From: Hamilton Hitchings
To: Council, City
Cc: Nose, Kiely; Kurotori, Alan
Subject: PAN Input to City Council on 34% Residential Gas Bill Increase Deferral Date: Saturday, May 10, 2025 6:41:06 PM
Attachments: PAN Input to City Council on residential 34 Percent Gas Rate Increase Deferral 2025-5-9_v1.pdf CAUTION: This email originated from outside of the organization. Be cautious of opening attachments and clicking on links.
i
Dear City Council,
On behalf of Palo Alto Neighborhoods, we thank the Finance Committee members Pat Burt, Julie Lythcott-Haims, and Keith Reckdahl for unanimously recommending that the new gas rate study be remanded to the Utility Advisory Commission for further review. We also thank staff for their hard work developing this alternative and providing more detailed information about this complex issue. We have a couple of suggested improvements to the Finance Committee recommendation at the end of this letter.
The new gas rate study proposed raising the average Tier 1 residential gas bill by 34% starting in July for basic needs such as cooking and winter heating.
This includes all
renters in individually metered apartments, where the majority of renters live. This proposed residential bill increase came despite the overall average gas bill across all customer classes rising by only 5%.
Problems with the new gas Cost of Service Analysis (COSA) The UAC finance subcommittee never got to see the COSA and the UAC only had a few days to review it.
Many UAC members thought they were required to accept it, although they expressed dissatisfaction.
Large and sudden utility rate hikes—such as a 34% increase—create financial risk, liability, and uncertainty for the city, regardless of who is affected.
Citing “seasonal variability,” the current consultant adopted a new, discretionary methodology—unlike the preceding consultant at the same firm—that moves infrastructure costs from small businesses onto households.
The old COSA methodology is well recognized, still legitimate, and complies with California Prop 26.
This message needs your attention
This is a personal email address.
Mark Safe Report
Powered by Mimecast
The new methodology means residential Tier 1 customers shoulder a larger share of the reserve replenishment costs.
The new COSA cuts small‑business and master-metered landlord service fees from $157 to $29, shifting costs so basic‑use residents face a 34% hike.
Using PG&E as a benchmark is misleading—PG&E’s CPUC‑regulated rates don’t dictate local rates, and PG&E already charges small businesses about 40% less per therm than residential customers.
Tier 2 high-usage residential customers receive a 10% rate cut, which undermines climate goals.
Large commercial customers face about a 7% bill increase, far below the 34% imposed on basic‑use households.
Raises residents’ share of the General Fund Transfer by changing this methodology, discarding Measure L’s voter‑approved Net Plant formula.
Understanding the Numbers
An average Tier 1 household (26 therms/month) would see its bill jump 34%— from $38 to $51 per month—driven by a 49% hike in the Tier 1 rate and a 15% hike in the monthly service charge.
The 22% proposed residential rate increase is an average that combines low-usage Tier 1 and high-usage Tier 2 customers.
The 13% residential rate increase cited in city communications was the 22% rate minus the proposed one-time rebate for residential customers using Cap-and-Trade funds.
Only the distribution component rises 9%; the average total bill increases 5%.
There is precedent for reconsideration
Other California cities have rejected their COSAs and revised their rate plans, including Davis (2013), Fresno (2013), Oxnard (2015-2017), and Glendale (2011-2014).
Our recommendations
1. Support the unanimous Finance Committee recommendations to:
a. Keep the FY 2025 gas rate structure to give an equal across-the-board rate increase for FY2026;
b. Refer staff to return to the UAC to further review the 2025 COSA assumptions and principles.
2. In addition:
a. Have the Utility Advisory Commission thoroughly review the internals of the model in the new COSA.
b. Recognize that redirecting Cap-and-Trade funds away from their purpose of permanently lowering greenhouse-gas emissions to subsidize gas use undermines the policy’s goals.
c. Remove the small business rebate using Cap-and-Trade funds. i. As Councilmember Reckdahl stated in the Finance Committee: we should not be putting the cart before the horse and trying to guess the new gas rates before UAC review.
ii. The Cap-and-Trade funds proposed rebate is outside the scope of the COSA and does not insulate the city from theoretical liability from changes to our COSA model.
Thank you again to the members of the Finance Committee for their thoughtful analysis and vote to remand this COSA for further UAC review.
Hamilton Hitchings on behalf of Palo Alto Neighborhoods Dear City Council,
On behalf of Palo Alto Neighborhoods, we thank the Finance Committee members Pat Burt, Julie Lythcott-Haims, and
Keith
Reckdahl
for
unanimously
recommending
that
the
new
gas
rate
study
be
remanded
to
the
Utility
Advisory
Commission
for
further
review.
We
also
thank
staff
for
their
hard
work
developing
this
alternative
and
providing
more
detailed
information
about
this
complex
issue.
We
have
a
couple
of
suggested
improvements
to
the
Finance
Committee
recommendation
at
the
end
of
this
letter.
The new gas rate study proposed raising the average Tier 1 residential gas bill by 34% starting in July for basic needs
such
as
cooking
and
winter
heating.
This
includes
all
renters
in
individually
metered
apartments,
where
the
majority
of
renters
live.
This
proposed
residential
bill
increase
came
despite
the
overall
average
gas
bill
across
all
customer
classes
rising
by
only 5%
.
Problems with the new gas Cost of Service Analysis (COSA) ● The UAC finance subcommittee never got to see the COSA and the UAC only had a few days to review it. ● Many UAC members thought they were required to accept it, although they expressed dissatisfaction. ● Large and sudden utility rate hikes—such as a 34% increase—create financial risk, liability, and uncertainty for
the
city,
regardless
of
who
is
affected.
● Citing “seasonal variability,” the current consultant adopted a new, discretionary methodology—unlike the preceding
consultant
at
the
same
firm—that
moves
infrastructure
costs
from
small
businesses
onto
households.
● The old COSA methodology is well recognized, still legitimate, and complies with California Prop 26. ● The new methodology means residential Tier 1 customers shoulder a larger share of the reserve replenishment
costs.
● The new COSA cuts small ‑ business and master-metered landlord service fees from $157 to $29, shifting costs
so
basic
‑
use
residents
face
a
34%
hike
.
● Using PG&E as a benchmark is misleading—PG&E’s CPUC ‑ regulated rates don’t dictate local rates, and PG&E
already
charges
small
businesses
about
40%
less
per
therm
than
residential
customers.
● Tier 2 high-usage residential customers receive a 10% rate cut, which undermines climate goals. ● Large commercial customers face about a 7% bill increase, far below the 34% imposed on basic ‑ use households.
● Raises residents’ share of the General Fund Transfer by changing this methodology, discarding Measure L’s
voter
‑
approved
Net Plant
formula.
Understanding the Numbers
● An average Tier 1 household (26 therms/month) would see its bill jump 34% —from $38 to $51 per month—driven
by
a
49%
hike
in
the
Tier 1
rate
and
a
15%
hike
in
the
monthly
service
charge.
● The 22% proposed residential rate increase is an average that combines low-usage Tier 1 and high-usage Tier
2 customers.
● The 13% residential rate increase cited in city communications was the 22% rate minus the proposed one-time
rebate
for
residential
customers
using
Cap-and-Trade
funds.
● Only the distribution component rises 9%; the average total bill increases 5%. continued on the next page…
There is precedent for reconsideration Other California cities have rejected their COSAs and revised their rate plans, including Davis (2013), Fresno (2013), Oxnard
(2015-2017),
and
Glendale
(2011-2014).
Our recommendations 1. Support the unanimous Finance Committee recommendations to:
a. Keep the FY 2025 gas rate structure to give an equal across-the-board rate increase for FY2026; b. Refer staff to return to the UAC to further review the 2025 COSA assumptions and principles.
2. In addition:
a. Have the Utility Advisory Commission thoroughly review the internals of the model in the new COSA. b. Recognize that redirecting Cap-and-Trade funds away from their purpose of permanently lowering greenhouse-gas
emissions
to
subsidize
gas
use
undermines
the
policy’s
goals.
c. Remove the small business rebate using Cap-and-Trade funds. i. As Councilmember Reckdahl stated in the Finance Committee: we should not be putting the cart
before
the
horse
and
trying
to
guess
the
new
gas
rates
before
UAC
review.
ii. The Cap-and-Trade funds proposed rebate is outside the scope of the COSA and does not insulate
the
city
from
theoretical
liability
from
changes
to
our
COSA
model.
Thank you again to the members of the Finance Committee for their thoughtful analysis and vote to remand this COSA
for
further
UAC
review.
Hamilton Hitchings on behalf of Palo Alto Neighborhoods From: Utsav Gupta
To: Julie Lythcott-Haims; Burt, Patrick; Reckdahl, Keith; Council, City Cc: Nose, Kiely; Kurotori, Alan; Clerk, City
Subject: Finance Committee - Comments re Gas COSA and Cap and Trade Date: Wednesday, May 7, 2025 8:17:27 AM
Attachments: 2025-05-07_Palo Alto Gas COSA Comments.pdf reso-9487.pdf
reso-10077.pdf
CAUTION: This email originated from outside of the organization. Be cautious of opening attachments and clicking on links.
Dear Finance Committee,
These comments address the proposed gas Cost of Service Analysis (COSA) and associated rate changes before the Palo Alto Finance Committee. While I currently serve as a commissioner on the Utilities Advisory Commission (UAC), the views expressed here are my personal comments and do not reflect the position or opinions of the Commission.
- The COSA should be remanded to UAC for further review. The UAC was under the impression that it was obligated to accept the findings, which is not true—other cities have revisited and revised their COSAs. Adopting the revised COSA making such drastic changes increases litigation and/or ballot initiative risk more than remanding the COSA for further review and maintaining the current, compliant COSA. - The $1.6 million allocation from Cap and Trade to subsidize fossil fuels and mask gas rate increases for one year violates the City’s policies and intentions for the use of these funds, including the City’s 2015 Resolution 9487 establishing the fund that explicitly intended using these funds for greenhouse gas reduction projects, such as energy efficiency programs and other carbon-cutting measures, "before providing rebates" to customers —and also Resolution 10077 stating that “its intention [is] to use revenues from the sale of City’s Gas Cap and Trade allowances for building, appliance and vehicle electrification”—and thus this transfer should be rejected. It’s a precedent that Palo Alto has refused to set before, and it’s not one that Palo Alto should adopt now.
Thank you for your service to our community.
Best,
Utsav
—
Utsav Gupta
Palo Proposed Gas COSA Comments May 7, 2025 Utsav Gupta These comments address the proposed gas Cost of Service Analysis (COSA) and associated rate changes before the Palo Alto Finance Committee. While I currently serve as a commis-sioner on the Utilities Advisory Commission (UAC), the views expressed here are my per-sonal comments and do not reflect the position or opinions of the Commission. SUMMARY - The COSA should be remanded to UAC for further review. The UAC was under the im-pression that it was obligated to accept the findings, which is not true—other cities have revisited and revised their COSAs. Adopting the revised COSA making such drastic changes increases litigation and/or ballot initiative risk more than remanding the COSA for further review and maintaining the current, compliant COSA. - The $1.6 million allocation from Cap and Trade to subsidize fossil fuels and mask gas rate increases for one year violates the City’s policies and intentions for the use of these funds, including the City’s 2015 Resolution 9487 establishing the fund that ex-plicitly intended using these funds for greenhouse gas reduction projects, such as energy eYiciency programs and other carbon-cutting measures, "before providing rebates" to customers1—and also Resolution 10077 stating that “its intention [is] to use revenues from the sale of City’s Gas Cap and Trade allowances for building, ap-pliance and vehicle electrification”2—and thus this transfer should be rejected. It’s a precedent that Palo Alto has refused to set before, and it’s not one that Palo Alto should adopt now. 1 https://www.cityofpaloalto.org/files/assets/public/v/1/city-clerk/resolutions/reso-9487.pdf; see also https://www.paloalto.gov/files/assets/public/v/1/agendas-minutes-reports/reports/city-manager-reports-cmrs/year-archive/2015/final-staF-report-id-5397_use-of-cap-and-trade-compliance-revenue.pdf (“The UAC generally supported the proposed policy for how the auction proceeds could be used, but expressed a pref-erence that the revenues be used for programs to reduce GHG emissions, rather than being returned to gas ratepayers in the form of a rebate. StaF agreed with the UAC's recommendation and revised the pro-posed policy to incorporate the recommendation. The minutes of the UAC's October 1, 2014 meeting are pro-vided as Attachment D.”) (emphasis added). 2 https://www.cityofpaloalto.org/files/assets/public/v/1/city-clerk/resolutions/resolutions-1909-to-pre-sent/2022/reso-10077.pdf (
COSA SHOULD BE REMANDED TO UAC The gas COSA should be remanded to the UAC for additional feedback regarding the rates and the changes from the prior COSA that were made by the consultant. The prior COSA is Proposition 26 compliant. Proposition 26 does not require any particular methodology or timeline—it is simply meant to protect ratepayers from unfair taxation by ensuring that costs are recovered appropriately. The UAC had very little time to consider this gas COSA that makes such drastic changes to rates. The gas COSA was not presented at the UAC Budget Subcommittee, upon which I serve, and was first made available as part of the regular meeting packet discussing it. Com-missioners were under the mistaken impression that they were obligated to accept the find-ings. Public acceptance is key to a COSA, and cities can revise or reject COSAs. Of course, this makes sense—that is precisely why it requires approval by city council. The following cases illustrate how California utilities have revisited their cost-of-service analyses. Adopting such large changes increases the risk that residents either sue or, more likely, seek the adoption of a ballot measure. This has happened at several cities before, as detailed be-low. Examples of Cities Revising COSAs and Rate Plans 1. Fresno: In 2013, Fresno approved water rate increases to fund infrastructure up-grades, backed by a COSA. Facing heavy public opposition, a referendum drive, and a lawsuit arguing the rates were excessive and improperly approved, the Fresno City Council unanimously voted in July 2014 to repeal the rate hikes (and had to pay $150,000 in attorney’s fees to the citizen’s coalition).3 The city canceled the in-creases, issued bill credits, paid legal fees, and revisited the plan to find a compro-mise acceptable to ratepayers. 2. Davis: Davis adopted a new water rate schedule in March 2013 based on a "Con-sumption-Based Fixed Rates" (CBFR) model to fund a surface water project. This model was criticized as unfair, particularly to single-family homeowners. A success-ful referendum (Measure P) in June 2014 repealed these rates, compelling the City Council to discard the original COSA and conduct a new rate study. By September 2014, Davis adopted a revised COSA and a more traditional rate structure aligned with community feedback.4 3 https://abc30.com/fresno-city-council-agrees-to-repeal-water-rates-hike/231407/ 4 https://www.cityofdavis.org/city-hall/public-works-utilities-and-operations/water/water-rates; https://bal-lotpedia.org/City_of_Davis_Water_Rates_Repeal_Referendum%2C_Measure_P_%28June_2014%29
3. Glendale: Glendale discovered serious flaws in its 2011-2012 COSA, which misallo-cated customer usage data, leading to undercharges for some and extreme increases for others. The city scrapped the flawed analysis and commissioned a new COSA in 2014 to correct the methodology and rebalance cost allocations. This revision was prompted by customer complaints and revenue shortfalls.5 The new COSA was adopted in July 2014. 4. Oxnard: Oxnard revised its COSA and rate plan in 2017 following community back-lash to an initial 2015-2016 proposal that included an 87% cumulative rate increase. After residents launched Measure M to repeal the steep rate hikes, Oxnard proactively revisited the COSA. A Utility Ratepayers Advisory Panel was formed, leading to a new, more gradual five-year rate schedule implemented in mid-2017 (but was still arguably noncompliant with Measure M).6 The City continued litigation for several years to challenge Measure M and justify the rate increase from the URAP, where it finally suc-ceeded on appeal, and the more gradual rates decided upon the URAP were held. LITIGATION RISK FAVORS REMAND, NOT ADOPTION The examples above show that residents will either: (1) sue and/or (2) seek a ballot measure to overturn unfair COSAs. The Finance Committee should get ahead of this potential out-come and return the COSA to the UAC for further review. Indeed, in Oxnard, not only did the city have to revise its COSA after it was the subject of a successful ballot measure, it then had to litigate the onerous eYects of that measure for several years. The original measure passed in November 2016, but litigation continued well into 2021. CAP AND TRADE TRANSFER RUNS CONTARY TO CLIMATE GOALS AND CITY POLICY The proposed $1.6 million transfer from our Cap and Trade reserves to mask the gas rate increase impact on residences directly contradicts both our climate goals and Palo Alto City Council's established policy governing the use of these revenues. In January 2015, the Coun-cil adopted a policy (Resolution 9487) establishing how Cap and Trade funds should be used that explicitly intended using these funds for greenhouse gas reduction projects—such as energy eYiciency programs, renewable biogas purchases, and other carbon-cutting 5 https://www.latimes.com/socal/glendale-news-press/news/tn-gnp-xpm-2014-04-02-tn-gnp-city-set-to-pay-consultant-to-fix-water-rates-20140402-story.html 6 https://oxnard.granicus.com/Docu-mentViewer.php?file=oxnard_5a0fece5e6118fcafd4a42b4bcae0fa1.pdf&view=1 (at page 7: “Due to the chal-lenge of the rate increase for Wastewater the City was granted a stay by the court until the City completes a new Cost of Service Study that is scheduled to begin in February 2017.”); https://www.movingoxnardfor-ward.org/wastewater_bond_rating_improves_after_oxnard_loses_measure_m_lawsuit.
measures—"before providing rebates" to customers. In adopting this policy, the Council signaled that climate programs would take priority over bill credits.7 This policy was further strengthened in October 2022, when the Council unanimously ap-proved an updated policy (Resolution 10077) to "clearly state its intention to use" the gas allowance revenues for building, appliance and vehicle electrification programs. At the same meeting, Council authorized using $1.25 million of gas Cap-and-Trade funds for an Advanced Heat Pump Water Heater Pilot program.8 More, this information was not presented to UAC, which is another reason justifying remand. Using these funds to subsidize gas rates directly contradicts both the letter and spirit of these policies, and is a misuse of resources specifically designated for combatting climate change. CONCLUSION Because of the limited review from UAC and significant community concerns, it is prudent to return the gas COSA to the UAC while maintaining the prior COSA with proportional rate increases that are fair to both residents and businesses. Additionally, the Finance Commit-tee should reject the proposed use of Cap-and-Trade funds for rate relief and instead direct those funds toward their intended purpose of reducing greenhouse gas emissions. Thank you for your service to our community. Respectfully Submitted. Utsav Gupta Palo Alto Resident UAC Commissioner (speaking in personal capacity) 7 See Footnote 1. 8 See Footnote 2.
Resolution No. 9487
Resolution of the Council of the City of Palo Alto Amending the Cap and-Trade Revenue Utilization Policy to Cover the Use of Freely Allocated Allowances for the Gas and Electric Utilities
RECITALS
A. The Global Warming Solutions Act, also known as Assembly Bill 32 (AB 32), requires that California's Greenhouse Gas {GHG) emissions by 2020 be at 1990 levels, and authorized the California Air Resources Board (CARB) to develop regulations to reach this goal.
B. The GHG emission cap-and-trade program is one of several tools designed by CARB to achieve the state's GHG reduction goal, and has been in operation since November 2012.
C. As of January 2015 and in accordance with CARB's cap-and-trade regulations, as a natural gas supplier, the City of Palo Alto will be GHG emission allowances (allowances) free of charge by CARB, to be utilized in a manner both consistent with the goals of AB 32 and exclusively for the benefit of retail gas ratepayers.
D. Under the terms of CARB's cap-and-trade regulations, including Title 17 California Code of Regulations Section 95893 (d)(3), the City is required to sell a portion of these allocated allowances in the auctions conducted by CARB and utilize the auction sale proceeds "exclusively for the benefit of retail ratepayers of each natural gas supplier" and "consistent with the goals of AB 32".
E. The Council of the City of Palo Alto supports the state's AB 32 goals, and intends to implement the City's Policy on the Use of Freely Allocated Allowances Under the State's Cap and-Trade Program (formerly titled the Cap-and-Trade Revenue Utilization Policy) in furtherance ofthese goals.
The Council of the City of Palo Alto RESOLVES, as follows:
SECTION 1. The City's Policy on the Use of Freely Allocated Allowances Under the State's Cap-and-Trade Program is amended as shown in Exhibit A.
SECTION 2. The Council grants the City Manager or his designee the authority to implement the Policy on the Use of Freely Allocated Allowances Under the State's Cap-and Trade Program and to use allowances and allocate auction revenues to projects or expenditures as defined in Exhibit A.
SECTION 3. Should California's cap-and-trade program and/or the CARB regulations implementing that program be suspended, discontinued or materially altered such that the City 150105 mf 6053201
of Palo Alto Utilities no longer receives allocated allowances of significant monetary value, the Council reserves the right to terminate the Policy on the Use of Freely Allocated Allowances Under the State's Cap-and-Trade Program and discontinue any programs funded from the City's allocated allowance revenues.
SECTION 4. The Council finds that the implementation of this Policy, including the use of revenue derived from it, and the expenditures of funds necessary to implement it, represent the City's cost of regulatory compliance with the state's cap-and-trade program and are consistent with the goals of AB 32. Such costs therefore represent the reasonable costs of providing service to CPAU's gas customers.
SECTION 5. The Council finds that the amendment of this policy does not meet the definition of a "project" under the California Environmental Quality Act, as defined by California Public Resource Code Section 21065.
INTRODUCED AND PASSED: January 26, 2015
AYES: BERMAN, BURT, DUBOIS, FILSETH, HOLMAN, KNISS, SCHARFF, SCHMID, WOLBACH NOES:
ABSENT:
ABSTENTIONS:
ATTEST: ~
~(
~1 City Clerk
~ APPROVED AS TO FORM:
~ctt~
Mayor
APPROVED:
r!Lti,L ~a
ATTACHMENT A
EXHIBIT A TO RESOLUTION NO •. __
ADOPTED BY COUNCIL ON: __ _
CITY OF PALO ALTO POLICY ON THE USE OF FREELY ALLOCATED ALLOWANCES
UNDER THE STATE'S CAP-AND-TRADE PROGRAM
This Polley applies to freely allocated greenhouse gas (GHG) emission allowances from the california Air Resources Board (CARB) to the City of Palo Alto's electric and natural gas distribution utilities ("Allocated Allowances"). The City Manager or his designee Is authorized to use Allocated Allowances and any resulting revenue in any lawful manner consistent with this policy.
The City's Polley on the Use of Freely Allocated Allowances for the Electric Utility Is as follows:
1. The City shall abide by CARB's regulations by using the auction proceeds and allowance value obtained from the City's allocated allowances for the exclusive benefit of the City's electric retail ratepayers, consistent with the goals of the Global Warming Solutions Act, also known as Assembly Bill 32 (AB 32), and not for the benefit of entities or persons other than such ratepayers.
2. The following uses of the City's auction proceeds are permitted:
a) Purchases or Investment in renewable resources (outside Palo Alto or locally) for the electric portfolio;
b) Investment In energy efficiency programs for the electric portfolio and retail customers; c) Investment In other carbon reduction activities, Including those required to achieve a carbon-neutral electric portfolio; and
d) Rebates to electric retail ratepayers.
3. Allocated allowances may also be used to meet the City's electric utility's compliance obligations for electricity scheduled into the California Independent System Operator Markets, should state law eventually permit this action.
4. Council will receive annual reports on the allowance revenues and expenditures associated with complying with CARB regulations and this policy.
5. Additional Council approval will be required for any rebates to electric ratepayers proposed under this Polley.
The City's Polley on the Use of Freely Allocated Allowances for the Gas Utility Is as follows:
1. The City shall abide by CARB's regulations by using the auction proceeds for the exclusive benefit of the City's natural gas retail ratepayers, consistent with the goals of _J;JJillP'-1\~:tO;:gesOtUTiO'N NO~~-~, ......_..,..
1\QQPTEQiiBV tOU.N¢l'L\(lN: ~-
~"'~- ~·rt)~l w:wrmioB-~QJ\ltl9o~-~~~t;: ~~~~,~ngwi:t~~i~~~l)lv $Jll.·~aJA~.a~rJ~~nd nAlHhr ~he•be-nefttof:'i!~tltfes:-l!Jr,persons::othenftan'-suelttatep~y.ers-~- ·2· ~:f1~
1 .:
1 J~~-·.'.!_!f,~ <:~Hti~t~J!JK~IJ~}Strt~~~ ~~ft ~¢JI{!e~.-~t9';ffi~~lJtlj~·~IW:~~~natQfjfg@~ y~UJW~$· ~~o~n.,; g'·'",.; "' , . tto:n~; :and the :r:e:malnin~;Aifotate'd •P..J'It5wUnt::~~ will ber~~n~f~~-~~ J~ ~q~flon.
s.. Theffbilowlhr;use§:\'ofthe dtts •auetiM -J)tocee.tis ftorn the:s~Oe:of-1\floeated Ailowan~es~ ~.;, P~.; .... ·· ···· w. :~lUr:fc3PTAter.il'l1l~.ttmt.gr,eenbtw~J~r.~$-rijwatf~n·m~~ur~f6e.~:p:t~r.m;uad<' ·~·-' - . ~l~Jff)I~~Jj . ' . •. .• ·.· ·, ..
th ]nVesrmtmttin ene~y·•etliciel'icy :pfcierllms :ff:>r tile ;natural :$,as·~p:ai'tlftiJio •ahtl retail:
;(iustom•r.:s~
b.i ~P~tijb~~!:~tir Jn~~~ti•'l~f:l~ ·Jri.,tQ$ti~ffMtN~ r~~~~~Jn~. 9IQ·ta~ t~mur~~$. ti?r<tht:~.&~$:
;poittftil!at
c. 'inMr:c~mertt· fll:Ptb~r CilfPQil '(*!flucfrgn a~Mttes·fQf' tht! t~atur~l .gas.: utU(ty,, jn(it!.!dlntt :5Y!~~m~ro~loten~~n~~:~~t:rept~¢~fu~ttt:~() ,.,.~q~~ ms1~ve g~~:~ffil$iiM~: . .-__ .. dj -Riib~tes.to natural gas retail rate~ayer:s .. _ ae'bates/if pt()Vtded{tnusfo~:aUocat-ed''ott ~'non~v,Qlt~tr:titric::l:iasis :as.~Sjait!d tn''t1t'le :tz;¢C.tt~e~tlon~9$:lt9:3 (~}.!~;l' ;4, Gourtcfi\wrri''r4teiVe'annua1 rep:ortS'J:iitthE!:use:nt.Ailo:cated'Atiowarn:~t~ irtc1'udl'ngd:h~:~lsef cir'au¢tlonx'v~n~es•~nd~l!pendittJr~s asso:d~fed·vdth ~o.mJIYing,,wltK~;«~tl r~gy:l~bons• ~~g·~lfti$·~91JPY; .· . . . ·- ..
,s.. b..ddltlo.nal',t.ouneJi ~approval wiH be'·.te-q~tred fonmv reba'te$ tQ. natyraLgaSi~rat~pa.vers ~tP1i4'~fi~t~ftqj¥r<tJ11$f~b.Jl~yi . . '· -.. ·.- .
Resolution No. 10077
Resolution of the Council of the City of Palo Alto Amending the City’s Policy on the Use of Freely Allocated Allowances Under the State's Cap-and-Trade Program and Authorizing the City Manager to use $1.25 million from the Gas Utility Cap and Trade Reserve for the Advanced Heat Pump Water
Heater program
R E C I T A L S
A. The Global Warming Solutions Act, a lso known as Assembly Bill 32 (AB 32), as amended by Senate Bill 32 (2016), requires that California's Greenhouse Gas {GHG) emissions be reduced 40% below 1990 levels by 2030, and authorized the California Air Resources Board (CARB) to develop regulations to reach this goal.
B. Under the terms of CARB's cap- and-trade regulations, including Title 17 California Code of Regulations Section s 95892 (d)(2) and 95893 (d)(3), the City is required to sell a portion of these allocated allowances in the auctions conducted by CARB and utilize the auction sale proceeds “exclusively for the benefit of retail electric ratepayers” (for the electric utility) or "exclusively for the benefit of retail ratepayers of each natural gas supplier" (for the gas utility) and "consistent with the goals of AB 32".
C. On J anuary 26, 2 015 t he C ouncil a pproved a Policy o n the U se o f Fr eely Allocated Allowances Under the State’s Cap and Trade Program (Resolution 9487).
D. The Council of the City of Palo Alto supports the state's AB 32 goals and intends to implement the City's Policy on the Use of Freely Allocated Allowances Under the State's Cap- and -Trade Program (formerly titled the Ca p-and-Trade Revenue Utilization Policy) in furtherance of these goals.
E. The Council has approved a Sustainability and Climate Action Plan Goal of 80% emissions reduction from 1990 levels by 2030, a Framework, and an Implementation Plan. A preliminary impact analysis reviewed by the Council on April 19, 2020 demonstrated that building and vehicle electrification was a critical part of achieving these emissions reduction goals.
F. The Council intends to establish various progra ms to promote building, appliance and vehicle electrification, which will require significant funding. The Council wants to amend the previously approved policy to clearly state its intention to use revenues from the sale of City’s Gas Cap and Trade allowances for building , appliance and vehicle electrification.
The Council of the City of Palo Alto (“City”) RESOLVES as follows:
SECTION 1. The Council finds that the use of revenues from the auction of freely allocated Gas Utility allowances under the State’s Cap and Trade program to promote building, appliance and vehicle electrification , when such conversions also reduce greenhouse gas emissions, 6056672
DocuSign Envelope ID: C22AC74B-ADCA-44DE-8FFF-3FE9B5B1D035 DocuSign Envelope ID: 9CDCD8E9-478A-42EF-907F-75217AB6B1A8 6056672
provides a variety of benefits to the City’s gas customers, including:
a. furthering State and local climate protection goals by reducing natural gas -related emissions due to the long-term and orderly transition away from natural gas to carbon neutral electricity;
b. avoiding increasing environmental and transmission charges on gas use; c. decreasing the energy cost of operating equipment, vehicles, and appliances due to Palo Alto’s low electricity costs;
d. avoiding increasing natural gas distribution system maintenance costs.
SECTION 2. The Council finds that because nearly all members of the community use both natural gas and electricity, fuel switching from natural gas to electricity reduces energy costs and greenhouse gas emissions and facilitates an orderly transition away from natural gas at the lowest feasible cost, it is of benefit to both gas and electric ratepayers to use revenues from auction of both gas and electric allowances under the State’s Cap and Trade program to promote fuel switching.
S
ECTION 3. The City's Policy on the Use of Freely Allocated Allowances Under the State's Cap-and-Trade Program is amended as shown in Exhibit A.
S
ECTION 4. The Council grants the City Manager or his designee the authority to implement the Policy on the Use of Freely Allocated Allowances Under the State 's Cap-and-Trade Program and to use allowances and allocate auction revenues to projects or expenditures as defined in Exhibit A.
S
ECTION 5. The Council affirms the use of up to $1.25 million in revenues from gas utility participation in the State’s Cap and Trade program to fund an Advanced Heat Pump Water Heater Pilot, as described in Staff Report 14606.
S
ECTION 6. The Council finds that the implementation of this Policy, including the use of revenue derived from it, and the expenditures of funds necessary to implement it, represent the City's cost of regulatory compliance with the state's cap -and-trade program and are consistent with the goals of AB 32. Such costs therefore represent the reasonable costs of providing service to CPAU's gas customers.
//
//
//
//
//
//
//
DocuSign Envelope ID: C22AC74B-ADCA-44DE-8FFF-3FE9B5B1D035 DocuSign Envelope ID: 9CDCD8E9-478A-42EF-907F-75217AB6B1A8 6056672
//
SECTION 7. The Council finds that the amendment of this policy does not meet the definition of a "project" under the California Environmental Quality Act, a s defined by Ca lifornia Public Resource Code Section 21065.
INTRODUCED AND PASSED: October 3, 2022
AYES: BURT, CORMACK, DUBOIS, FILSETH, KOU, STONE
NOES: TANAKA
ABSENT:
ABSTENTIONS:
ATTEST:
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
Assistant City Attorney City Manager
Director of Utilities
Director of Administrative Services
DocuSign Envelope ID: C22AC74B-ADCA-44DE-8FFF-3FE9B5B1D035 DocuSign Envelope ID: 9CDCD8E9-478A-42EF-907F-75217AB6B1A8
Exhibit A to Resolution No. 10077
Adopted by Council on 10/3/2022
CITY OF P ALO AL TO P OLICY ON THE U SE O F F REELY ALLOCATED A LLOWANCES UNDER THE STATE’S CAP-AND-TRADE PROGRAM
This Policy applies to freely allocated greenhouse gas (GHG) emission allowances from the California Air Resources Board (CARB) to the City of Palo Alto’s electric and natural gas distribution utilities (“Allocated Allowances”). The City Manager or his de signee is authorized to use Allocated Allowances and any resulting revenue in any lawful manner consistent with this policy.
T
he City’s Policy on the Use of Freely Allocated Allowances for the Electric Utility is as follows:
1. T
he City shall abide by CARB’ s regulations by using the auction proceeds and allowance value obtained from the City’s allocated allowances for the exclusive benefit of the City’s electric retail ratepayers, consistent with the goals of the Global Warming Solutions Act, also known as Assembly Bill 32 (AB 32), and not for the benefit of entities or persons other than such ratepayers.
2. T
he following uses of the City’s auction proceeds are permitted:
a) Purchases or investment in renewable resources (outside Palo Alto or locally) for the electric portfolio;
b) Investment in energy efficiency programs for the electric portfolio and retail customers; c) Fuel switching from other fuels to electricity that reduces greenhouse gas emissions; c)d) Investment in other carbon reduction activities, including those required to achieve a carbon-neutral electric portfolio; and
d)e) Rebates to electric retail ratepayers.
3. Allo
cated allowances may also be used to meet the City’s electric utility’s compliance obligations for electricity scheduled into the California Independent System Operator Markets, should state law eventually permit this action.
4. C
ouncil will receive annual reports on the allowance revenues and expenditures associated with complying with CARB regulations and this policy.
5. A
dditional Cou ncil approval will be required for any rebates to electric ratepayers proposed under this Policy.
T
he City’s Policy on the Use of Freely Allocated Allowances for the Gas Utility is as follows:
1. T
he City shall abide by CARB’s regulations by using the auction proceeds for the exclusive benefit of the City’s natural gas retail ratepayers, consistent with the goals of the Global Warming Solutions Act, also known as Assembly Bill 32 (AB32), and not for the benefit of entities or persons other than such ratepayers.
DocuSign Envelope ID: C22AC74B-ADCA-44DE-8FFF-3FE9B5B1D035 DocuSign Envelope ID: 9CDCD8E9-478A-42EF-907F-75217AB6B1A8
2. A portion of the Allocated Allowances can be used to meet the City’s natural gas utility’s compliance obligations, and the remaining Allocated Allowances will be consigned to auction.
3. T
he following uses of the City’s auction proceeds from the sale of Allocated Allowances are permitted, with a preference that greenhouse gas reduction measures be pursued before providing rebates:
a. Investment in energy efficiency programs for the natural gas portfolio and retail customers;
b. Purchases or investment in cost effective renewable bio -gas resources for the gas portfolio;
c. Fuel switching from natural gas to electricity that reduces greenhouse gas emissions; c.d. Investment in other carbon reduction activities for the natural gas utility, including system maintenance or replacement to reduce fugitive gas emissions; d.e. Rebates to natural gas retail ratepayers. Rebates, if provided, must be allocated on a non-volumetric basis as stated in Title 17 CCR Section 95893 (d)(3).
4. Co
uncil will receive annual reports on the use of Allocated Allowances, including the use of auction revenues and expenditures associated with complying with CARB regulations and this policy.
5. Ad
ditional Council approval will be required for any rebates to natural gas ratepayers proposed under this policy.
DocuSign Envelope ID: C22AC74B-ADCA-44DE-8FFF-3FE9B5B1D035 DocuSign Envelope ID: 9CDCD8E9-478A-42EF-907F-75217AB6B1A8 6056673
Resolution No. 10078
Re
solution of the Council of the Ci ty of Palo Alto Adopting a Carbon Neutrality Goal to Further the Cl imate Goals of the Sustainability and Climate Action Plan
R E C I T A L S
A. In
December 2007, Council adopted t he City’s Climate Protection Plan which set a greenhouse gas (GHG) emissions reduction goal of 20% reduction by the year 2020.
B. In March 2013, Council approved Resolution 9322 directing staff to achieve carbon neutrality for the electric supply portfolio by 2013 through the use of a combination of hydroelectric resources, long -term renewable resources and short- term renewable energ y resources and/or renewable energy certificates (RECs).
C. In 2013, Council established the Office of Sustainability to work with other City departments to bring a sharper strategic focus, better interdepartmental synergy, and greater mo
mentum to the City’s sustainability and climate initiatives.
D. In April 2016, Council adopted a GHG emissions reduction goal of 80% reduction by the year 2030, relative to a 1990 baseline (the “80 x 30” goal). In 2016, the City and Community reduced GHG emissions an estimated 37% relative to the 1990 bas eline.
E. In December 2016, Council approved Resolution 9649 directing staff to achieve carbon neutrality for the natural gas supply portfolio by 2018 through the use of high -quality environmental offsets and physical “biogas” or “biomethane”.
F. In September 2018, Governor Brown issued California Executive Order B-55-18, setting the goal to achieve carbon neutrality as soon as possible, by 2045 at the latest, and achieve and maintain net negative emissions from that point forward. A s defined by the
California Air Resources Board, “Carbon neutrality means that all GHG emissions emitted into th
e atmosphere are balanced in equal measure by GHGs that are removed from the atmosphere, either through carbon sinks or carbon capture and storage” .
G. In 2020, the City and Community reduced GHG emissions an estimated 50.6% relative to the 1990 baseline.
H. In
April 2021, Council directed the Mayor to form a Sustainability and Climate Act
ion Plan (S/CAP) Ad Hoc Committee to guide the development, im plementation, communication, and future community engagement of the S/CAP. In April 2022, the S/CAP Ad Ho
c Committee began discussions on carbon neutrality. The “80 x 30” goal is an interim step that supports California’s statewide goal of achieving carbon neutrality by 2045.
I. As a result, the Council wishes to adopt a carbon neutrality goal to further the climate goals of the S/CAP beyond the “80 x 30” goal, and direct staff to evaluate how the City wo
uld meet a carbon neutrality goal.
DocuSign Envelope ID: 9CDCD8E9-478A-42EF-907F-75217AB6B1A8 6056673
The Council of the City of Palo Alto (“City”) RESOLVES as follows:
SECTION
1. The Council hereby approves a goal to achieve carbon neutrality by 2030.
SECTION 2. The Council finds that the adoption of this resolution is not subject to California Environmental Quality Act (CEQA) review because it is an administrative government activity that will not result in any direct or indirect physical change to the environment (CEQA Guidelines section 15378(b)(5)).
INTRODUCED
AND PASSED: October 3, 2022
AYES: BURT, CORMACK, DUBOIS, FILSETH, KOU, STONE, TANAKA NOES:
A
BSENT:
ABSTENTIONS:
A
TTEST:
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
Assistant City Attorney City Manager
Director of Utilities
Director of Administrative Services
DocuSign Envelope ID: 9CDCD8E9-478A-42EF-907F-75217AB6B1A8
Certificate Of Completion
Envelope Id: 9CDCD8E9478A42EF907F75217AB6B1A8
Subject: Complete with DocuSign: S/CAP Resolutions
Source Envelope:
Document Pages: 19
Signatures: 19
Certificate Pages: 5 Initials: 0
AutoNav: Enabled
EnvelopeId Stamping: Enabled
Time Zone: (UTC-08:00) Pacific Time (US & Canada)
Status: Completed
Envelope Originator:
Vinhloc Nguyen
250 Hamilton Ave
Palo Alto , CA 94301
[email protected]
IP Address: 199.33.32.254
Record Tracking
Status: Original
10/4/2022 1:50:41 PM
Holder: Vinhloc Nguyen
[email protected]
Location: DocuSign
Security Appliance Status: Connected Pool: StateLocal
Storage Appliance Status: Connected Pool: City of Palo Alto Location: DocuSign Signer Events Signature Timestamp
Amy Bartell
[email protected]
Assistant City Attorney
City of Palo Alto
Security Level: Email, Account Authentication
(None)
Signature Adoption: Pre-selected Style
Using IP Address: 199.33.32.254
Sent: 10/4/2022 1:58:55 PM
Viewed: 10/5/2022 4:13:07 AM
Signed: 10/5/2022 4:17:42 AM
Electronic Record and Signature Disclosure:
Accepted: 7/16/2015 5:52:40 AM
ID: d8ecb53d-ef81-4016-8886-1560c48de42a
Kiely Nose
[email protected]
Director, Administrative Services/CFO
City of Palo Alto
Security Level: Email, Account Authentication
(None)
Signature Adoption: Uploaded Signature Image
Using IP Address: 73.162.77.140
Sent: 10/5/2022 4:17:44 AM
Viewed: 10/5/2022 9:36:57 AM
Signed: 10/5/2022 9:37:41 AM
Electronic Record and Signature Disclosure:
Not Offered via DocuSign
Dean Batchelor
[email protected]
Director of Utilities
City of Palo Alto
Security Level: Email, Account Authentication
(None)
Signature Adoption: Pre-selected Style
Using IP Address: 199.33.32.254
Sent: 10/5/2022 9:37:44 AM
Viewed: 10/5/2022 9:42:34 AM
Signed: 10/5/2022 9:43:09 AM
Electronic Record and Signature Disclosure:
Not Offered via DocuSign
Ed Shikada
[email protected]
Ed Shikada, City Manager
City of Palo Alto
Security Level: Email, Account Authentication
(None)
Signature Adoption: Pre-selected Style
Using IP Address: 199.33.32.254
Sent: 10/5/2022 9:43:12 AM
Viewed: 10/5/2022 5:09:53 PM
Signed: 10/5/2022 5:10:06 PM
Electronic Record and Signature Disclosure:
Not Offered via DocuSign
Signer Events Signature Timestamp
Patrick Burt
[email protected]
Mr
Security Level: Email, Account Authentication
(None)
Signature Adoption: Pre-selected Style
Using IP Address: 98.37.159.0
Sent: 10/6/2022 11:02:12 AM
Resent: 10/13/2022 10:43:14 AM
Viewed: 10/13/2022 2:47:51 PM
Signed: 10/13/2022 2:48:31 PM
Electronic Record and Signature Disclosure:
Not Offered via DocuSign
Lesley Milton
[email protected]
City Clerk
City Clerk
Security Level: Email, Account Authentication
(None)
Signature Adoption: Pre-selected Style
Using IP Address: 199.33.32.254
Sent: 10/13/2022 2:48:33 PM
Viewed: 10/13/2022 2:52:52 PM
Signed: 10/13/2022 2:53:12 PM
Electronic Record and Signature Disclosure:
Not Offered via DocuSign
In Person Signer Events Signature Timestamp
Editor Delivery Events Status Timestamp
Agent Delivery Events Status Timestamp
Intermediary Delivery Events Status Timestamp
Certified Delivery Events Status Timestamp
Carbon Copy Events Status Timestamp
Witness Events Signature Timestamp
Notary Events Signature Timestamp
Envelope Summary Events Status Timestamps
Envelope Sent Hashed/Encrypted 10/4/2022 1:58:55 PM
Certified Delivered
Signing Complete
Completed
Security Checked
Security Checked
Security Checked
10/13/2022 2:52:52 PM
10/13/2022 2:53:12 PM
10/13/2022 2:53:12 PM
Payment Events Status Timestamps