Interconnection Process Enhancement stakeholder process, SVCE has launched its Queue Cluster 16 solicitation. This process will allow SVCE to assign commercial interest points (CIP) to projects that they think provide value to SVCEs portfolio. In addition to looking for new build resources, SVCE is looking for existing resources that could fit SVCEs' needs.

Attachment 1 provides a summary of clean energy procurement and development progress.

Budget and Financial Outlook Update
Treasurer’s Report: The Board packet includes the Treasurer’s report (Item 2b), which indicates that SVCE’s Total Net Position increased from $522.6 million to $527.6 million compared to the prior month’s report, reflecting SVCE’s $4.9 million net income in June, which was $3.2 million larger than the -$1.8 million monthly net income anticipated in the Mid-Year budget. Slightly higher revenues due to potential favorable changes in load profile, combined with lower energy prices and savings from other operating expenses, contributed to better than budgeted results for the month of June.

Customer Success Department Updates
EV Charging Rebates Expand to Serve Multifamily, Businesses, and Publicly Accessible LocationsIn June 2026, SVCE’s EV Charging Rebate Program expanded eligibility to include multifamily properties, businesses, and publicly accessible locations. With this expansion, the program aims to scale local EV charging to meet community needs, fill funding gaps, and encourage more daytime charging. Simplified flat rebates of $2,500- $5,500 for Level 1 and Level 2 chargers are now available to eligible properties, covering up to 100% of total project costs (up from 75%). Additionally, the City of Mountain View Adder Rebate went live on June 30, 2026, offering an additional $2,000-$3,000 per charger rebate for multifamily properties, layered on top of SVCE’s rebates.

Customers can learn more at https://svcleanenergy.org/ev-charging-rebates.

Bonus Rebates Drive Strong Interest in Home Rebates and Full-Service Home Upgrade Programs SVCE offered its first limited-term $500 bonus heat pump water heater (HPWH) rebate for customers reserving rebates between May 1 through June 30. This bonus was stacked with the new standard HPWH $2,500 rebate (up from $2,000), for a total of $3,000. The promotion generated 300 new Home Rebates applications (an increase of ~200% from May-June 2025), and 28 committed Full-Service Home Upgrade direct installation projects with several more in the pipeline. The next bonus campaign will be from September 1 through October 31.

Item 3
Agenda Item: 3 Agenda Date: 8/12/2026

Annual EmpowerSV Scholarship Competition Winners
SVCE held another successful annual student scholarship competition. Each year, the competition evolves to try and increase participation from schools throughout the SVCE service area. This year had very high participation with 19 entries, including from new schools, as the competition was an art contest, making it more accessible to more grades.

There were categories for students from K-12 to participate and submit art for the theme "Powering Communities." High school students were asked to design an art piece for display in the new SVCE headquarters, and elementary school students were asked to design a sticker for use at community events.

Local Sunnyvale students will receive recognition for their submissions. The scholarship recipients include Chloe D., a rising senior at Homestead High School, and Rihaan P., a rising 5th grader at Stocklmeir Elementary School.

Press and Media
Press Releases
• Silicon Valley Business Journal Recognizes SV Clean Energy CEO Monica Padilla as Woman of Influence, 5-29-26
• Santa Clara County Students Receive Scholarships from SV Clean Energy Art Competition, 7-02-26 Media Mentions
• A single evening plug-in across millions of U.S. driveways is part of the load surge pushing the five-year peak forecast to 166 gigawatts, and the math that could erase most of that cost has utilities racing to reach your car before you do, GCN, 7-27-26
• Avantus completes Aratina 1, secures phase 2 financing, targets 952 MWh of solar-charged storage, PV Magazine, 7-22-26
• Avantus’ Aratina 1 solar-storage project goes live in California, Energy Innovation Review, 7-21-26 • Avantus completes 1st phase of Aratina solar + storage project in California, Solar Power World, 7-20- 26 • Avantus’ Aratina 1 Solar Project Powers More Than 105,000 California Homes, Energy Magz, 7-21-26 • Avantus’ Aratina 1 Project Officially Online, Generating Enough Clean, Reliable Energy to Power 105,000 California Homes, Avantus, 7-20-26
• Letter: Promotion of clean cars brings hope, Gilroy Dispatch, 7-09-26 • Letters: Critics are using scare tactics to stop switch to electric, The Mercury News, 7-07-26 • Gilroy EV show promotes benefits of cleaner road travel, Gilroy Dispatch, 7-02-26 • Guest View: Uninformed criticism of data center plan is misleading, Gilroy Dispatch, 7-01-26 • Mountain View doubles funding for heat pump water heater rebates, Mountain View Voice, 6-18-26 • SunZia Wind Project Goes Live: Single Farm Lifted California Grid Record by 20 Percent, 6-15-26 • Op-Ed: Hakhamaneshi: Why I walked away from a $4,000 water heater rebate, San Jose Spotlight, 6- 15-26
• REV Renewables and Northern California Community Choice Aggregators Launch First-Ever Eight-Hour Energy Storage Project in California, Informed Infrastructure, 5-29-26 • California’s Community Choice Aggregators are leading the way on energy storage, PV Magazine, 5- 29-26
Recent & Upcoming Events
August 4 – Royal Court Apartments National
Night Out
- Tabling
- Time TBA
August 4 – SNAIL National Night Out
- Sponsorship, tabling, and powering stage
- 5 p.m. - sundown
- 400 block of E. Arbor Ave
Item 3
Agenda Item: 3 Agenda Date: 8/12/2026

- 17925 Monterey Rd, Morgan Hill, CA
95037
August 8 – SVYCA Summit
- Panelist, sponsorship, and tabling
- 9 a.m. – 3 p.m.
- Cupertino Quinlan Community Center
August 29 – CUHSD Summit
- Tabling
- 9 a.m. - 1 p.m.
- Location TBA
August 29 – Sunnyvale Library Community
Grant Ribbon Cutting
- Photobooth sponsorship and tabling
- 10 a.m. – 5 p.m.
- 760 Lakechime Dr, Sunnyvale, CA 94089
August 29 – Electrification Collaboration
Resource Fair
- Panelist
- 10:30 a.m. - 1 p.m.
- Cupertino Library, 10800 Torre Ave,
Cupertino, CA 95014
September 12 – Silicon Valley Fall Festival
- Sponsorship
- 10 a.m. – 7 p.m.
- Memorial Park, 21121 Stevens Creek Blvd,
95014
September 12-13 – Mountain View Arts &
Wine Festival
- Dream Home, sponsorship, and tabling
(tentative)
- September 12 from 11 a.m. to 7 p.m. and
September 13 from 10 a.m. to 6 p.m.
- Downtown Mountain View
Regulatory & Legislative Update
Regulatory:

Power Charge Indifference Adjustment (PCIA): The 3
rd District Court of Appeal denied CalCCA’s appeal of the California Public Utilities Commission’s (CPUC) June 2025 Track 1 Decision that updated the methodology for calculating the market-price benchmark (MPB) for resource adequacy. The appeal argued that the CPUC engaged in retroactive ratemaking by applying the new methodology to the 2025 ERRA proceeding. CalCCA will now appeal the decision to the California Supreme Court.

Legislative:

At the state level, AB 1761 (Rogers) to provide data transparency around the PCIA, a CalCCA-sponsored and SVCE-supported bill, passed out of the Senate Energy, Utilities, and Communications Committee, and is awaiting a vote in the Senate Appropriations Committee. SB 1138 (Padilla) to allow Resource Adequacy obligation trading, a CalCCA-sponsored and SVCE-supported bill, passed out of the Assembly Utilities and Energy Committee, and is awaiting a vote in the Assembly Appropriations Committee. SVCE is working closely with CalCCA to ensure the passage of the bills.

SVCE had an Oppose Unless Amended position on AB 2383 (Zbur), a bill that would direct the California Public Utilities Commission to set tariffs for large-loads and data centers. However, CalCCA was able to negotiate significant aments to address the jurisdictional issues in AB 2383, and both CalCCA and SVCE moved to a neutral position.

On the federal level, the Federal Energy Regulatory Commission (FERC) issued a “show cause” order to six regional transmission and independent system operators. FERC found that the tariffs of these organizations, including the California Independent System Operator (CAISO) have unjust and unreasonable tariffs for large loads that fail to interconnect them in a timely and fair way. On July 22, 2026, CAISO responded in a report which notes that the California Energy Commission’s demand forecast includes significant data center load and that the California Public Utilities Commission has ordered load serving entities to procure additional resources, partially in response to anticipated increase in data center loads.

On July 2, 2026, the Department of Energy released a Notice of Proposed Rulemaking to update energy efficiency standards for home appliances including gas stoves and water heaters. SVCE is working with the national CCA trade association, the Community Choice Energy Alliance, to respond to this rulemaking.

Item 3
Agenda Item: 3 Agenda Date: 8/12/2026

Attachment 2 contains a summary of current regulatory proceedings and legislative initiatives SVCE staff are either participating in or monitoring.

New SVCE Headquarters
Construction on the new SVCE Headquarters started in February. As of July 31, SVCE has fully moved out of 333 W El Camino Real #330, Sunnyvale, CA. Due to unforeseen delays, the construction timeline was pushed back by a few weeks, with an estimated completion in late August. Staff will be fully remote until move-in in September and have reserved an external space for committee meetings in the meantime. The project remains on budget.

Strategic Plan – FY 2025-2027 Quarter 3 Update
On September 10, 2025, the SVCE Board of Directors adopted the five Strategic Focus Areas and Strategic Plan for fiscal years 2025-2027. Attachment 3 provides the highlights of the accomplishments and progress on the Strategic Focus Areas and Strategic Plan for the third quarter, April – June 2026. The Senior Leadership Team met recently to review the goals and measures of the current Strategic Plan to assess if the goals are still relevant; if there are any substantive changes, they will be presented to the Board before the end of the year.

Look Ahead Update
Staff continues to plan for Board and committee meetings for the year. Below is a preview of what’s ahead for the Board from September through November 2026:

Upcoming Events

1. August 31: Upcoming Air District Regulations: What Elected Officials Need to Know

ATTACHMENTS

1. SVCE Clean Power Update, August 2026

2. Regulatory and Legislative Update, August 2026

3. Q3 Strategic Focus Areas and Strategic Plan Progress and Accomplishments Item 3
Agenda Item: 3 Agenda Date: 8/12/2026

Exhibit 1 - CEO Agreements Executed Under Delegated Authority The following agreements have been executed by the CEO or their delegate, consistent with the authority delegated by the Board:

Type Consultant Description Compensation Term Authority Agreement

CITY OF MOUNTAIN
VIEW
Member Agency Grant
Program NTE - $379,921
6/3/2026 -
12/31/2028
BOD
approved
3/2024
Agreement Peter Mustacich
Decarb Roadmap
Development NTE - $100,000
7/1/2026 -
10/31/2026
CEO
Spending
Authority
Agreement dryvIQ Sharepoint Migration NTE- $32,047
6/10/2026 -
9/31/2026
CEO
Spending
Authority
Amendment Acterra
Education Nonprofit
Grant Agreement no new money
extending
term
12/31/2026
BOD
Approved
10/9/2024
Agreement Locus Environmental
Carb GHG Verification
Services for Data Year
2025 NTE - $8720.00
6/16/2026 -
6/1/2027
CEO
Spending
Authority
Amendment
KMVT15 Mountain View
Community Television Professional Video
Production Services
increased NTE
to $40,000
extending
term
12/31/2026
CEO
Spending
Authority
Amendment
Cohen Ventures, Inc.,
dba Energy Solutions
For Residential
Accessible On-Bill
Financing Pilot
Support
increased NTE
from vendor to
SVCE to
$918000
extending
term
3/31/2027
BOD
approved
8/14/2024
Agreement Ecology Action
Electric Vehicle
Charging Technical
Assistance Services NTE - $900,000
6/24/2026 -
6/21/2029
BOD
approved
6/10/2026
Task Order
E Source (formerly
Opinion Dynamics)
Data Analytics
Support – Hourly Flex
Pricing Pilot EM&V NTE - $96,680
no change in
term
BOD
Approved
(12/13/23)
Amendment
Municipal Resource
Group Consulting Services NTE- $109,250
no change in
term
CEO
Spending
Authority
Item 3

Exhibit 2 - CEO Power Supply Agreements Executed Under Delegated Authority Counterparty Name Execution/Effective
Date Transaction Type Product Start Date End Date Notional Value 3PR Trading, Inc 6/11/2026 Sale Resource Adequacy 8/1/2026 8/31/2026 $76,500 Shell Energy North
America (US), L.P. 6/17/2026 Purchase Carbon Free Energy 1/1/2030 12/31/2030 $1,050,000 Brookfield Renewable
Trading and Marketing LP 6/18/2026 Purchase Carbon Free Energy 1/1/2028 12/31/2028 $925,000 Morgan Staley Capital
Group Inc. 6/29/2026 Purchase Carbon Free Energy 1/1/2028 12/31/2029 $4,225,000 Peninsula Clean Energy
Authority 6/29/2026 Sale Resource Adequacy 9/1/2026 9/30/2026 $29,400 Clean Power Alliance of
Southern California 7/1/2026 Sale Resource Adequacy 9/1/2026 9/30/2026 $294,000 Item 3
• Subtitle
New SV Clean Energy
PowerPoint Template
CEO Report
Clean Power Update
SVCE Board Meeting
August 12, 2026
Item 3
Attachment 1
Clean Power Update, August 2026
2 California’s Clean Energy Goals
SVCE’s
procurement
targets are
primarily driven
by regulatory
requirements
and Board goals
• 60% Renewable Energy by 2030 SB100 • 100% Carbon Free by 2045 • 65% of Renewable Energy must be from Long-Term SB350 (10yr or more) contracts • Mid-Term Reliability
• Established by the CPUC to focus on securing
sufficient online resources to meet expected demand
in the coming few years
MTR
• 100% Clean – annually, with line losses
• 75% Renewable by 2030
• 100% Renewable by 2035 (adopted late 2024)
SVCE
BOD
Item 3
Attachment 1
Clean Power Update, August 2026
3 SVCE is On Track to Meet SB100 and Agency Goals
for Clean and RPS…
Item 3
Attachment 1
Clean Power Update, August 2026
4 And Making Significant Progress Toward Meeting
Long-Term RPS Targets
SB350 is a multi-year compliance
period obligation,
which has interim
annual targets
• Currently in Compliance Period 5: 2025-2027
9%
6%
1%
3%
3%
4%
4%
7%
7% 45%
31%
% of Retail Sales
CY 2026 Expected Long-Term RPS
Item 3
Attachment 1
Clean Power Update, August 2026
Long-Term Power Purchase Agreements
• $4.2B+ in commitments
• 26 PPAs signed
• 23 new build projects
• 16 projects online and delivering
• 1,000+ MW of Renewable Power
• 2,000+ MWh of Battery Storage
Projects online this year:
• Angela Solar + Storage – May 2026
• SunZia Wind (4 PPAs) – May 2026
• Tumbleweed LDS – June 2026
• Aratina Solar + Storage – June 2026
Item 3
Attachment 1
Clean Power Update, August 2026
Long-Term Contracts: Online
Victory Pass Solar + Storage
Casa Diablo Geothermal
Seller Project Name Technology
Generation
MW Storage MW Storage MWh
Term
(years)
SVCE Board
Approval Online Date
1 MN8 Slate Solar + Storage 93 46.5 186 17 Oct-18 Jan-22 2 Ormat Casa Diablo Geothermal 7.5 15 Feb-20 Jul-22
3 Atlantica Coso Geothermal 43.8 15 Mar-20 Jan-22
4 Leeward Rabbitbrush Solar + Storage 40 8 20 15 Apr-20 Oct-22 5 NextEra Yellow Pine Solar + Storage 50 26 104 20 May-20 Jul-23 6 AES Mountain View Wind 33.3 20 Apr-21 Jul-22
7 Clearway Victory Pass Solar + Storage 100 25 100 15 May-21 Mar-24 8 Terra-Gen Cameron Crest Wind 77.7 15 May-21 Jan-23
9 AES Baldy Mesa (RA-only) Storage 0 75 300 10 Sep-22 Jun-24 10 Middle River
Power Hanford Thermal + BESS 99.4 131.4 131.4 12 Apr-23 Aug-25 11 SB Energy Angela Solar + Storage 20 10 40 15 Mar-21 May-26 12 Pattern SunZia South Wind 70.2 15 Nov-23 May-26
13 Pattern SunZia North Wind 29.8 15 Nov-23 May-26
14 Pattern SunZia South Incremental Wind 17.54 10 May-25 May-26 15 Pattern SunZia North Incremental Wind 7.46 10 May-25 May-26 16 Avantus Aratina Solar + Storage 80 50 200 20 Jun-20 Jul-26 Item 3
Attachment 1
Clean Power Update, August 2026
Long-Term Contracts: In Development
SunZia Wind & Transmission
Seller Project Name Technology
Generation
MW Storage MW Storage MWh
Term
(years)
SVCE Board
Approval Status
1 Origis San Luis West Solar + Storage 62.5 15.625 62.5 15 Apr-21 Pre-construction 2 Rev
Renewables Tumbleweed Long Duration Storage 0 15.9375 127.5 15 Feb-22 Construction 3 Ormat
Geothermal
Portfolio Geothermal 16.75 20 Jun-22 Pre-construction
4 OME Fish Lake Geothermal 1.82 20 Jun-22 Pre-construction 5 NextEra Grace Solar 120 15 Aug-23 Pre-construction
6 NextEra Yellow Pine III Storage 0 24 96 15 Aug-23 Pre-construction 7 NextEra Yellow Pine III Long Duration Storage 0 9 72 15 Apr-25 Pre-construction 8 VCI Energy Garden Green Solar Solar + Storage 50 50 200 10 Oct-24 Pre-construction 9 Intersect Power Darden III Solar + Storage 91.48 91.48 365.92 15 Sep-25 Construction 10 Hydrostor Willow Rock
Long Duration Storage
(Compressed Air) 0 5.7 45.6 20 Jan-26 Pre-construction
Item 3
Attachment 1
Clean Power Update, August 2026
Clean Energy Resources Online Progress
as of July 22, 2026
2026 • San Luis West Solar + Storage: Pre-construction - delayed (from 2025) • Fish Lake Geothermal: Pre-construction
• Grace Solar: Pre-construction
• Ormat Geothermal Portfolio: Pre-construction
2027
• Yellow Pine III Storage: Pre-construction
• Yellow Pine III LDS: Pre-construction
• Darden: Construction mode
2028
• Garden Green Solar: Pre-construction 2029+ • Willow Rock: Pre-construction Item 3
Attachment 1
Clean Power Update, August 2026
THANK YOU!
9 Item 3
Attachment 1
Clean Power Update, August 2026
1 • Subtitle
New SV Clean Energy
PowerPoint Template
SVCE Legislative and
Regulatory Update
August 12, 2026
Item 3
Attachment 2
SVCE Leg/Reg Update, August 2026
2 Policy Updates
Regulatory Update:

1. Timely Energization

2. High Distributed Energy Resources (DER)

3. Billing Modernization

4. Power Charge Indifference Adjustment

5. Integrated Resource Planning
Legislative Update:

1. SVCE’s Bill Positions

2. State Budget Update

3. 2026 Legislative Calendar
Item 3
Attachment 2
SVCE Leg/Reg Update, August 2026
3 Regulatory
Update
3 Item 3
Attachment 2
SVCE Leg/Reg Update, August 2026
4 Key Regulatory Activities
Activity Purpose Status
Timely Energization To implement energization
timelines in California
The CPUC's consultant has issued an analysis of the investor owned utilities' biannual energization reports. The consultant found that the reports have significant amounts of missing data, which make it hard to evaluate whether or not the utilities are adhering to the Commission's timelines for completing service energizations. The consultant also provided recommendations on improvements which would include the adoption of a data sufficiency standard. SVCE, through its trade association, CalCCA is supporting the data sufficiency recommendations and plans to oppose certain recommendations made by the utilities that would change the reports, lessening transparency on progress made to improve energization timelines.

High DER To prepare the grid for the
high number of distributed
energy resources
There have been two Rulings in the High DER case. The first Ruling continues record development for the CPUC to eventually adopt rules expanding further use of Flexible Service Connections (FSCs). FSCs allow customers to connect to the grid even if there are upstream capacity constraints under either static or variable operating limits (sometimes both) earlier than what would have normally been possible. The second Ruling requests party feedback on the contents of a workshop held earlier this summer on the development of a framework for better orchestrating distributed energy resources on the grid. SVCE plans to respond to both Rulings through CalCCA.

Billing Modernization PG&E's application to upgrade
its billing system
On July 9, 2026, PG&E and a group of Joint CCAs (of which SVCE was a part) filed a motion for the Commission to review and approve a settlement agreement in the Billing Modernization case. This settlement represents over a year of work between the settling parties. The settlement contains terms that would make several improvements to the CCA page of a customer's bill as well as to the data sharing between PG&E and CCAs. Other parties have 30 days to file opening comments, after which the settling parties (PG&E and Joint CCAs) would be able to respond to comments or concerns with the settlement.

Item 3
Attachment 2
SVCE Leg/Reg Update, August 2026
5 Key Regulatory Activities
Activity Purpose Status
Power Charge
Indifference Adjustment
Proceeding to Update the
PCIA Methodology
The 3rd District Court of Appeal denied CalCCA’s appeal of the CPUC's June 2025 Track 1 Decision that updated the methodology for calculating the market-price benchmark (MPB) for resource adequacy. The appeal argued that the CPUC engaged in retroactive ratemaking by applying the new methodology to the 2025 ERRA proceeding. CalCCA will now appeal the decision to the California Supreme Court.

Integrated Resource
Planning
Ensure LSEs are collectively
on track to build a reliable
system while meeting CA’s
clean energy targets
At the end of June, the CPUC issued an additional proposal in the Reliable Clean Power Procurement Program (RCPPP). This proposal would require LSEs to procure their load share of the Preferred System Plan each IRP cycle starting with the 2030 IRP. The proposal acknowledges some flexibility is needed for LSE procurement to be viable but does not provide specifics on what this flexibility will be. The proposal also contemplates both specific resource requirements and “attribute” based requirements as possible methods of evaluating compliance.

SVCE is reviewing the proposal and drafting responses which are due to the CPUC on August 14th.

Item 3
Attachment 2
SVCE Leg/Reg Update, August 2026
6 Legislative Update
Item 3
Attachment 2
SVCE Leg/Reg Update, August 2026
7 SVCE Bill Positions
Bill Number Summary SVCE
Position
Position Taken
Under which Board -
Adopted Legislative
Platform Policy
Status
AB 1761
(Rogers)
Requires CPUC to share all
data used in calculation of
the Power Charge
Indifference Adjustments to
CCAs and other
stakeholders.

Support Affordability and
Rates
Senate Appropriations
Committee
SB 1138
(Padilla)
Requires CPUC to allow
load -serving entities to trade
Resource Adequacy
compliance obligations.

Support Affordability and
Rates
Assembly
Appropriations
Committee
Item 3
Attachment 2
SVCE Leg/Reg Update, August 2026
8 SVCE Bill Positions
Bill Number Summary SVCE
Position
Position Taken
Under which Board -
Adopted Legislative
Platform Policy
Status
AB 2313
(Berman)
Requires establishment of
Gas Distribution Service Line
Replacement Alternatives
Program to offer financial
incentives for zero -emission
appliances.

Support Climate Change/Fuel
Switching
Senate Appropriations
Committee
AB 2383
(Zbur)
Requires CPUC to set a large
loads and data center tariff.

Neutral Do No
Harm/Competitive
Equity
Senate Appropriations
Committee
Item 3
Attachment 2
SVCE Leg/Reg Update, August 2026
9 SVCE Bill Positions
Bill Number Summary SVCE
Position
Position Taken
Under which Board -
Adopted Legislative
Platform Policy
Status
AB 2748
(Quirk-Silva)
Reverts electric vehicle
charging standards to the
2022 state building code for
affordable housing
developments.

Neutral Climate Change/Fuel
Switching
Senate Appropriations
Committee
SB 1265
(Richardson)
Establishes the GoGreen
Program as a permanent
statewide financing program
that offers electrification
loans.

Support Climate Change/Fuel
Switching
Died
Item 3
Attachment 2
SVCE Leg/Reg Update, August 2026
10 SVCE Bill Positions
Bill Number Summary SVCE
Position
Position Taken
Under which Board -
Adopted Legislative
Platform Policy
Status
SB 913
(Becker)
Directs state agencies to
enhance existing market -
integrated pathways for
aggregated distributed
energy capacity resources.

Support Clean, Reliable Grid Assembly
Appropriations
Committee
Item 3
Attachment 2
SVCE Leg/Reg Update, August 2026
11 FY ’26 -27 State Budget
Includes modest investments in climate/energy. Does not include funding for building electrification through TECH or Low -income Weatherization Program.

Investment Funding Amount Details
Light -duty EV
Rebates
$135.5 million Funding for new point -of-sale rebates for first -time EV customers.

Heavy -duty EV
Incentives
$135 million Funding for Hybrid Zero=Emission Truck and Bus Voucher program
Demand Side Grid
Support Program
$22 million Shifted unused funding from the Distributed Energy Back -up Generation program to this demand response program.

Geothermal $10 million Funding for exploration, mapping, and development of geothermal. Funding must be matched by non -state
resources.

Item 3
Attachment 2
SVCE Leg/Reg Update, August 2026
12 • January 5 – Legislature Reconvenes
• January 31 – Last day for each house to pass bills introduced in that house in 2025 • February 20 – Last day for bills to be introduced
• April 24 – Last day for policy committees to hear fiscal bills • May 15 – Last day for fiscal committees to hear bills introduced in that house • May 29 – Last day for each house to pass bills introduced in that house • June 15 – Budget bill must pass by midnight
• July 2 – Last day for policy committees to vote on bills • August 14 – Last day for fiscal committees to vote on bills • August 31 – Last day for each house to pass bills
• September 30 – Last day for Governor to sign bills
• November 3 – Statewide General Election
Key 2026 State Legislative Milestones
Item 3
Attachment 2
SVCE Leg/Reg Update, August 2026
Silicon Valley Clean Energy

STRATEGIC PLAN
FY 25-27 Q3 Progress Update
April - June 2026
Strategic Focus Areas
SFA 1: Expand Affordability Efforts
This fall, SVCE will conduct community workshops at local community centers and libraries in South County and Milpitas with our Community Based Organization partner Breathe California.

The plan is to integrate SVCE income-qualified program promotion with the existing services offered by these facilities and cohost 3-4 workshops; other goals include sharing bill and energy efficiency resources and enrolling eligible customers for payment assistance programs.

SFA 2: Expand Clean & Reliable Grid Actions
One of two geothermal power purchase agreements (PPAs) were amended within the authority approved by the Board to help meet the Renewable Portfolio Standard (RPS) and Resource Adequacy (RA) requirements. Assessments on power portfolios were performed for the development of the Integrated Resource Plan submissions of a Preferred Conforming Plan and an Alternate Conforming Plan.

SFA 3: Expand Offerings and C/I Customers
Continued progress in commercial and industrial (C&I) decarbonization programs to deliver gas, electric, and bill savings for these customers. Staff is in the process of hiring a new key account management role that will greatly expand SVCE's engagement with large customers.

Staff continued discussions with local large loads including data centers - evaluating non-standard agreements and alternative default rate designs.

Item 3
Attachment 3
1 SFA 4: Prepare Region for Electrification at
Scale
Four member agencies adopted two-way AC codes that will support electrification at a lower upfront cost. Joint Bay Area CCA group developed a collaborative contractor engagement model program. SVCE increased HPWH rebates to $2,500 and offered a $500 limited-term bonus in May-June, leading to a significant increase in Home Rebate and FSHU program participation.

SFA 5: Attract & Retain Employees
SVCE held its organization-wide quarterly in-person days in June in Los Gatos. Staff reviewed core competencies, received a presentation on how to banish burnout, and engaged in connection activities. SVCE welcomed a Senior Human Resources Manager in June, who has since been reviewing SVCE's current procedures and is developing a human resources workplan.

Item 3
Attachment 3
2 Silicon Valley Clean Energy

STRATEGIC PLAN
FY 25-27 Quarter 3 Progress Update
Goal Accomplishments
Goal 1 - Advance policies
which support SVCE’s
mission to reduce
dependence on fossil fuels.
(SFA1, SFA4)
SVCE is supporting two CalCCA-sponsored bills - AB 1671 (Rogers) on Power Charge Indifference Adjustment data
transparency and SB 1138 (Padilla) on Resource Adequacy transactability. Both bills are still moving through the legislative process. SVCE is also advocating to maintain key affordability tools like municipal tax-exempt financing at the federal level.

Worked through CalCCA to successfully advocate for
changes to data center bills to ensure SVCE can serve data center customers and protect SVCE's Board's ratemaking
authority.

Advocating for AB 2313 (Berman), which would create a
new electrification incentive program instead of certain gas distribution line upgrades.

Goal 2 - Long-term, target
for 100% clean energy
annually by building a
balanced portfolio with
consideration for both
affordability and reliability
while exploring long-term
pathways to clean power
supply. (SFA1, SFA2)
Developed 2026 Integrated Resource Plan for CPUC
compliance. Included two scenarios which achieve 100%
clean annually (with differing RPS levels) with preliminary plans reviewed by the Board in June.

Staff continues to iterate on specific demand flex
programs, and develop strategy for next load management standards (LMS) plan. Staff is beginning to develop
project plan for broader demand flexibility assessments.

Goal 3 - Create a long-term
decarbonization plan that
integrates supply and
demand changes,
opportunities, and
challenges. (SFA1, SFA2)
Staff is on track to bring a draft set of plan
recommendations for the Integrated Decarbonization Plan to the Board in September and for final adoption in
October.

Item 3
Attachment 3
Goal 4 - Acquire power
supply resources in a cost-effective manner to meet
legislative and regulatory
obligations, Board
directives and customer
specific products. (SFA2,
SFA3)
Exploration of mutually beneficial default rate design
specifically for customers with new large loads in the
territory.

Continued analysis and thought leadership on the obtainable value of VPP and demand flexibility resources owned by
SVCE customers to inform the maximum incentives and
dispatch instructions that can be offered. Including potential improvements to current statewide valuations.

Goal 5 - Manage and
optimize load and power
resources to meet
affordability, GHG
reduction and reliability
objectives. (SFA1, SFA2)
The last few months have led to several resources coming online adding to Silicon Valley Clean Energy Portfolio.

Angela, an SB Energy project of 40 MW Solar and 20
MW Battery Energy Storage System (BESS) came
online. This resource is a buyer share resource that is split 50/50 with Central Coast Community Energy
(3CE), making SVCE’ share 20 MW of Solar and 10 MWs
of BESS.

Pattern SunZia a 3,650 MW wind park located in New
Mexico came online. These resource contracts were
jointly negotiated with 3CE and SVCE is holder of 125
MW of the project.

The Rev Renewables Tumbleweed project, a 75 MW
Long Duration Energy Storage (LDES) CC Power project
went commercial. The project has 5 CC Power member
off-takers, SVCE’s share is ~15.94 MW.

The Avantus Aratina project is a combined 200 MWs
solar and 125 MWs BESS. The project was jointly
negotiated with 3CE, of which SVCE gets 40% (80 MWs
Solar and 50 MW BESS).

In total this brings 245 MW of generation and ~76 MW of storage into SVCE’s portfolio.

Goal 6 - Maintain healthy
financial position; avoid
failures in management of
market risk, credit risk,
liquidity risk, operational
risks, and enterprise risks.

SVCE financial liquidity remains strong. Through Financial Levers analysis, the Board proactively approved a playbook to further enhance SVCE's finances if needed, given an
outlook of rising PCIA.

Staff is working to mitigate a significant liquidity drop resulting from large collateral postings to PG&E by using a surety bond to meet the financial security requirements.

Staff is developing Power Prepay Strategies that can also significantly increase savings and enhance SVCE finances.

Item 3
Attachment 3
Goal 7: Support all SVCE
communities to
decarbonize through
local investments that
reduce barriers and
demonstrate sensible,
scalable, and equitable
solutions. (SFA1, SFA2,
SFA3, SFA4)
SVCE completed its first $500 bonus HPWH rebate from 5/1 - 6/30. This bonus stacked with the new standard HPWH
$2,500 rebate (up from $2,000), for a total of $3,000. The promotion generated 300 new Home Rebates applications
for HPWH (an increase of ~200% from May-June 2025), and 28 committed Full-Service Home Upgrade projects with
several more in the pipeline.

In June, SVCE’s EV Charging Rebate Program expanded
eligibility to include multifamily properties, businesses, and publicly accessible locations. With this expansion, the program aims to scale local EV charging to meet
community needs, fill funding gaps, and encourage more
daytime charging. Additionally, the City of Mountain View Adder Rebate was implemented to offer an additional
$2,000-$3,000 per charger rebate for multifamily
properties, layered on top of SVCE’s rebates.

Continued work with a handful of large customers to sign non-standard pricing agreements to lock in clean supply benefits and support local decarbonization projects at these sites.

Goal 8 - Engage
customers and
community stakeholders
to build trust of SVCE
and advance
decarbonization. (SFA1,
SFA3, SFA4)
Earth Month was a success with 11 events and engaging
over 1,000 with the SVCE Dream Home.

The inaugural SVCE EV Ride and Drive was event held in
Gilroy on June 27. Collaborating with CBO partner, Breathe California, SVCE facilitated nearly 60 test drives over the course of four hours, attracting a little over 100 attendees.

The event also garnered positive EV articles in the Gilroy Dispatch, furthering the reach of the event to the local community.

Item 3
Attachment 3
Goal 9 - Implement
industry best practices to
enable data-driven
decision making across
the organization;
enhance systems,
standards and
procedures to streamline
business processes and
improve operational
effectiveness and
reliability (aka SVCE 3.0).

Policy and Standards review and updates are largely
complete, with many policies being reviewed and approved by the Board in June. Staff continues to refine the internal process for review.

The RADaR project (Repository for Analytics, Data, and
Reporting), phase 1 will be complete in 2026.

Goal 10 - Hire, retain and
develop high-performing
talent via competitive
benefits and rewarding
work culture. (SFA5)
The Operations team has changed SVCE's benefits broker
to get a fresh set of eyes on our benefits program.

Acquired Lattice as it's new performance management
platform to strengthen employee development and
feedback.

Hosted two HR Essentials trainings for supervisory and
potential supervisory staff, building foundational
management and compliance skills.

Hosted an in-person De-escalation Training for on-site staff and those partaking in community outreach.

Item 3
Attachment 3

Staff Report – Item 4
Item 4: Receive Silicon Valley Clean Energy Audit Committee Resignation from Director Bryan Mekechuk and Appoint Members to Serve on the 2026 Silicon Valley Clean Energy Audit Committee
From: Monica Padilla, CEO
Prepared by: Andrea Pizano, Sr. Executive Assistant/Board Clerk Date: 8/12/2026

RECOMMENDATION
Staff recommends the Silicon Valley Clean Energy (SVCE) Board of Directors (Board) receive Director Bryan Mekechuk’s resignation from the SVCE Audit Committee and consider appointing additional members to serve on the 2026 Silicon Valley Clean Energy Audit Committee.

BACKGROUND
Per SVCE’s Operating Rules and Regulations, annual appointments for SVCE’s Executive Committee were made in January and remaining committees (2026 Legislative Response to Industry Transition Ad Hoc Committee, Finance and Administration Committee, and Audit Committee) were appointed in February. The Board conducted a second round of appointments in May 2026 to provide an opportunity for additional members to be added to committees with open seats.

When making these committee appointments, Director Mekechuk announced his intention to resign from the Audit Committee once the FY 2024-2025 financial audit was complete.

ANALYSIS & DISCUSSION
Staff received Director Mekechuk’s verbal notice of Audit Committee resignation at the June 10, 2026 Board meeting and formal resignation letter on June 30, 2026 (Attachment 1).

Following is the remaining 2026 Audit Committee roster:

1. Committee member Harjot Sangha (Vice Chair), Gilroy

2. Committee member Jessie Kim, Los Altos

3. Director George Tyson, Los Altos Hills

4. Committee member Dat Nguyen, Morgan Hill
With Director Mekechuk’s resignation, Alternate Director Terry McCarthy expressed interest in filling Director Mekechuk’s seat (Attachment 2). Being that both members represent the City of Monte Sereno, they could not both serve on the committee simultaneously.

Per SVCE’s Operating Rules and Regulations, which were last updated in October 2025, the Audit Committee shall consist of no fewer than three members and no greater than six members. Eligible members shall be Board members, Alternate Board members, and Member Agency Staff.

STRATEGIC PLAN
N/A
Item 4
Agenda Item: 4 Agenda Date: 8/12/2026

ALTERNATIVE
The Board could choose not to appoint additional members and leave the Audit Committee membership at four members. Staff is open to additional alternatives from the Board.

FISCAL IMPACT
No fiscal impact as a result of the proposed membership changes.

ATTACHMENTS

1. Resignation Letter from SVCE’s Audit Committee from Director Bryan Mekechuk

2. Letter of Interest in SVCE’s Audit Committee from Alternate Director Terry McCarthy Item 4
Bryan J. Mekechuk
17509 Via Sereno
Monte Sereno, CA 95030
408.655.0400
[email protected]
June 30, 2026
SVCE Board of Directors
Silicon Valley Clean Energy
333 W. El Camino Real
Suite 330
Sunnyvale, CA 94087
Dear SVCE Board Members:

Re: Resign from SVCE Audit Committee
I have enjoyed serving on SVCE’s Audit Committee and contributing to SVCE’s decarbonization journey to reduce carbon emissions and reduce the consumption of fossil fuels.

The Audit Committee duties for the September 30, 2025 concluded with the acceptance of Sorren’s opinion on the financial statements for the year then ended so it is appropriate for me to resign from the Audit Committee.

At the most recent Board of Directors meeting on June 2026, I announced my resignation – please take this letter as my written resignation from the Audit Committee.

I look forward to staying involved with SVCE as a member of the Executive and Finance Committees.

Sincerely,
Bryan J. Mekechuk
Councilmember, City of Monte Sereno
cc Mr. Terry McCarthy, Alternate Director
Item 4
Attachment 1
1 Andrea Pizano
From:

Sent:

To:

Cc:

Subject:

Terry McCarthy
Tuesday, June 23, 2026 11:29 PM
Andrea Pizano
Monica Padilla; Bryan Mekechuk; Amrit Singh; Michael Callahan Re SVCE audit Committee position
ATTENTION: This message is from an external user. Confidential information such as social security, credit card bank routing, wire transfer and other personally identifiable information should not be transmitted to this user.

For questions, please contact the SVCE IT Department.

Hello Andrea:

I understand that now that Bryan is no longer on the audit committee, that I am eligible.

Not sure if the formal request(if required) for candidates has been sent out, but this is my formal notice that I am interested in the audit committee position.

Regards
Terry McCarthy
Item 4
Attachment 2

Staff Report – Item 5
Item 5: Bay Area Air District Rule 9-6 (Zero NOx Water Heater Standard) Update From: Monica Padilla, CEO
Prepared by: Zoe Elizabeth, Director of Decarbonization Policy and Community Strategies Date: 8/12/2026

RECOMMENDATION
Staff requests the Silicon Valley Clean Energy (SVCE) Board of Directors (Board) receive an informational update on the Bay Area Air District’s (“Air District”) draft amendments to Regulation 9, Rule 6 (Rule 9-6), including the proposed compliance date change, the proposed exemption framework, and SVCE’s role in providing technical input and coordinating with other load serving entities and local agencies in advance of the Air District Board’s tentatively scheduled November 2026 decision.

SVCE has not taken an official position on the Air District’s draft amendments. Staff are not seeking action from the Board either in support or opposition to the Air District’s draft amendments but if directed to do so can return with a recommendation.

BACKGROUND
Rule 9-6 sets nitrogen oxides (NOx) emission standards for natural gas-fired water heaters sold or installed in the Bay Area. It applies at the point of sale and installation only. It does not require anyone to remove or replace a working water heater, and it does not cover any other appliance.

In March 2023, the Bay Area Air District adopted a zero NOx standard for these water heaters, effective January 1, 2027. Because only electric appliances currently meet a zero NOx standard, this effectively requires a heat pump water heater at the point of replacement. The Air District has estimated that its 2023 water heater and furnace standards together would prevent up to 85 premature deaths and avoid up to $890 million in health impacts each year.

At its Board’s direction, the Air District studied the cost and readiness challenges of the standard and has since run a public process to add flexibility before the rule takes effect. That process produced draft amendments now out for public comment.

ANALYSIS & DISCUSSION
Where Things Stand
The Air District released draft amendments in July 2026. Public comments are due August 13, 2026, and the Air District Board is tentatively scheduled to decide in November 2026. The current January 1, 2027 date stays in effect unless the Board acts. In summary, the draft would:
• Delay the standard by one year, moving the small water heater deadline to January 1, 2028 (and larger commercial units to 2033).
• Create targeted exemptions for property owners who would face the greatest cost or feasibility barriers, issued through a new Air District certificate system.

Item 5
Agenda Item: 5 Agenda Date: 8/12/2026

What Would Be Exempt
The draft focuses relief on the situations where installing an electric unit is hardest or most expensive. At a high level, exemptions are proposed for:
• Low-income and housing cost-burdened property owners. • Properties with space or electrical panel constraints that make a compliant install unusually difficult. • Certain multifamily and deed-restricted affordable housing (time-limited). • Specialized businesses with high hot water demand, such as restaurants and laundries.

Small units (30 gallons or less), mobile home water heaters, and pool and spa heaters fall outside the standard entirely. Exact eligibility rules and thresholds are still being finalized through the comment process.

What This Means for SVCE
• A one-year delay shifts the timing of demand for SVCE’s heat pump water heater rebates and the contractor pipeline into 2028.
• The share of installations that end up exempt is the biggest unknown in forecasting near-term participation. Early Air District estimates suggested a meaningful portion could qualify (up to 38% of water heater projects).
• Many customers who qualify for an exemption are the same customers eligible for SVCE and partner incentives that can make an electric install affordable, which is a natural handoff for our programs.

SVCE’s Role
SVCE is not regulated under Rule 9-6 and has no compliance obligation. Our role is to bring practical, on-the-ground input to the Air District and to help customers and partners prepare. That has taken three forms:
• Technical input. SVCE has shared cost, market readiness, and incentive data through the Air District’s stakeholder process.
• Multi-agency coordination. Staff works with peer CCAs, cities, and partners to prepare our respective customers in a coordinated way so residents across the region get consistent information. • Customer, contractor, and elected official readiness. SVCE’s rebates, Go Electric Advisor, and contractor and community outreach are positioning customers ahead of the deadline. Staff is also co-hosting an "Upcoming Air District Regulations – What Elected Officials Need to Know" workshop for local elected officials on August 31 at Sunnyvale City Hall.

Timeline
• August 13, 2026: Air District public comment period closes. • August 31, 2026: Upcoming Air District Regulations – What Elected Officials Need to Know, Sunnyvale City Hall, 6:00 – 7:30 PM
• November 2026 (tentative): Air District Board decision. • January 1, 2028 (if adopted): standard applies to small water heaters.

Staff will return to the Board with an update after the Air District’s decision, including any program or outreach adjustments needed.

STRATEGIC PLAN
This effort is supports SVCE Strategic Plan Goal 1 – "Advance policies which support SVCE’s mission to reduce dependence on fossil fuels." It supports Goal 7 – "Support all SVCE communities to decarbonize through local investments that reduce barriers and demonstrate sensible, scalable, and equitable solutions" – and Goal 8 – "Engage customers and community stakeholders to build trust of SVCE and advance decarbonization."

ALTERNATIVE
N/A
Item 5
Agenda Item: 5 Agenda Date: 8/12/2026

FISCAL IMPACT
None associated with this item. Adoption of the amendments could affect the timing of program participation and rebate demand in future budget years.

ATTACHMENTS

1. Bay Area Air District, Draft Regulatory Language, Rule 9-6 (revised July 14, 2026).

2. Bay Area Air District, Updated Regulatory Overview: Rule 9-6 Flexibility Amendments (revised July 14, 2026).

Item 5
Bay Area Air Quality Management District March 15, 2023 9-6-1
REGULATION 9

INORGANIC GASEOUS POLLUTANTS
RULE 6

NITROGEN OXIDES EMISSIONS FROM

NATURAL GAS-FIRED BOILERS AND WATER HEATERS
INDEX
9-6-100 GENERAL
9-6-101 Description
9-6-102 Applicability
9-6-110 Exemptions
9-6-111 Limited Exemption for Qualifying Projects
9-6-112 Time-Limited Exemptions for Water Heaters Larger than 30 gallons and Less than 75,000 BTU/Hour
9-6-113 Limited Exemptions for Licensed Contractor Installations 9-6-114 Limited Exemption for Wholesale Sales
9-6-200 DEFINITIONS
9-6-201 Boilers and Water Heaters
9-6-202 BTU
9-6-2033 Direct-Vent Water Heater
9-6-204 Distributor
9-6-205 Exemption Certificate
9-6-2046 Heat Input
9-6-2057 Heat Output
9-6-208 Hydronic Water Heater
9-6-2069 Instantaneous Water Heater
9-6-210 Licensed Contractor
9-6-211 Low-Income Program
9-6-212 Mobile Home
9-6-20713 Mobile Home Water Heater
9-6-20814 Natural Gas
9-6-20915 NOx Emissions
9-6-21016 Pool/Spa Heater
9-6-21117 Power Direct-Vent Water Heater
9-6-21218 Power-Vent Water Heater
9-6-21319 Rated Heat Input Capacity
9-6-220 Retailer
9-6-21421 Storage Tank Water Heater
9-6-300 STANDARDS
9-6-301 Natural Gas-Fired Storage Tank Water Heaters with a Rated Heat Input Capacity of 75,000 BTU/Hour or Less
9-6-302 Certification of Boilers and Water Heaters
9-6-303 Natural Gas-Fired Boilers and Water Heaters with a Rated Heat Input Capacity of 75,001 to 2,000,000 BTU/Hour
9-6-304 Natural Gas-Fired Mobile Home Water Heaters
9-6-305 Natural Gas-Fired Pool/Spa Heaters
9-6-400 ADMINISTRATIVE REQUIREMENTS
9-6-401 Compliance with Emission Standards
Item 5
Attachment 1
Bay Area Air Quality Management District March 15, 2023 9-6-2
9-6-402 Compliance Statement Equipment Certification
9-6-403 Identification
9-6-404 Interim Report
9-6-405 Exemption Certificate Requirements for Non-Compliant NOx-Emitting Equipment 9-6-406 Reporting Requirements for Temporary Replacement Loaners 9-6-407 Noticing Requirements for NOx Emitting Equipment Offered for Sale 9-6-500 MONITORING AND RECORDS
9-6-501 Recordkeeping Requirements for Water Heater Sellers 9-6-502 Recordkeeping Requirements for Licensed Contractors 9-6-600 MANUAL OF PROCEDURES
9-6-601 Determination of Emissions
Item 5
Attachment 1
Bay Area Air Quality Management District March 15, 2023 9-6-3
REGULATION 9

INORGANIC GASEOUS POLLUTANTS
RULE 6

NITROGEN OXIDES EMISSIONS FROM NATURAL GAS-FIRED BOILERS

AND WATER HEATERS
(Adopted April 1, 1992)
9-6-100 GENERAL
9-6-101 Description: This rule limits the emissions of nitrogen oxides from natural gas-fired water heaters and boilers.
(Amended November 7, 2007)
9-6-102 Applicability: This Rule applies to any person who sells, purchases, installs, or offers for sale a natural gas-fired water heater for use within the District (Section 9-6-300s Standards and Section 9-6-500s Monitoring and Records) and any manufacturer who intends to sells or distributes for sale or installation a natural gas-fired water heater for use within the District (Section 9-6-400s Administrative Requirements, Section 9-6- 500s Monitoring and Records, and Section 9-6-600s Manual of Procedures). (Adopted March 15, 2023)
9-6-110 Exemptions: The requirements of Sections 9-6-301 and 9-6-303.5 shall not apply to the following:
110.1 Natural gas-fired boilers and water heaters with a rated heat input capacity of greater than 2,000,000 BTU/Hour.
110.2 Natural gas-fired water heaters used in recreational vehicles. 110.3 Water heaters using a fuel other than natural gas. 110.4 Natural gas-fired pool/spa heaters with less than 400,000 Btu/Hour rated heat input capacity used exclusively to heat swimming pools, hot tubs or spas. (Amended November 7, 2007)
9-6-111 Limited Exemptions for Qualifying Projects: Notwithstanding the limitations of Sections 9-6-301.5 and 9-6-303.5, any person may install a natural gas-fired water heater that does not meet the requirements specified in Sections 9-6-301.5 and/or 9- 6-303.5 in the following circumstances, provided they obtain an Exemption Certificate pursuant to Section 9-6-405 prior to installation; and any person may sell or purchase a water heater that does not meet the requirements specified in Sections 9-6-301.5 and/or 9-6-303.5 for installation in such circumstances upon presentation of such Exemption Certificate.
111.1 Qualifying Businesses with Specialized Applications and High Hot Water Demand – Installation of a water heater at a business that is classified as a Restaurant, Food Service, Laundry, Dry Cleaner, Healthcare or Assisted Living business, as stated on the business license.
111.2 Ventilation Space Constraint (One-Time) – One-time replacement of an existing natural gas-fired water heater in an enclosed space that (i) is less than 700 cubic feet in volume and (ii) cannot be fitted with a louvered door, transfer grille or air duct(s) because it is not adjacent to a space of greater than 700 cubic feet in volume.
111.3 Ceiling Height Space Constraint (One-Time) – One-time replacement of an existing natural gas-fired water heater in (i) a garage with a ceiling height less than 7.2 feet high or (ii) any other indoor space with ceiling height less than 6 feet high.
111.4 Low-Income Program Qualified Property Owner – Installation of a water heater at a property owned by a person who is a participant in a Low-Income Program as defined in Section 9-6-211.
111.5 Housing Cost Burdened Property Owner – Installation of a water heater at a property owned by a person whose annual property taxes and mortgage - costs are 28 percent or more of annual household gross income.

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The “One-Time” exemptions in Subsections 111.2 and 111.3 shall be limited to a single installation of a water heater that does not comply with the requirements specified in Sections 9-6-301.5 and/or 9-6-303.5 at an installation address. Once a non-compliant water heater has been installed at an address, no further non-compliant water heater may be installed at that installation address pursuant to either of the exemptions in Subsections 111.2 and 111.3 (although other exemptions may still apply). 9-6-112 Time-Limited Exemptions for Water Heaters Larger than 30 gallons and Less than 75,000 BTU/Hour: Notwithstanding the limitations of Section 9-6-301.5, any person may install a natural gas-fired water heater that does not meet the requirements specified in Sections 9-6-301.5 in the following circumstances, provided they obtain an Exemption Certificate pursuant to Section 9-6-405 prior to installation; and any person may sell or purchase a water heater that does not meet the requirements specified in Section 9-6-301.5 for installation in such circumstances upon presentation of such Exemption Certificate.
112.1 Hydronic Units – Installation of a natural gas-fired storage tank hydronic water heater manufactured prior to January 1, 2031.
112.2 Multifamily Buildings – Installation of a water heater manufactured prior to January 1, 2033 in a residential building containing five or more separate dwelling units with separate mailing addresses.
112.3 Deed-Restricted Affordable Housing – Installation of a water heater manufactured prior to January 1, 2033 in a building covered by a Federal, State, or Local Deed Restriction/Regulatory Agreement (e.g. HUD HAP, CA HCD, LITC).
9-6-113 Limited Exemptions for Licensed Contractor Installations: Notwithstanding the limitations of Sections 9-6-301.5 and 9-6-303.5, a Licensed Contractor may install a natural gas-fired water heater that does not meet the requirements specified in Sections 9-6-301.5 and/or 9-6-303.5 in the following circumstances, provided the Licensed Contractor obtains an Exemption Certificate pursuant to Section 9-6-405 prior to installation; and any person may sell or purchase a water heater that does not meet the requirements specified in Sections 9-6-301.5 and/or 9-6-303.5 for installation in such circumstances upon presentation of such Exemption Certificate. 113.1 Contractor-Certified Electrical Constraints (One-Time) – One-time installation of a water heater in a building under any of the following circumstances:

1.1 The building has knob-and-tube wiring and installation of the water heater would require more than 50 feet of conduit connecting the water heater to the electrical panel or subpanel;

1.2 The electrical panel that would serve the water heater is less than 100 amps, or is less than 60 amps for a residential building containing five or more separate dwelling units with separate mailing addresses;

1.3 The water heater would require a new 240v electrical connection with more than 50 feet of conduit; or

1.4 The electrical panel that would serve the water heater has no open circuit breaker space nor expansion slot(s).
113.2 Contractor Temporary Replacement – Replacement of an existing natural gas-fired water heater on a temporary basis pending permanent replacement with a compliant water heater, provided that the Licensed Contractor (i) ensures that the temporary replacement water heater is removed within 12 months after installation and (ii) complies with the reporting requirements specified in Section 9-6-406.

The “One-Time” exemption in Subsection 113.1 shall be limited to a single installation of a water heater that does not comply with the requirements specified in Sections 9- 6-301.5 and/or 9-6-303.5 at an installation address. Once a non-compliant water heater has been installed at an address, no further non-compliant water heater may Item 5
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be installed at that installation address pursuant to either of the exemptions in Subsection 113.1 (although other exemptions may still apply). 9-6-114 Limited Exemption for Wholesale Sales: The limitations of Sections 9-6-301.5 and 9-6-303.5 do not apply to wholesale sales and purchases in which sales tax is not charged.
9-6-200 DEFINITIONS
9-6-201 Boilers and Water Heaters: Any combustion equipment used to heat water or produce steam and that is not exclusively used to produce electricity for sale. For the purposes of this Rule, a boiler does not include any waste heat recovery boiler that is used to recover sensible heat from the exhaust of a combustion turbine or any unfired waste heat recovery boiler that is used to recover sensible from the exhaust of any combustion equipment.
(Adopted November 7, 2007)
9-6-202 BTU: British thermal unit or units.
(Adopted November 7, 2007)
9-6-2033 Direct-Vent Water Heater: A storage tank water heater with air intake and exhaust ducts that use a gravity system to collect air from outside a building for combustion and exhaust combustion byproducts to the outside of a building. (Adopted November 7, 2007)
9-6-204 Distributor: Any business that sells water heaters primarily to retailers, builders, and contractors.
9-6-205 Exemption Certificate: A certificate with a unique authorization number issued by the Air District upon completion of registration pursuant to Section 9-6-405. 9-6-2046 Heat Input: The heat of combustion released by fuels burned in a unit based on the higher heating value of fuel. This does not include the enthalpy of incoming combustion air.
(Adopted November 7, 2007)
9-6-2057 Heat Output: The product obtained by multiplying the recovery efficiency, as defined by Section 6.1.3 of the Code of Federal Regulation, Title 10, Part 430, Subpart B, Appendix E, by the input rating of the water heater.
(Renumbered November 7, 2007)
9-6-208 Hydronic Water Heater: A water heater serving a system that heats water and circulates it through pipes or through an air handler to provide space heating. 9-6-2069 Instantaneous Water Heater: A device in which water is heated only when the water flows through a heat exchanger.
(Adopted November 7, 2007)
9-6-210 Licensed Contractor: A plumber, electrician, heating ventilation & air conditioning (HVAC) contractor, or general contractor licensed through the California Contractors State License Board.
9-6-211 Low-Income Program: Any of the following programs, or other program designated by the APCO as a “Low Income Program” eligible for an exemption under Section 9-6- 111.4:

Covered California Silver 94
Covered California Silver 87
Covered California Silver 73
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Medi-Cal for Adults
Medi-Cal for Pregnant Individuals
Bureau of Indian Affairs General Assistance
CalFresh/SNAP (Food Stamps)
CalWorks (TANF) or Tribal TANF
California Alternate Rates for Energy (CARE)
Family Electric Rate Assistance Program (FERA)
Free or Reduced National School Lunch Program (NSLP)
Head Start Income Eligible (Tribal Only)
Women, Infants and Children (WIC)
Supplemental Security Income (SSI)
Low Income Home Energy Assistance Program (LIHEAP)
9-6-212 Mobile Home: Any home that is a “manufactured home” or “mobile home” as defined in California Health and Safety Code (H&SC) Sections 18007 and 18008. Mobile home does not include a commercial modular, as defined in H&SC Section 18001.8; factory-built housing, as defined in H&SC Section 19971; a manufactured home, as defined in H&SC Section 18007; or a multifamily manufactured home, as defined in H&SC Section 18008.7.
9-6-20713 Mobile Home Water Heater: A closed vessel manufactured exclusively for mobile home use in which water is heated and is withdrawn for use external to the vessel at pressures not exceeding 160 psig, including the apparatus by which heat is generated and all controls and devices necessary to prevent water temperatures from exceeding 210ºF (99ºC).
(Adopted November 7, 2007)
9-6-20814 Natural Gas: A mixture of gaseous hydrocarbons containing at least 80 percent methane by volume as determined according to Standard Method ASTM D1945-64. (Renumbered November 7, 2007)
9-6-20915 NOx Emissions: The sum of nitric oxide and nitrogen dioxide in the flue gas, collectively expressed as nitrogen dioxide.
(Adopted November 7, 2007)
9-6-21016 Pool/Spa Heater: A device in which water is heated when pool or spa water circulates through a heat exchanger.
(Adopted November 7, 2007)
9-6-21117 Power Direct-Vent Water Heater: A storage tank water heater with an air intake duct outside of a building with a blower installed to assist in the expulsion of exhaust gases. (Adopted November 7, 2007)
9-6-21218 Power-Vent Water Heater: A storage tank water heater with an air intake duct outside of a building with a blower installed to assist in the expulsion of exhaust gases. (Adopted November 7, 2007)
9-6-21319 Rated Heat Input Capacity: The heat input capacity specified on the nameplate of the combustion unit.
(Renumbered November 7, 2007)
9-6-220 Retailer: Any business that purchases water heaters from manufacturers, wholesalers or distributors and sells them to individuals, including contractors, for end use and charges sales tax.
9-6-21421 Storage Tank Water Heater: A closed vessel, in which water is heated and is withdrawn for use external to the vessel at pressures not exceeding 160 psig, including the apparatus by which heat is generated and all controls and devices necessary to prevent water temperatures from exceeding 210°F.

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9-6-300 STANDARDS
9-6-301 Natural Gas-Fired Storage Tank Water Heaters with a Rated Heat Input Capacity of 75,000 BTU/Hour or Less:
301.1 No person shall sell, install, or offer for sale within the District any natural gas-fired storage tank water heater, manufactured after July 1, 1992, with a rated heat input capacity of 75,000 BTU/Hour or less, that emits more than 40 nanograms of nitrogen oxides (calculated as NO2) per joule of heat output. 301.2 No person shall sell, install, or offer for sale within the District any natural gas-fired storage tank water heater less than or equal to 50 gallons capacity that is manufactured after January 1, 2009, and that emits more than 10 nanograms of nitrogen oxides (calculated as NO2) per joule of heat output.

This subsection shall not apply to direct-vent, power-vent, power direct-vent water storage tank heaters and water heaters used for mobile homes. 301.3 No person shall sell, install, or offer for sale within the District any natural gas-fired storage tank water heater greater than 530 gallons capacity that is manufactured after January 1, 2010, and that emits more than 10 nanograms of nitrogen oxides (calculated as NO2) per joule of heat output. This subsection shall not apply to direct-vent, power-vent, power direct-vent storage tank water heaters and water heaters used for mobile homes. 301.4 No person shall sell, install, or offer for sale within the District any natural gas-fired storage tank water heater with a capacity of 30 gallons or smaller that is manufactured after January 1, 2011, and that emits more than 10 nanograms of nitrogen oxides (calculated as NO2) per joule of heat output. This subsection shall not apply to water heaters used for mobile homes. 301.5 No Except as provided in Sections 9-6-111 through 114, no person shall purchase, sell or install, or offer for sale within the District any natural gas-fired storage tank water heater that is manufactured after January 1, 20278, with a capacity greater than 30 gallons and a rated heat input capacity rating of 75,000 BTU/hour or less, that emits more than 0 nanograms of nitrogen oxides (calculated as NO2) per joule of heat output. This subsection shall not apply to mobile home water heaters.
(Amended 11/7/07and 3/15/23)
9-6-302 Certification of Boilers and Water Heaters: No person shall purchase, sell or install, or offer for sale within the District any natural gas-fired boiler or water heaters subject to Section 9-6-301, 303, 304, or 305 unless the water heater manufacturer brand name and model is tested and certified in accordance with Sections 9-6-401 and 402. (Amended November 7, 2007)
9-6-303 Natural Gas-Fired Boilers and Water Heaters with a Rated Heat Input Capacity of greater than 75,0001 to 2,000,000 BTU/Hour:
303.1 No person shall sell, install, or offer for sale within the District any large natural gas-fired boiler, storage tank water heater, or instantaneous water heater with a rated heat input capacity of greater than 75,0001 from to 400,000 BTU/Hour, inclusive, manufactured after January 1, 2008, that emits more than 40 nanograms of nitrogen oxides (calculated as NO2) per joule of heat output. 303.2 No person shall sell, install, or offer for sale within the District any large natural gas-fired boiler, storage tank water heater, or instantaneous water heater with a rated heat input capacity of greater than 75,0001 from to 400,000 BTU/Hour, inclusive, manufactured after January 1, 2013, that emits more than 14 nanograms of nitrogen oxides (calculated as NO2) per joule of heat output. 303.3 No person shall sell, install, or offer for sale within the District any large natural gas-fired boiler, storage tank water heater, or instantaneous water heater with a rated heat input capacity of greater than 400,0001 from to 2,000,000 BTU/Hour, inclusive, manufactured after January 1, 2008, that emits more Item 5
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than 20 nanograms of nitrogen oxides (calculated as NO2) per joule of heat output, or more than 30 ppm NOx at 3% O2, dry.
303.4 No person shall sell, install, or offer for sale within the District any large natural gas-fired boiler, storage tank water heater, or instantaneous water heater with a rated heat input capacity of greater than 400,0001 from to 2,000,000 BTU/Hour, inclusive, manufactured after January 1, 2013, that emits more than 14 nanograms of nitrogen oxides (calculated as NO2) per joule of heat output, or more than 20 ppm NOx at 3% O2, dry.
303.5 No Except as provided in Sections 9-6-111 through 114, no person shall purchase, sell or install, or offer for sale within the District any large natural gas-fired boiler, storage tank water heater, or instantaneous water heater with a rated heat input capacity of greater than 75,0001 from to 2,000,000 BTU/Hour, inclusive, manufactured after January 1, 20313, that emits more than 0.0 nanograms of nitrogen oxides (calculated as NO2) per joule of heat output.
(Adopted 11/7/07; Amended 3/15/23)
9-6-304 Natural Gas-Fired Mobile Home Water Heaters: No person shall sell, install, or offer for sale within the District any natural gas-fired mobile home water heater manufactured after January 1, 2008, that emits more than 40 nanograms of nitrogen oxides (calculated as NO2) per joule of heat output.
(Adopted November 7, 2007)
9-6-305 Natural Gas-Fired Pool/Spa Heaters:
305.1 No person shall sell, install, or offer for sale within the District any natural gas-fired pool/spa heater with an input rating from 400,001 to 2,000,000 BTU/Hour, inclusive, manufactured after January 1, 2008, that emits more than 40 nanograms of nitrogen oxides (calculated as NO2) per joule of heat output, or more than 55 ppm NOx at 3% O2, dry.
305.2 No person shall sell, install, or offer for sale within the District any natural gas-fired pool/spa heater with an input rating from 400,001 to 2,000,000 BTU/Hour, inclusive, manufactured after January 1, 2013, that emits more than 14 nanograms of nitrogen oxides (calculated as NO2) per joule of heat output, or more than 20 ppm NOx at 3% O2, dry.
(Adopted November 7, 2007)
9-6-400 ADMINISTRATIVE REQUIREMENTS
9-6-401 Compliance with Emissions Standards: The manufacturer shall obtain confirmation from an independent testing laboratory that each boiler or water heater model it intends to sell or distribute for sale into the District that is subject to the requirements of Sections 9-6-301, 303, 304, or 305 has been tested in accordance with the procedures in Section 9-6-601.
(Amended November 7, 2007)
9-6-402 Compliance StatementEquipment Certification: To certify a boiler or water heater for sale and installation in the District pursuant to Section 9-6-302, the manufacturer shall submit to the APCO either of the following:
402.1 The manufacturer shall submit a statement to the APCO that each the boiler or water heater model meets the emission standard set forth in Section 9-6- 301 or 303. The compliance statement must:
402.1.1 Provide the following general information: name and address of manufacturer, brand name, trade name, model number and heat input rating as it appears on the water heater rating plate. 402.1.2 Provide a description of the model being certified. 402.1.3 Include a complete certification source test report demonstrating that the boiler or water heater model was tested in accordance with procedures in Section 9-6-601 and a written statement that the Item 5
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model complies with Section 9-6-301.1 through 301.4, 303.1 through 303.4, 304, or 305.
402.1.4 Be submitted to the APCO no more than 90 days after the date of the emissions compliance test conducted in accordance with Section 9-6-401.
402.1.5 Be submitted to the APCO no less than 90 days before the intention to selling or distributinge a new water heater model within the District, or no less than 90 days before the effective dates in Section 9-6- 301.1 through 301.4, 303.1 through 303.4, 304, or 305.
402.2 The manufacturer shall submit to the APCO an approved South Coast Air Quality Management District (SCAQMD) certification issued pursuant to SCAQMD Rules 1121 and 1146.2 to demonstrate compliance with Section 9- 6-301.1 through 301.4, 303.1 through 303.4, 304, or 305. (Amended 11/7/07 and 3/15/23)
9-6-403 Identification: The water heater manufacturer shall display No person shall sell, install, or offer for sale within the District any natural gas-fired water heater subject to Section 9-6-301, 303, 304, or 305 unless the model number, and certification status, and date of manufacture of a the water heater complying with this rule is displayed on the shipping carton and on the rating plate of each the unit. (Amended November 7, 2007)
9-6-404 Interim Report: At least two years prior to the compliance date listed in Sections 9-6- 301.5 and 303.5, the APCO shall present to the Air District Board of Directors for consideration at a public meeting a report that includes the technology options currently (and projected to be) available to be sold, installed or offered for sale that do not conflict with the standard in Section 9-6-301.3; the projected costs of purchase and installation of such technology, including any ancillary costs, as applicable; any incentive programs available to reduce these costs; and infrastructure readiness associated with rule compliance.
(Adopted March 15, 2023)

9-6-405 Exemption Certificate Requirements for Non-Compliant NOx-Emitting Equipment: A person seeking an Exemption Certificate to authorize the installation, sale, and purchase of a water heater that does not meet the requirements specified in Sections 9-6-301.5 or 9-6-303.5 shall apply to the APCO, provide the following information, and certify that the information is true and accurate:
405.1 Address where the NOx-emitting water heater will be installed 405.2 Applicant name and contact information
405.3 Information required by the APCO to demonstrate applicability of an exemption under Sections 9-6-111 through 114.

Upon receipt of a complete application with information demonstrating eligibility for an exemption under Sections 9-6-111 through 9-6-114, the APCO shall issue an Exemption Certificate allowing the installation, sale, and purchase of one non-compliant NOx-emitting water heater. 9-6-406 Reporting Requirements for Temporary Replacement Loaners: Any Licensed Contractor that has purchased a NOx emitting water heater under the exemption in Section 9-6-113.2 shall report the serial number of each water heater purchased pursuant to the exemption, its Exemption Certificate number, and any address that the unit was installed at during the prior year to the APCO by January 31st of each year. If any water heater purchased pursuant to Section 9-6-113.2 is sold or disposed of, the annual report must state who the equipment was sold to or how it was disposed of. 9-6-407 Noticing Requirements for NOx Emitting Equipment Offered for Sale: Any person selling or offering for sale any water heater that does not meet the requirements of Sections 9-6-301.5 or 9-6-303.5 must display prominent notice within the vicinity of the following information:

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407.1 Notice that any water heater that does not meet the requirements of Sections 9-6-301.5 and 9-6-303.5 can be purchased and installed only with a valid Exemption Certificate issued pursuant to Section 9-6-405. 407.2 Web address to access Air District information on compliance and registration form to obtain an Exemption Certificate.
9-6-500 MONITORING AND RECORDS
9-6-501 Recordkeeping Requirements for Water Heater Sellers: Beginning January 1, 2028, any person who sells or offers for sale any NOx emitting water heater or boiler subject to this rule shall maintain records of each purchase or sale of a NOx emitting water heater or boiler subject to this rule for a period of at least five years from the date of the purchase or sale, and make these records available to the APCO upon request.

The records must include the following information:
501.1 The date and location of the purchase or sale;
501.2 The sale price and amount of sales tax charged, if any; 501.3 The identity of the seller and purchaser, and whether the purchaser is a reseller or an installer/end user of the water heater or boiler; 501.4 If the sale/purchase of the water heater is covered by an Exemption Certificate under Sections 9-6-111 through 9-6-114, the associated Exemption Certificate number.
9-6-502 Recordkeeping Requirements for Licensed Contractors: Beginning January 1, 2028, any Licensed Contractor who purchases and/or installs a NOx emitting water heater shall maintain records of the date and location of the purchase and/or installation; and if the water heater was purchased and/or installed pursuant to an exemption under Sections 9-6-111 through 9-6-114, the associated Exemption Certificate number. The Licensed Contractor must maintain the records for a period of a least five years from the date of purchase or installation, and make the records available to the APCO upon request. If the License Contractor purchases and installs a water heater subject to this provision, it must maintain records for both the purchase and the installation.
9-6-600 MANUAL OF PROCEDURES
9-6-601 Determination of Emissions: Emissions of oxides of nitrogen from water heaters subject to Section 9-6-301, 303, 304, or 305 shall be tested in accordance with the following provisions:
601.1 Each water heater model shall receive certification based on emission tests of a randomly selected unit of that water heater model.
601.2 The measurement of nitrogen oxides emissions shall be conducted in accordance with EPA Reference Method 7, including 7A-7E. 601.3 Each tested water heater shall be operated in accordance with Section 2.4 of American National Standards ANSI Z21.10.1-1990 at normal test pressure, input rates, and with a five-foot exhaust stack installed during the nitrogen oxides emissions tests.
601.4 The following procedure shall be used to calculate the NOx emission rate in nanograms of NOx per joule of heat output:

HxCxE
x xPxU N
4 10566.4 =
Where:

N = NOx Emission Rate in nanograms of NOx emitted per joule of heat output
P = Concentration of NOx in the flue gas in parts per million (volume) Item 5
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U = Dry volume percent of CO2 in flue gas necessary for stoichiometric combustion
H = Gross heating value of the gas, BTU/ft3 (at 60oF and 30"Hg) C = Dry volume percent of CO2 in flue gas
E = Recovery efficiency, percentage, as defined in Section 6.1.3 of the Code of Federal Regulation, Title 10, Part 430, Subpart B, Appendix E. (Amended 12/7/07 and 3/15/23)
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JULY 2026
Bay Area Air District

REGULATORY DEVELOPMENT DIVISION & PLANNING DIVISION

UPDATED REGULATORY
OVERVIEW: RULE 9-6 DRAFT

FLEXIBILITY AMENDMENTS
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Amy Dao, Advanced
Projects Advisor–
Planning
Eric Lara, Senior Air
Quality Specialist–
Regulatory
Development
Poornima Dixit, PhD
Senior Air Quality
Engineer– Regulatory
Development
Contributors:

Sally Newman, Senior
Air Quality Specialist–
Planning
Richard Chien,
Manager – Planning
Jennifer Lam, Manager – Regulatory
Development
Gregory Nudd, Deputy
Executive Officer –
Policy
Philip Fine, PhD, Air
Pollution Control Officer

PRIMARY AUTHORS

CONTRIBUTORS

REVIEWED BY
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Table of Contents
Executive Summary........................................................................................................ 5 Introduction: Rules 9-4 & 9-6 .......................................................................................... 7 Clarifying Common Misconceptions............................................................................ 8 Health Benefits from Implementing Rules 9-4 & 9-6 Amendments ................................ 8 Background ..................................................................................................................10 Current Status and Compliance Timeline....................................................................10 Implementation Working Group..................................................................................13 IWG Phase 1 Findings ................................................................................................14 Overview of Draft Rule Amendments..............................................................................16 General Provisions and Exemptions............................................................................16 Definitions ................................................................................................................19 Emissions Standards .................................................................................................19 Administrative Requirements .....................................................................................20 Monitoring and Records .............................................................................................20 Economic Considerations .............................................................................................22 Challenging Installations ...........................................................................................22 Average Upfront and Operational Costs ......................................................................22 Socioeconomic Impact Evaluation .............................................................................24 Available Rebates ......................................................................................................25 Summary of Potential Impacts and Considerations.........................................................27 Grid and Reliability Impacts .......................................................................................27 Potential Renter Impacts............................................................................................27 Workforce Development and Availability.....................................................................28 Quantitative Estimates on Number of Exemptions.......................................................28 Health Equity vs. Economic Equity Considerations......................................................30 Appendix A....................................................................................................................33 Appendix B ...................................................................................................................37 References for Income Qualified Calculations ............................................................37 Item 5
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Appendix C ...................................................................................................................38 Sources for Project Constraint Estimates....................................................................38 Appendix D ...................................................................................................................39 Average Estimated Upfront and Incremental Costs......................................................39 Table 1. Simplified Myths Vs. Facts for the Currently Adopted Rule 9-6 ........................ 8 Table 2. Health Benefits from Rule 9-4 & 9-6 ................................................................. 9 Table 3. Current Compliance Schedule for Rules 9-4 and 9-6 ......................................10 Table 4. Post-Adoption Timeline of Regulatory Events for Rules 9-4 & 9-6....................11 Table 5. Technical Research on Implementation Issues ..............................................14 Table 6. Available HPWH rebates in the Bay Area as of March 2026 .............................25 Table 7. Residential Certified Exemptions Expected by Category ................................29 Table 8. Equity Considerations ....................................................................................30 Item 5
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Executive Summary
In March 2023, the Bay Area Air District Board of Directors adopted amendments to Regulation 9, Rule 6 (“Rule 9-6”) that established a zero nitrogen oxides (NOx) standard for all sales and installations of covered water heaters beginning with those manufactured after January 1, 2027. These amendments did not include any flexibilities or exemptions for any potential extenuating circumstances. Over the past two years, Air District Staff have collaborated with stakeholders to develop and refine potential amendments to introduce flexibility into the zero NOx standard, with the intention of easing requirements and potential cost impacts and provide options for an easier transition.

The Air District convened an external Implementation Working Group (IWG) comprised of over 40 members representing a variety of stakeholder segments to identify and compile potential solutions to identify implementation barriers. The IWG’s focus areas included technology readiness, costs, permitting, workforce, grid capacity, and equitable access to incentives and financing. Over 20 IWG meetings were held between May 2023 and August 2024 that informed staff’s December 2024 Board update and subsequent October 2025 preliminary concepts paper for flexibility and affordability amendments.

This Updated Regulatory Overview is being released in tandem with draft amendments to Rule 9-6 for public review and comment in advance of a final rule proposal and anticipated hearing of the Air District Board of Directors in November 2026.

The draft amendments include delayed implementation dates for zero NOx standards for water heaters as follows:

January 1, 2028 Water heaters less than 75,001 BTU/hr1 (typically residential tank water heaters)
January 1, 2033 Water heaters between 75,001 and 2 million BTU/hr (typically commercial and multifamily as well as tankless units)
The draft amendments included in these draft amendments include additional exemptions from the zero NOx standard for:
• Challenging installations due to space constraints (one-time exemption) • Existing electrical system or panel upgrades (one-time exemption) • Low-income qualified property owners
1 BTU/hr means British thermal unit per hour
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• Water heaters with a capacity of less than 30 gallons • Hydronic water heating systems (delay until 2031)
• Multifamily and deed-restricted affordable housing installations (delay until 2033) • Businesses with high-heat demand (Examples: restaurants, healthcare, dry cleaners, etc.)
• Temporary emergency gas water heater installed by licensed contractors The draft amendments also include additional registration, reporting and recordkeeping requirements to ensure compliance with the zero NOx standards and associated exemption provisions.

Staff estimate that the average incremental cost to install a heat pump water heater for a “standard” project is approximately $3,500. Of this, the incremental retail cost of a heat pump water heater as compared to a new natural-gas fired unit ranges from $600 - $1,600.

The remaining cost difference is due to additional labor to install the unit.

Income-based eligibility exemptions for low-income or housing cost burdened property owners would account for approximately 18 percent of installations. Project or building constraints, such as space or electrical limitations, account for another 20 percent of installations.

Staff plans to provide a mobile-friendly website for property owners to request and immediately receive exemptions. The goal is to make that process as fast and seamless as possible while ensuring that rule requirements are met.

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Introduction: Rules 9-4 & 9-6
The Bay Area Air District has two adopted building appliance rules that address pollution from gas fueled equipment in buildings.
2 • Regulation 9, Rule 4: Nitrogen Oxides from Fan Type Residential Central Furnaces, which regulates small residential and commercial furnaces that heat indoor air • Regulation 9, Rule 6: Nitrogen Oxides from Natural Gas-Fired Boilers and Water Heaters regulates natural gas water heaters and small boilers that are used to heat water
• These rules do not apply to gas stoves, laundry drying, or any other appliance that may use natural gas.

Rules 9-4 and 9-6 were first adopted more than 30 years ago to reduce nitrogen oxides (NOx) emissions from these everyday appliances, because NOx contributes to the formation smog and fine particles (i.e. particulate matter, or PM) that result in harmful health effects.

In March 2023, the Board adopted amendments to Rules 9-4 and 9-6 that tighten “point-of-purchase” emission standards for small furnaces and water heaters, including new zero NOx standards that start to phase in between 2027 and 2031 depending on the size and type of equipment. These updated standards apply to the new replacement appliances that would be installed when an existing appliance reaches the end of its life (“burn out”) and needs to be replaced, and to new equipment manufactured after the future compliance dates.
2 https://www.baaqmd.gov/en/rules-and-compliance/rule-development/building-appliances Item 5
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Clarifying Common Misconceptions
The overarching goal of this rule amendment effort for Rule 9-6 is to support equity and affordability for residents while continuing to achieve the air quality benefits associated with the replacement of polluting equipment over time.

Staff have received several recurring questions regarding the applicability and implementation of Rule 9-6 during stakeholder engagement. In some cases, the interpretations stem from misunderstandings about when or how the rule applies. Table 1 below highlights several common misconceptions and provides clarification of the actual requirements of the currently adopted Rules 9-4 and 9-6, prior to any potential changes discussed elsewhere in this document.

Table 1. Simplified Myths Vs. Facts for the Currently Adopted Rule 9-6 Myths Facts
Mandatory replacements of all
equipment starting in 2027
Existing water heaters can remain in operation
until they burn out or need replacement
Point-of-purchase requirement The rule is triggered when equipment is replaced (purchased), not when a property is sold
Applicability based on building
type or installation date
Requirements are based on the appliances btu
rating and date of manufacture
This rule is an electrification or
decarbonization mandate
The rule reduces regional NOx emissions caused
by natural gas combustion and the associated
PM2.5 formation to improve air quality and public
health
This rule applies to stoves,
ovens and dryers
The rule does not apply to stoves, ovens, nor
dryers.

Health Benefits from Implementing Rules 9-4 & 9-6 Amendments By phasing out polluting gas furnaces and water heaters starting in 2027, Rules 9-4 and 9-6 will help clean up the air we all breathe, prevent dozens of early deaths every year, and save Item 5
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the region hundreds of millions of dollars in health costs. A summary of the health benefits is shown in the table below.
3 Table 2. Health Benefits from Rule 9-4 & 9-6
Major health benefits from Rules 9-4 and 9-6
These appliance rules help improve
regional air quality by reducing
pollution from furnaces and water
heaters.
����������������������
Cleaner outdoor air
Less NOx & PM2.5 from venting
Lower pollution means lower exposure
to fine particles (PM2.5)
�����
Cleaner Bay Area Communities
Biggest PM2.5 reductions in communities of
color & overburdened neighborhoods
Reducing PM2.5 and NOx exposure can
prevent dozens of early deaths every
year in the Bay Area.
����������������
Up to 85 early deaths avoided each year from
cleaner air
Health improvements from cleaner air
avert unnecessary costs from health
impacts.
��������������
Up to $890M
Annual health benefits saved in avoided
illnesses, hospital visits, and early deaths4
Climate co-benefits resulting from
electrification of appliances
Based on current technology, zero NOx
appliances are electric, and their use would
result in a reduction of greenhouse gas
emissions
3 https://www.baaqmd.gov/~/media/dotgov/files/rules/reg-9-rule-4-nitrogen-oxides-from-fan-type-residential-central-furnaces/2021-amendments/documents/20230307_fsr_rules0904and0906- pdf.pdf?rev=100de6caff2342e6b095b59acf2321d0 4 https://www.baaqmd.gov/~/media/dotgov/files/rules/reg-9-rule-4-nitrogen-oxides-from-fan-type-residential-central-furnaces/2021-amendments/documents/20221220_sr_appe_rg09040906- pdf.pdf?rev=d4b056153496491fad817c6d4a87df78&sc_lang=en Item 5
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Background
Current Status and Compliance Timeline
For the past 30 years, the Air District has been updating these rules to reflect newer, cleaner technologies and to help meet the region’s clean air goals. In March 2023, the Board adopted amendments to Rules 9-4 and 9-6 that tighten “point-of-purchase” emission standards for small furnaces and water heaters, including new zero NOx standards that start to phase in between 2027 and 2031 depending on the size and type of equipment. These updated standards apply to the new replacement appliances that would be installed when an existing appliance reaches the end of its life (“burn out”) and needs to be replaced, and to new equipment manufactured after the future compliance dates. The current compliance schedule for zero NOx equipment is shown below.

Table 3. Current Compliance Schedule for Rules 9-4 and 9-65 January 1, 2027 Water heaters less than 75,001 BTU/hr6 (typically residential tank water heaters)
January 1, 2029 Residential and commercial furnaces
January 1, 2031 Water heaters between 75,001 and 2 million BTU/hr (typically commercial and multifamily as well as tankless units)
(The above only applies to appliances manufactured after the noted date) Together, Rules 9-4 and 9-6 are a key part of the Air District’s broader strategy to reduce air pollution from stationary sources, including buildings. The staff’s technical analysis for these rules clearly show that emissions from gas furnaces and water heaters affect both local and regional air quality, contribute to ozone and secondary particulate matter formation, and exacerbate health and equity concerns in the Bay Area.

The 2023 amendments to Rules 9-4 and 9-6 included a provision to report back to the Board of Directors two years prior to each implementation date on the current state of available technologies, costs and other potential implementation challenges. The Board of 5 Please note that the above table shows compliance dates currently in effect based on active regulations.

The draft amendments accompanying this regulatory overview introduce delayed compliance dates of January 1, 2028 and January 1, 2033 for small and large water heaters, respectively. More information on this can be found in the “Overview of Draft Amendments” section of this document. The compliance date for furnaces is currently being evaluated as part of the Implementation Working Group process and more a full report from that process is forthcoming in Fall 2026.
6 BTU/hr means British thermal unit per hour
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Directors directed staff to include a provision in the 2023 amendments to establish an Implementation Working Group, consisting of a wide spectrum of stakeholders, and called for the corresponding report to inform any further changes to the rules.

Table 4 below summarizes the Board’s actions over time, showing what has happened so far and where the rule currently stands. This timeline provides context for how Rule 9-6 has progressed from adoption to subsequent discussions regarding updates and flexibility.

Table 4. Post-Adoption Timeline of Regulatory Events for Rules 9-4 & 9-6 Date What happened? Brief description
March 15,
2023
The Board of Directors
adopted amendments to
9-4 & 9-6. The Board also
directed staff to come
back with a Rule 9-6
implementation report in
2024.

The Board held a public hearing and adopted the
proposed amendments to Rules 9-4 and 9-6, and
certified the CEQA Environmental Impact Report,
formally approving the new zero NOx standards
and related requirements.

June 21,
2023
The Board heard details
on SIP submittal of Rules
9-4 & 9-6
The Board of Directors held a public hearing and
directed staff to submit the current versions of
Rules 9-4 and 9-6 to U.S. EPA and the California Air
Resources Board for inclusion in the State
Implementation Plan (SIP). That process is
currently on hold while the Air District develops its
attainment plan for the new PM2.5 air quality
standard.

December
4, 2024
The Board received
information on staff’s
research on Rule 9-6
implementation per the
2023 direction.

Staff presented informational updates on
implementation readiness of the zero NOx
requirements for residential water heaters under
Rule 9-6, summarizing the Implementation
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Date What happened? Brief description
Working Group findings and professional research
in a Rule 9-6 Implementation Report.
7 October
2025
Public Release of Rule
9-6 Concepts Paper
(flexibility options)
Staff released the Rule 9-6 Concepts Paper,
outlining potential flexibility concepts for
amending Rule 9-6. The flexibility amendments are
a result of findings from the 2024 implementation
report that recognized constraints for seamless
adoption of Rule 9-6.8
December
10, 2025
The Stationary Source
Committee received
information from staff on
potential flexibility
amendments based on
affordability and
availability issues for
Rule 9-6.

Staff presented informational updates on flexibility
amendments to Rule 9-6 which would address
issues that would make the rule more practical to
implement. Staff’s discussion highlighted the
concept paper and the public comments received
on the concept paper.

The Committee directed staff to come back with
information on possible exemptions for low-income property owners.

February
11, 2026
Per direction from the
12/10/2025 Stationary
Source Committee
meeting, staff presented
specifics on options for
defining and qualifying
low-income affordability
Staff presented to the Stationary Source
Committee on:

1. Who qualifies as "low-income" – presenting
two options including different income
limits as well as considerations for housing
cost burden
7 https://www.baaqmd.gov/~/media/dotgov/files/rules/reg-9-rule-4-nitrogen-oxides-from-fan-type-residential-central-furnaces/2021-amendments/documents/20241127_board-report-dec-2024- pdf.pdf?rev=f9b89cc7ceb54588b5c505d6f20635e3&sc_lang=en 8 https://www.baaqmd.gov/~/media/dotgov/files/rules/reg-9-rule-4-nitrogen-oxides-from-fan-type-residential-central-furnaces/2021-amendments/documents/rule-09_06-concepts-paper_final-v1- pdf.pdf?rev=9eac6fc7a84e4b259fd2017c838de68c&sc_lang=en Item 5
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Date What happened? Brief description

2. How much does it cost to help low-income
households switch to cleaner water
heaters
The Committee directed staff to return in May
2026 with a full set of final options so the full
Board can give clear directions on how to
proceed with the rule.

May 6 &
13, 2026
Staff presented the initial
Regulatory Overview and
flexibility concepts for
Board of Directors
discussion and direction
Staff presented on flexibility concepts including
exemptions for space and electrical constraints,
low income and housing cost burdened property
owners, as well as delays for hydronic and small
units and reporting requirements.

The Board of Directors directed staff to continue
in developing flexibility amendments and to
release draft language for public review and
comment.

Implementation Working Group
As part of the 2023 zero NOx amendments, the Board required that two years prior to each compliance date, staff must provide updates to the Board regarding implementation challenges, especially focused on concerns raised by stakeholders during rulemaking— such as costs, workforce, market development, and equity issues in terms of incentives and tenant impacts. With this direction, staff coordinated and led a multi-stakeholder Implementation Working Group (IWG) focusing primarily on the Rule 9-6 amendments (IWG Phase 1), holding 21 meetings from May 2023 through August 20249 to provide input on those topics relevant to January 2027 implementation for small water heaters less than 75,000 BTU/hr. Members included industry representatives, union representatives, industry associations, local governments, utilities, community choice aggregators and subject matter expert organizations, among others.
9 https://www.baaqmd.gov/community-health/building-appliances-rule-implementation/building-appliances-implementation-working-group Item 5
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The IWG was comprised of various subcommittees. The Technical Subcommittee compiled and reviewed the most up-to-date technical information relevant to implementing Rule 9-6 to present to the Working Group, such as market availability and projected cost of compliant appliances, and potential financial incentives for consumers.

The Technical Subcommittee also provides recommendations for the Working Group and/or Steering Committee to consider.

IWG Phase 1 Findings
Overall, staff found that even in just a short two-year timeframe (2023-2024), several significant challenges brought up during the 2022 rulemaking process had been mitigated or were found not to be major barriers to Rule 9-6 implementation (e.g., water heater impacts to the grid and reliability, market readiness including post-Covid supply chain, workforce availability, and local jurisdictional permit streamlining). However, some challenges remain, and staff’s overall recommendation highlighted the need for future flexibility and amending the 100 percent sales requirement. To review all findings, please see the IWG Phase 1 Staff Report Informational Update Regarding Regulation 9, Rule 6 ,10 which was presented to the Board of Directors in December 2024.

The following table provides a brief overview of the milestone deliverables prepared for the Building Appliances Implementation Working Group. Each technical report addresses a distinct implementation issue and helped inform the Air District’s analysis of Rule 9-6 implementation.

Table 5. Technical Research on Implementation Issues
Technical Report Brief Description
Installation Costs for Zero NOx
Space and Water Heating
Appliances
Updates the estimated installation costs of zero NOx
heating appliances and how incentives affect household
bills and upfront costs.

Workforce Challenges for Zero NOx
Requirements
Reviews contractor availability, training needs, and
workforce readiness for heat pump adoption.
10 https://www.baaqmd.gov/~/media/dotgov/files/rules/reg-9-rule-4-nitrogen-oxides-from-fan-type-residential-central-furnaces/2021-amendments/documents/20241127_board-report-dec-2024- pdf.pdf?rev=f9b89cc7ceb54588b5c505d6f20635e3
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Technical Report Brief Description
Challenging Use Cases and
Emerging Solutions for Zero NOx
Appliances
Identifies difficult retrofit situations and summarizes practical solutions for constrained sites.

Renter Protections Policy
Landscape Summary
Reviews renter-protection policies and suggests ways to reduce possible negative impacts on tenants.

Market and Sales Trends for Zero
NOx Appliances
Summarizes market conditions, sales trends, and
contractor input on the current and future heat pump
market.

Permitting Requirements for Zero
NOx Appliances
Describes permitting barriers, requirements, and best
practices for installing zero NOx appliances.

Grid Reliability and Interconnection
Challenges
Examines concerns about electric grid reliability, service upgrades, outages, and appliance-level performance.

Lived Experience Interviews
Summary
Summarizes renter interviews on housing insecurity,
displacement, energy burden, and other quality-of-life
impacts.

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Overview of Draft Rule Amendments
In October 2025, staff released a Concepts Paper outlining potential future amendments to Rule 9-6 directly addressing the challenges identified in the implementation working group report described above. In July 2026, accompanying this report, staff released draft rule amendments for public review and comment. The draft rule amendments are summarized below.

General Provisions and Exemptions
Sections 9-6-100 through 9-6-114
1) Section 111: Limited Exemptions for Qualifying Projects:

A natural gas-fired water heater that does not meet the zero NOx requirements may be installed in the following situations, but only if the purchaser obtains an Exemption Certificate before installation.
• Low-income property owners: Property owners who participate in a qualifying low-income assistance program may install a non-compliant water heater. Draft amendments to Rule 9-6 define qualifying low-income programs for this exemption which include Covered California, Medi-Cal, food assistance programs, energy rate assistance programs and supplemental security income (SSI). This exemption is intended to provide relief from potentially higher incremental costs of installation for low-income property owners. • Housing cost-burdened property owners: Property owners whose annual mortgage and property tax payments are at least 28% of their annual household gross income may install a non-compliant water heater. Property owners will self-attest to their status as housing cost-burdened. This exemption is intended to provide relief for property owners who spend a large portion of their income on housing cost and may not be able to afford the incremental cost of installing a zero NOx water heater.
• Certain businesses: Restaurants, food service businesses, laundries, dry cleaners, healthcare facilities, and assisted living facilities may install a non-compliant natural gas water heater. These businesses have been identified to have specialized high hot water heat demands whose needs may not be met by the technical capabilities of zero NOx water heaters that are currently available on the market.

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• Space constraints (one-time only): A one-time non-compliant replacement is allowed if the existing water heater is in an enclosed space smaller than 700 cubic feet that cannot be modified to provide required ventilation, or in a garage with a ceiling lower than 7.2 feet or another indoor space with a ceiling lower than 6 feet. This exemption is intended to provide relief from additional potential costs associated with water heater relocation and major construction due to existing space constraints within the home.

The "one-time" exemptions for ventilation constraints and low ceiling height can only be used once at a given property. After a non-compliant water heater has been installed under either of those exemptions, that address cannot use either one-time exemption again, although it may still qualify for one of the other exemptions. 2) Section 112: Time-Limited Exemptions for Water Heaters Larger than 30 gallons and Less than 75,000 BTU/Hour:

This section provides a temporary exemption for certain natural gas-fired water heaters (over 30 gallons and under 75,000 BTU/hour) that do not meet the zero NOx requirements if an Exemption Certificate is obtained before installation. This exemption is only available for qualifying equipment types or properties and water heaters manufactured before the applicable deadlines. The exemption applies to:
• Hydronic heating systems: Non-zero NOx water heaters manufactured before January 1, 2031. Though there are currently a limited number of hydronic heat pump water heaters on the market, the product carries a significant price premium. In order to ensure minimal impacts and to allow for new technology to develop in this category, the draft amendments delay this project category to a 2031 compliance date
• Multifamily and affordable housing: Non-zero NOx water heaters manufactured before January 1, 2033 may be purchased, sold, or installed in residential buildings with five or more dwelling units or in properties covered by qualifying federal, state, or local affordable housing programs. This additional time recognizes that these properties often require longer planning horizons to coordinate cost-effective equipment replacements, particularly for deed-restricted affordable housing with long-term budgeting and regulatory requirements.
3) Section 113: Limited Exemptions for Licensed Contractor Installations:

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A licensed contractor may install a water heater that does not meet the zero NOx requirements if they obtain an Exemption Certificate before installation. This exemption is intended to prevent costly or time-sensitive installation challenges where replacing or upgrading building systems to support a compliant water heater may not be immediately feasible.
o Electrical constraints (one-time only): Applies to buildings where installing a compliant water heater is expected to be particularly expensive due to conditions such as knob-and-tube wiring requiring more than 50 feet of conduit, an electrical panel below 100 amps (or below 60 amps for multifamily buildings with five or more units), the need for a new 240V connection requiring more than 50 feet of wiring/conduit, or a panel with no available breaker space or expansion capacity.
o Temporary replacements: Allows a non-compliant water heater to be installed temporarily while awaiting permanent replacement with a compliant unit. The temporary unit must be removed within 12 months and required reporting must be completed.
4) Section 114: Limited Exemption for Wholesale Sales: In order to allow for the continued retail availability of water heaters that do not meet the zero NOx requirements for the above exempt scenarios, this section allows for continued wholesale distribution of these units.

To support the exemption process, Staff plan to develop a web application accessible from the Air District’s home webpage for anyone seeking an Exemption Certificate for any of the exemption options listed above. The portal would be mobile friendly and would require some documentation and attestation prior to purchase and installation.

When applying for an exemption, staff intend to provide educational resources embedded into the web portal to notify property owners and contractors of incentives that may be available to them based on their location and income level. It is staff’s intention to provide residents information to make an informed decision about whether they would like to continue to pursue an exemption to Rule 9-6 or to purchase and install a zero NOx appliance with the help of incentives or other financing.

The certification process as part of the registration portal could be designed to require that contractors must make property owners aware of their zero NOx options, right-sizing (120- Item 5
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volt plug-in HPWHs; circuit-sharing; skinny breakers, etc.), benefits, as well as the incentive programs available to them.

Definitions
Sections 9-6-200 through 9-6-221: Definitions are added and updated to improve clarity throughout the rule. New definitions included in these draft amendments include:

Distributor, Exemption Certificate, Hydronic Water Heater, Licensed Contractor, Low-Income Program, Mobile Home and Retailer. Staff welcomes public comment on these definitions to ensure understanding of rule applicability.

Emissions Standards
Sections 9-6-300 through 9-6-305
1) Section 301: NOx Standards for Water Heaters Less than 75,000 BTU/hr:

Water heaters manufactured after January 1, 2028 must meet the zero NOx standard to be sold, purchased, or installed in the Bay Area. This deadline has been extended one year to ensure appropriate rollout of the exemption process, and to provide more time for outreach to the public. There are a few exceptions to the January 1, 2028 deadline as follows:
a. Units less than 30 gallons are subject to the 10 ng/J11 standard set forth in Section 301.4. Continued sales are allowed as there are currently no 30- gallon or smaller zero NOx water heaters available in the US market.

Editorial changes have been made to Sections 301.3 and 301.4 for consistency in applying this standard.
b. The zero NOx standard does not apply to exempt projects as limited and described above in the exemptions section (Sections 111 through 114). 2) Section 303: NOx Standards for Water Heaters greater than 75,000 BTU/hr to 2,000,000 BTU/hr: Water heaters manufactured after January 1, 2033 must meet the zero NOx standard to be sold, purchased, or installed in the Bay Area. This deadline has been extended two years to allow time for new multifamily incentive programs such as the Equitable Building Decarbonization Program to collect additional cost data for evaluation.

The zero NOx standard does not apply to exempt projects as limited and described above in the exemptions section (Sections 111 through 114). This 11 Nanograms of nitrogen oxides (measured as NO2) per joule of heat output.

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deadline and additional exemptions will be re-evaluated as a report to the Board of Directors by January 1, 2031 as required by Section 9-6-404.

Additionally, editorial changes to this section were made to clarify the applicability of the standard to units greater than 75,000 BTU/hr (as opposed to 75,001 BTU/hr).

Administrative Requirements
Sections 9-6-400 through 9-6-406: The draft amendments include new administrative requirements to facilitate the Exemption Certification process. New requirements include:
• Section 405: Exemption Certificate requirements: Anyone purchasing or installing a non-compliant NOx-emitting water heater under an approved exemption must first register with the Air District, certify that the information provided is accurate, and obtain an Exemption Certificate. The application must include the installation address, registrant contact information, and some documentation showing that the exemption requirements are met.
• Section 406: Emergency replacement loaner reporting: Licensed contractors using the temporary replacement exemption must report each unit’s serial number, Exemption Certificate number, and installation address to the Air District by January 31 each year. Reports must also identify any units that were sold or disposed of and provide details on the transfer or disposal.
• Section 407: Sales notice requirements: Sellers offering non-compliant water heaters must clearly display a notice stating that the equipment may only be purchased and installed with a valid Exemption Certificate. The notice must also provide information on how to access Air District compliance guidance and the exemption registration process.

Additionally, Section 402 (Interim Report) was updated to remove the interim reporting requirement for water heaters less than 75,000 BTU/hr. This report was given to the Air District Board of Directors in December 2024 and has informed the draft amendments summarized here. Interim reporting is still required two years prior to the January 1, 2033 deadline for larger water heaters.

Monitoring and Records
Section 9-6-501 and 9-6-502: New recordkeeping requirements are introduced to ensure compliance with the zero NOx and related exemption provisions. Beginning January 1, 2028, sellers must keep records of each sale, including the date, location, price, buyer and Item 5
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seller information, and exemption certificate number as applicable. Licensed contractors must keep records of each purchase and installation, including the date, location, and any exemption certificate number. If they both purchase and install the water heater, they must keep records for both.

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Economic Considerations
Challenging Installations
Variations across the building stock (i.e. existing space configuration, existing electrical system and panel condition, amount of deferred maintenance) will result in some challenging installation cases for zero NOx water heating. TECH Clean CA12 program data for heat pump water heater (HPWH) installations in the Bay Area showed costs ranging from $2,900 to $38,800, with the high end of costs representing the most challenging installation cases. It should be noted that this data on costs only includes completed jobs and includes data from years before new and improved products were available on the market. These high-cost edge cases are typically driven by either electrical or space constraints. Specifics around drivers for electrical and space constraints, potential heat pump configurations and available data on projects that face these constraints can be found in Appendix A. The previously described exemptions present in the draft rule amendments are designed to address these situations and allow for relief where needed.

Average Upfront and Operational Costs
For the remaining projects that may not be eligible for one of the potential exemptions, or more “standard” projects or “drop-in” replacements, staff estimate average incremental cost to remain at approximately $3,500. Original IWG research was based on a large dataset of over 4,000 incentive program projects with very little difference between mean versus median costs. These amendments would help to eliminate the high-cost projects or other outliers. Therefore, staff expect average costs to be similar to the IWG estimates.

Retail additional (incremental) cost for the equipment only is as follows for most basic models with 50 gallon tanks:
• 120V: $1,100-$1,600
• 240V: $600-$1,30013
12 TECH Clean California is a statewide initiative to accelerate the adoption of heat pumps across California homes, overseen by the CA Public Utilities Commission and the CA Energy Commission. https://techcleanca.com/
13 Baseline assumes midpoint of $900 MSRP for ultra low NOx natural gas tanked water heaters: Low end:
$770 (e.g. Rheem Performance 50 gal. Tall 6-Year 34,000 BTU Ultra Low NOx Natural Gas Tank Water Heater; A.O. Smith Signature 100 50-Gallon Tall 6-year Warranty 50000-BTU Natural Gas Water Heater) ; Higher end: $1100 (e.g. Rheem Performance Platinum 50 Gal. Tall 38,000 BTU Ultra Low NOx Natural Gas Water Heater)
Zero NOx water heater costs:120V: $2,000 - $2,500 (e.g., GE GeoSpring 120V, Rheem 120V); 220V: $1,500 - $2,200 (e.g. A.O. Smith Signature 900, Rheem ProTerra, A.O. Smith HPTS-50 Voltex) Online retailer websites accessed February and March 2026.

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Note that most of the upfront costs for HPWH projects consist of labor and installation, along with permitting costs. HPWHs can require extra labor compared to a like-for-like gas water heater due to:
• new electrical wiring
• condensate management or new drain lines
• potential ventilation measures for water heaters in confined spaces (ducts, louvered doors)
• capping the old water heater gas line; and
• further components such as mixing valves, heat exchangers, and vibration-reducing flexible piping.

These are mostly one-time upgrades that will also support future water heater replacements. The number of higher cost installations that need these upgrades will be significantly reduced through the potential exemptions.

Staff expect that over time, larger pools of contractors and greater experience region-wide will lead to lower labor costs.

Operational costs analyses found that with the switch to HPWHs, households will either see utility bill savings or a very small monthly increase. 95 percent of high-usage customers (5,000 kWh or more annual usage before electrifying) see bill savings or no change in bills after switching to a HPWH. For low-use customers, approximately 35 percent of single-family and 60 percent of multi-family (MF) market-rate customers (those not receiving any low-income program discounts) experience a bill increase of around $2 per month on average.

To understand upfront costs, the Air District analyzed incentive program data from multiple agencies (statewide, regional and local) covering over 4,000 projects installed exclusively in the Bay Area between 2021-2023. The average upfront additional incremental cost to install a zero NOx HPWH compared to a NOx-emitting gas water heater is estimated to fall between $1,840, and $3,496,
14 before rebatesError! Bookmark not defined.. This number varies based on the program analyzed and the types of projects and baseline appliance (tanked and tankless vs. tanked only) being replaced.

As noted in the IWG report, actual costs may vary depending on site conditions, equipment size, electrical upgrades, installation complexity, and energy prices. Although upfront costs for certain HPWH configurations can be higher than their gas counterparts, these costs can 14 Installation Costs for Zero NOx Space and Water Heater Appliances https://www.baaqmd.gov/~/media/files/community-health/building-appliance-implementation/task1_electrificationcosts-pdf.pdf?rev=3cb66a09f3094f94b35fa7fc90cfd4ec Item 5
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often be offset through various available rebates or incentives, while comparable gas options may not. Zero NOx water heaters are expected to have lower operational energy costs for most customers.
15 Socioeconomic Impact Evaluation
The California Health and Safety Code requires that whenever an air district intends to propose the adoption, amendment, or repeal of a rule or regulation that will significantly affect air quality or emissions limitations, that agency must actively consider the socioeconomic impact of regulations and make a good faith effort to minimize adverse socioeconomic impacts. A “socioeconomic impact” means the following:
a. The type of industries or business, including small business, affected by the rule or regulation.
b. The impact of the rule or regulation on employment and the economy of the region affected by the adoption of the rule or regulation.
c. The range of probable costs, including costs to industry or business, including small business, of the rule or regulation.
d. The availability and cost-effectiveness of alternatives to the rule or regulation being proposed or amended.
e. The emission reduction potential of the rule or regulation. f. The necessity of adopting, amending, or repealing the rule or regulation to attain state and federal ambient air standards.

For the 2023 Appliance Rule Amendments for Rules 9-4 and 9-6 for Nitrogen Oxide Emissions from Natural Gas-Fired Water Heaters, Boilers and Furnaces, staff additionally analyzed:
16 a. The direct impacts of increased compliance costs on residential consumers installing and replacing space and water heaters
b. Potential equity impacts at the household level by different income groups, housing tenure, and poverty level.
c. Monetized health impacts and benefits analysis of residents across the region based on race, including a range of valuations, based on modeled particulate matter exposures across the region and an equity assessment by race. d. Potential shifts in consumer spending and potential job losses (both direct and indirect/induced)
e. Impacts to electrical grid capacity and reliability and related potential costs of related electric utility infrastructure upgrades
15 ibid 15 16 https://www.baaqmd.gov/~/media/dotgov/files/rules/reg-9-rule-4-nitrogen-oxides-from-fan-type-residential-central-furnaces/2021-amendments/documents/20221220_sr_appc_rg09040906- pdf.pdf?rev=0680bc8794e74d53909fc180e4936de0&sc_lang=en Item 5
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f. Air District costs to implement the proposals
The flexibility amendments being discussed at this time are expected to decrease costs as compared to the analysis conducted for the 2023 amendments and therefore does not necessitate conducting a socioeconomic analysis under the California Health and Safety Code. Nevertheless, staff intend to publish an updated analysis outlining expected costs and other relevant items described above for consideration by the Board of Directors and the public. At the July 8th meeting of the Stationary Source Committee of the Air District Board of Directors, the Committee recommended that a newly developed proposed Socioeconomic Impact Analysis Policy be brought to the full Board of Directors for further consideration and potential adoption at its September meeting. Staff currently plans to follow the draft policy as the updated socioeconomic analysis is developed for the draft amendments.

Available Rebates
A variety of rebates currently exist across federal, state, utility, and local programs, though availability can vary depending on funding cycles and program capacity. The low-income exemptions will help those property owners who are unable to afford the switch to compliant equipment, even with available funding.

Updated information on HPWH rebates available by zip code can also be found at incentives.switchison.org. This information will be also be provided to property owners when they apply for the low-income exemption.

An updated snapshot of currently available rebates is included in Table 6 below.

Table 6. Available HPWH rebates in the Bay Area as of March 202617 Geographic
Scope
Program or Funder Name Incentive amount per HPWH
Statewide Multifamily HEEHRA18 $1,750
City of Alameda Alameda Municipal Power
(AMP)
$1,500
Palo Alto City of Palo Alto Utilities $3,500
PCE customers Peninsula Clean Energy
(PCE)
up to $3,000
17 https://incentives.switchison.org/residents/incentives?state=CA and filter for equipment “Heat Pump Water Heater”
18 High-Efficiency Electric Home Rebate Act (HEEHRA), now often called Home Electrification and Appliance Rebates (HEAR)
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PG&E customers California Energy Smart
Homes
$1,000 for Integrated Heat
Pump Space and Water
Heating
PG&E customers Golden State Rebates $400-$700
Pinole City of Pinole up to $3,000
Redwood City Redwood City Up to $500
San Francisco Clean PowerSF Water
Heater Upgrade Program
$1,200 - $1,800 in bill credits
($50/month)
SCP customers Sonoma Clean Power (SCP) $700
SJCE customers San Jose Clean Energy
(SJCE)
$2,000 to $3,000
SVCE customers Silicon Valley Clean Energy
(SVCE)
up to $2,000
Note that Table 6 does not include highly targeted funding programs available to limited households, including PG&E’s Energy Savings Assistance (ESA) program; 19 the California
Energy Commission’s Equitable Building Decarbonization (EBD) Program; 20 and upcoming
SB 1221 Neighborhood Decarbonization pilots.
21 19 https://www.pge.com/en/save-energy-and-money/energy-saving-programs/energy-savings-assistance-program.html 20 https://www.energy.ca.gov/programs-and-topics/programs/equitable-building-decarbonization-program 21 https://www.cpuc.ca.gov/industries-and-topics/natural-gas/sb-1221-implementation Item 5
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Summary of Potential Impacts and Considerations
Grid and Reliability Impacts
Though often cited by the public as a concern, new electrical loads resulting from Rule 9-6 are highly unlikely to cause power outages. The change in electrical load due to the implementation of these rules will be spread over at least 15 years and is included in the State’s ongoing planning for future enhancements of the electric grid. There are current and new (SB 410) requirements for utilities and the California Energy Commission (CEC) regarding grid planning for increasing loads, which will include added load from the building appliance rules.

The large majority of power outages are not caused by electrical load or bulk capacity issues but are instead caused by external physical impacts (e.g. downed trees, storms) or public safety power shutoffs (PSPS), which have been significantly reduced since 2019.22 For the rare instances of bulk capacity issues (e.g., statewide Flex Alerts), many HPWHs allow users to shift energy usage to off-peak hours (sometimes with the direct support from utilities), essentially using electricity to make and “store” hot water during periods of lower electricity demand and prices. HPWHs are increasingly being used by utilities for demand response to help improve overall grid reliability.

In the event of a power outage, tanked water heaters, including HPWHs, can stay hot for several hours, especially when installed with a cold-water mixing valve. Note that, some new NOx- emitting gas water heaters have dampers and fans (including tankless on-demand, tanked models with power venting) that rely on electricity and cannot operate during power outages.23
Potential Renter Impacts
The Air District commissioned research and engaged stakeholders regarding concerns for renter impacts due to Rule 9-6. These analyses confirmed that implementation of the 2023 amended rule language could lead to capital cost pass-throughs, potential rent increases, and temporary evictions for some tenants, though water heaters covered under the 2027 22 Rincon and E3. Grid Reliability and Interconnection Challenges. https://www.baaqmd.gov/~/media/files/community-health/building-appliance-implementation/grid-impacts-final-pdf.pdf?rev=14a3ea4d46704d19a48cf03e3984c90e&sc_lang=en 23https://docs.bradfordwhite.com/Spec_Sheets/1118_0815.pdf https://www.hotwater.com/info-center/water-heater-venting.html#:~:text=Power%20Vent,professional%20plumbing%20contractor%20for%20installation Item 5
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requirements of Rule 9-6 posed a lower risk than other appliances due to lower costs and construction impacts.

Landlords could use a “substantial repair” clause found in the local and state renter protection laws for “no-fault evictions,”24 creating potential eviction risk for some high-cost water heater installations. In these cases, “substantial repair” refers to significant construction work that requires the renter to vacate while the work occurs, takes more than 30 days, and requires a permit to complete.

Cities with the highest concentration of renters also have the strongest renter protections.

San Jose, San Francisco, Oakland and an additional 13 Bay Area jurisdictions have local renter protection laws that go beyond state law. Each major jurisdiction has its own limits on rent increases and capital improvement pass-through costs, as well as eviction protections. In cities without local rent stabilization, renters rely on state protections. AB 1482 provides statewide rent increase limits and just cause eviction protections but does not specifically address capital improvement pass-throughs. The law expires in 2030.

Workforce Development and Availability
Bay Area workforce research shows positive signs for contractor availability and readiness.

Compared to national benchmarking, the Bay Area has equivalent levels of relevant contractors compared to the US average. Based on region-wide surveys, the majority of contractors are available to respond to emergency water heater failures within a couple days. A two-thirds majority of surveyed contractors were already aware of the building appliance rules and at least one category of applicable incentives, though slightly less than half of the surveyed contractors participated in incentive programs.

Further education for many installers is needed, however. Large-scale public awareness campaigns and specific outreach to installers are planned for 2026.

Quantitative Estimates on Number of Exemptions
Total estimates for potential certified exemptions are estimated to be up to 38 percent of residential small water heater unit installs. This varies slightly depending upon how the low-income qualified exemption is defined. See Table 7 below for a more detailed break out.
24 No-fault evictions allow landlords to remove tenants who have not violated lease terms, but can occur under strict reasons, such as owner move-in, substantial remodeling, or removing units from the market.

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Table 7. Residential Certified Exemptions Expected by Category Annual Residential Small Gas Water Heater Turnover:             120,000 Exemption type Percentage Annual Number
Very Low Income & Housing Cost
Burdened

15.8% 19,000
Project/ building constraints 20% 25 24,000
The certified exemption estimates do not include continued sales of 30 gallon and below tanked water heaters, which are estimated at 10 percent per year.

Given that the purchase of Emergency Replacement Loaner water heaters will not displace zero NOx water heaters nor be installed permanently, numbers are not quantified below.

However, in the nine-county Bay Area, current numbers of licensed contractors who would be eligible to purchase a limited number of NOx emitting water heaters (larger than 35 gallons tanked and less than 75,000 btu/hour) for emergency replacement loaners is listed below:
26 • B (General Contractor License) 15,967
• C36 (Plumbing) 1,762
• C20 (HVAC) 868
Lastly, for businesses with specialized applications and high hot water demand, many may already be utilizing water heaters above the 75,000 btu/hour threshold based on high hot water needs. However, estimated numbers of these businesses are listed below. • Food service/restaurant facilities - approximately 2,427 food service buildings27 • Healthcare clinics and assisted living facilities - while not separate categories, BayREN buildings inventory estimates “Medical - Hospital & Clinic” and “Medical – Other” at 3,021 buildings in the Bay Area28
• Laundry, dry cleaner and laundromat - estimates in the Bay Area are not available.

Overall, staff expect the annual number of exemptions granted to specialized business applications to be low as compared to other exemption pathways as described above. 25 Reasonable estimate based on program data and case studies citing prevalence of space and electrical constraints. See Appendix C. 26 https://www.cslb.ca.gov/onlineservices/dataportal/ accessed October 2025. 27 https://bayren-existing-buildings.mtcanalytics.org/ 28 Ibid.

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Health Equity vs. Economic Equity Considerations
Staff considered both health equity and economic equity implications when evaluating future potential amendments to Rule 9-6. From a health equity perspective, the rule is intended to reduce NOx and PM2.5 exposure, particularly in communities that have historically experienced higher pollution burdens. At the same time, staff evaluated potential economic impacts on low-income property owners and renters, including whether compliance costs could create financial hardship or housing instability. To address these considerations, the potential rule amendments incorporate targeted exemptions, phased implementation timelines, and other implementation safeguards intended to mitigate potential cost impacts and help preserve access to housing. Table 8 below summarizes several of the key policy considerations staff evaluated in balancing these health and economic equity objectives.

Table 8. Equity Considerations
Health Equity
Reduced indoor and outdoor air pollution exposure
Health-protective technology standards
Protections for renters and occupants
Fewer exemptions to maximize health benefits
Prioritize reductions in overburdened communities
Faster reduction of NOx and PM2.5 emissions
Economic Equity
Manage cost impacts for residents and businesses
Phased-in compliance timelines
Protections for landlords and property owners
Targeted exemptions to address barriers
Flexibility pathways for cost or technical constraints
Incentives, rebates, and market support programs
For the zero NOx amendments to Rules 9-4 and 9-6 in 2023, staff evaluated ambient air quality and health impacts from covered appliances. Staff estimated NOx and PM2.5 emissions from these sources, as well as their contributions to levels of fine particulate Item 5
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matter exposures.
29 Approximately 60 percent of average PM2.5 exposure in the Bay Area associated with the target appliances results from secondary formation driven by NOx emissions. In general, because secondary PM2.5 formation requires time and atmospheric transport, exposure to secondary PM2.5 occurs at a regional scale rather than near the original emission sources. As a result, certain homes or locations that may forgo local emission reductions due to an exemption would still benefit from region-wide improvements in exposure if the flexibility amendments were implemented. Figure 1, below, depicts the modeled annual average baseline concentrations and reductions of secondary particulate matter attributed to the elimination of emissions associated with appliances impacted by the 2023 zero NOx amendments to Rules 9-4 and 9-6, which accrue on a regional basis.

Figure 1. Baseline concentrations (left) and reductions (right) for secondary PM2.5 Staff believe that it is too speculative at this time to make assumptions about the locations at which property owners will choose to utilize a certified exemption for project constraints or low-income qualification as there are many factors that would impact this decision. As 29 https://www.baaqmd.gov/~/media/dotgov/files/rules/reg-9-rule-4-nitrogen-oxides-from-fan-type-residential-central-furnaces/2021-amendments/documents/20221220_sr_appe_rg09040906- pdf.pdf?rev=d4b056153496491fad817c6d4a87df78&sc_lang=en Item 5
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summarized above, up to 38 percent of small water heaters could be eligible for an exemption or extension of the compliance timeline. However, due to the regional benefit of reduction of secondary fine particulate matter exposure and the focus of Rule 9-6 on the reduction of nitrogen oxides, a precursor for secondary particulate matter, staff does not believe that the flexibility amendments discussed in this document will result in a significantly different disparity in health benefits in existing overburdened communities.

Additionally, the exemption pathways are intentionally designed as one-time exemptions so that any disparity does not exist in perpetuity. Staff intend for outreach related materials and the exemption portal to point all projects, including low-income property owners, to available incentives to mitigate any remaining equity concerns.

With regards to renters, under the Air District’s flexibility concepts, exemptions would be provided in scenarios requiring significant construction including space and/or electrical constraints. Landlords would not be required to install zero NOx water heaters in scenarios that align with “substantial repair” exemptions, thus greatly decreasing “renoviction” risks.

Since the remaining projects that would be required will be more standard, average-cost projects, the risk of major pass-through costs will also be reduced as a result.

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Appendix A
Electrical Constraints
In most homes, some electrical work will be needed to switch to a HPWH from an older gas water heater. This can range from minor work (e.g., simply installing a short length of new electrical conduit or outlet), to major work resulting in significant time and cost (e.g., extensive rewiring, electrical panel upsizing and potential utility service upgrades).

A minimum of 44 percent of single-family homes in the Bay Area is estimated to have electric panels with 200 amps,
30 which is considered to be the modern standard, and could fully electrify without panel upsizing.
32 percent of single-family and 59 percent of multifamily homes in California have panels of intermediate size (100 amps for single-family, 60 amps for multi-family)31 and will likely require “right-sizing”, “watt diet” or panel optimization strategies (low-voltage appliances; circuit pausing/sharing; smart panels) to avoid panel and service upsizing in these homes.

Newer 120-volt plug-in HPWHs (see Figure 1A) can also help mitigate the need for extensive electrical upgrades, particularly for smaller households with less hot water demand. For a small portion of homes, extensive electrical work likely cannot be avoided and would be especially costly, encompassing panel upsizing and in some cases, subsequent utility service upsizing. Statewide, 3 percent of single-family homes had panels smaller than 100 amps and 10 percent of multi-family homes had panels smaller than 60 amps (per dwelling unit) which will most likely require upsizing for electrification. In disadvantaged communities (DACs), the number of single-family homes with panels smaller than 100 amps is disproportionately higher at 8 percent.
32 30 NREL model, as described in Table 19. https://www.baaqmd.gov/~/media/files/community-health/building-appliance-implementation/task1_electrificationcosts-pdf.pdf?rev=3cb66a09f3094f94b35fa7fc90cfd4ec&sc_lang=en 31 Fournier, Eric et al. Quantifying the electric service panel capacities of California's residential buildings. 2024. https://www.sciencedirect.com/science/article/pii/S0301421524002581 32 Ibid.

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Figure 1A. Heat Pump Water Heater (HPWH) configurations and wiring, siting and installation needs
Space Constraints
HPWHs need adequate ventilation space as well as physical space (because of the integrated compressor unit, they are typically a bit taller than NOx-emitting units).

Modifications to address space constraints range in costs.

Ventilation measures (air openings such as louvered doors, see Figure 2A) were mostly relatively low cost (average=$208 and max=$1,701) according to Palo Alto HPWH program Item 5
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data.
33 Lower costs for these measures are also dependent upon having adequate ventilation space in the adjoining room or access to an outdoor wall.

Figure 2A. Ways to circulate more air34
HPWHs, due to their slower recharge times, are typically upsized approximately 10-15 gallons compared to a gas water heater; these larger tanks, in addition to the integrated compressor, can lead to lack of physical space for the new HPWH if the existing location is a utility closet, a basement space with low ceilings, etc. Space reconfiguration or relocating the water heater can cause significant costs (average= $1,287 and max= $4,540), according to Palo Alto HPWH program data, as seen below in Figure 3A. Program data as illustrated in the Figure 3A bar chart shows that for individual projects, ventilation measures (red bars) were generally less expensive to add (<$1,000) compared to space reconfiguration and carpentry measures (blue bars). Bars showing both red and blue 33 Data provided by Palo Alto Utilities staff, September 2024. Note that the Palo Alto program is one of the few programs documenting detailed measures such as ventilation or carpentry measures, with hundreds of projects.
34 https://library.peninsulacleanenergy.com/m/c76176ab7d47195/original/Heat-Pump-Water-Heater-Space-and-Air-Guidance.pdf Item 5
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represent projects and costs that deployed both ventilation measures and space reconfiguration or carpentry measures.

Figure 3A. Palo Alto HPWH Program: Additional Space Constraint Costs ($) for Space Reconfiguration, Carpentry, and Ventilation Measures35
HPWH solutions for small spaces are emerging. Split-system HPWHs offer an unattached, outside condenser/heat pump (see Figure 1A) but there are fewer and less common market options.
35 Data provided by Palo Alto Utilities staff, September 2024. Note that the Palo Alto program is one of the few programs documenting detailed measures with hundreds of projects.

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Appendix B
References for Income Qualified Calculations
For 2025 values of 250 percent Federal Poverty Guidelines for each household size:
https://aspe.hhs.gov/sites/default/files/documents/dd73d4f00d8a819d10b2fdb70d254f7b/detaile d-guidelines-2025.pdf
For 2023 5-year American Community Service Tables:

B25009 - tenure by household size for owner and renter occupied homes - use owner occupied:
https://data.census.gov/table/ACSDT5Y2023.B25009?g=050XX00US06001$1400000,06013$140 0000,06041$1400000,06055$1400000,06075$1400000,06081$1400000,06085$1400000,0609 5$1400000,06097$1400000
B25118 - number of households in different income bins for owner- and renter-occupied homes - used owner-occupied housing units: Tenure by Household Income in the Past 12 Months (in 2023 Inflation-Adjusted Dollars):
https://data.census.gov/table/ACSDT5Y2023.B25118?q=California+Income+and+Poverty&t=Own er/Renter+(Householder)+Characteristics&g=050XX00US06001,06013,06041,06055,06075,0608 1,06085,06095,06097&y=2023
For Area Median Income (AMI) for each county and household size:
https://www.hcd.ca.gov/sites/default/files/docs/grants-and-funding/income-limits-2023.pdf Item 5
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Appendix C
Sources for Project Constraint Estimates
Program/ Source
Geographic
Scope Constraint Prevalence
Palo Alto Palo Alto
Space, electrical, drainage
measures >$1500 per
project 15%
TECH / NBI 120V HPWH
study Statewide
Space constraint. (Note:
program did not use any
space ventilation measures
e.g. louvered doors) 28%
UCLA Quantifying the
electric service panel
capacities of California's
residential buildings. Statewide Electrical
3% SF, 10%
MF
BayREN Home Energy
Score Audits (included
water heater location
information)
Santa Clara
Co.

Space: interior utility
closets (some basements
may also be constrained)
4% interior
closet, 20%
Basement
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Appendix D
Average Estimated Upfront and Incremental Costs
The costs presented below are general estimations and are not meant to represent exact costs for any specific project or installation. Actual costs will vary based on site conditions, equipment size, and installation requirements.

Unit Type Upfront Installation Cost Long-Term Energy Cost 35-gal gas water heat Moderate Moderate-low
75-gal gas water
heater Moderate Moderate-high
Gas tankless Moderate-high Moderate
120-volt Plug-in HPWH Moderate-high Moderate-low
Standard HPWH Moderate-high Low-moderate
Electric tankless High High
Figure 4A Illustrative Relative Costs Trends by Water Heater Technology36 36 Adapted from ibid 15; values are illustrative and reflect staff interpretation of available data Item 5
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Staff Report – Item 6
Item 6: Silicon Valley Clean Energy Programs + Marketing: Mid-Year Highlights From: Monica Padilla, CEO
Prepared by: Raul Hernandez, Marketing Manager
Nupur Hiremath, Manager of Decarbonization Programs
Date: 8/12/2026
This item will be addressed in the form of a presentation to the Board of Directors covering selected mid-year highlights from programs and marketing initiatives.

ATTACHMENT
The presentation for this item is posted to the SVCE website.

Item 6