City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Utilities
Meeting Date: August 18, 2025
Report #:2507-4994
TITLE
PUBLIC HEARING: Adoption of Resolution Correcting Clerical Errors in Three Electric Rate Schedules: E-16 (Unmetered Electric Service), E-EEC-1 (Export Electricity Compensation), and E- NSE-1 (Net Surplus Electricity Compensation); CEQA Status: Not a project under CEQA Guidelines Sections 15378(b)(4) and (5) and Exempt Under Section 15273(a).
RECOMMENDATION
Staff recommends that Council adopt the attached Resolution (Attachment A) and Electric Rate Schedules (Attachment B) to correct clerical errors associated with three FY 2026 Electric rate schedules approved on June 16, 2025: E-16 (Unmetered Electric Service), E-EEC-1 (Export Electricity Compensation), and E-NSE-1 (Net Surplus Electricity Compensation).
BACKGROUND
At the June 16, 2025 Council meeting (Staff Report #2411-37761), Staff uploaded incorrect rate schedules for E-16 (Unmetered Electric Service), E-EEC-1 (Export Electricity Compensation), and E-NSE-1 (Net Surplus Electricity Compensation). Due to the clerical error, Staff recommends adoption of the attached resolution correcting the three impacted rate schedules to reflect the correct FY 2026 rates from the Electric Financial Forecast adopted by Council June 16, 2025 for these services. Customers have not been charged or negatively impacted by the incorrect rates.
Solar customers are still receiving the FY 2025 rates.
ANALYSIS
Rate Schedule E-16 (Unmetered Electric Service Rate) – (Table 1) The City offers an E-16 rate for unmetered electric service for wireless communication facilities and related equipment on wood utility poles and streetlight poles. The E-16 unmetered service rate aligns 1 Council Meeting June 16, 2025, Item 22:
https://cityofpaloalto.primegov.com/Portal/viewer?id=0&type=7&uid=35104f06-6925-4fe3-89c7-b0e53e6eec42
closely with the E-2 rate for small commercial electric service and excludes costs related to meter reading and is determined based on the energy requirement of equipment specifications. The E-16 rate also includes miscellaneous electric utility charges such as licensing fees for City-owned spare conduit, usable space for utility pole attachments, and mounting communication equipment on utility poles and streetlight poles.
The corrections from the June 16, 2025 adopted E-16 rates are:
C1 – Customer Charge should be increased from $7.31 to $10.96 per month to reflect the actual labor cost. Prior to June 2025, this rate was last updated in July 2009. E4 – Processing Fee for Utility Pole Attachment should be changed from $152 to one total hour of engineering and operations review under the C-1 rate schedule for utility miscellaneous charges. The current C-1 hourly rate for engineering and operations review is still $152, but Staff is in the process of updating the FY 2026 C-1 miscellaneous rates, as these rates were last updated in 2019. Prior to June 2025, the pole attachment processing fee was last updated in October 2012.
Table 1 – Summary of E-16 Unmetered Electric Service Rate Rate Current FY 2026 Proposed FY 2026
Customer Charge, $/month $7.31 $10.96
Processing Fee for Utility Pole Attachment, $/pole $152.00 One regular hour based on the C-1
Miscellaneous Rate
Schedule
Rate Schedules E-NSE-1 (Net Energy Metering Compensation Rate) and E-EEC-1 (Export Energy Compensation Rate) – (Table 2)
The City operates two Net Energy Metering (NEM) programs. Solar customers served by the City of Palo Alto's (CPAU) original NEM program, also called NEM 1, are compensated at retail rates for electricity they export to the grid, and solar customers served by the NEM successor program, or NEM 2 (effective after the City reached its NEM 1 cap at the end of 2017), are compensated at the Export Electricity Compensation (EEC) rate for exported electricity.
Customers on the NEM 1 program who have chosen to have the value of any annual net generation they produced over the past 12 months credited back to their account do so under the Net Metering Net Surplus Electricity Compensation (E-NSE-1) rate. The Net Surplus Electricity Compensation rate represents the value of the City’s avoided cost or value of customer-generated electricity in Palo Alto, including compensation for the energy, avoided capacity charges, avoided transmission and ancillary service charges, avoided transmission and distribution (T&D) losses, and renewable energy credits (RECs), or environmental attributes.
The corrections being made from the June 16, 2025 rate schedules are:
E-NSE-1 – Net Surplus Electricity should be decreased from $0.1273 to $0.1012 to reflect market prices.
E-EEC-1 – Export Electricity should be decreased from $0.1243 to $0.1206 to reflect market prices.
No customers have been charged the incorrect rates. Net energy metering customers are still receiving the FY 2025 rates for the months of July and August 2025.
Table 2: NEM Buyback Rates – Current vs. Proposed
Rate
Current
FY 2026
$/kWh
Proposed
FY 2026
$/kWh
Net Surplus Electricity (E-NSE-1) $0.1273 $0.1012
Export Electricity (E-EEC-1) $0.1243 $0.1206
FISCAL/RESOURCE IMPACT
The estimated financial cost impact to the Electric utility from the two-month delay in implementing the correct rates for schedules E-NSE-1 and E-EEC-1 is approximately $1,200 and $23,000, respectively. There is a fiscal impact of $1,600 from the E-16 schedule revisions since it is used for annual billing. The annual customer charge bills will be invoiced post-Council action, with two months charged at the June-adopted rate and the remainder of the year at the corrected rates. There were no pole attachment applications in July and August 2025.
STAKEHOLDER ENGAGEMENT
The City Council reviewed staff’s proposal for the Electric Utility at its June 16, 2025 meeting.
The City Council unanimously approved the Electric Utility proposal, and this action simply corrects clerical errors in three rate schedules, to align with the Council-approved Electric Utility Financial Forecast.
ENVIRONMENTAL REVIEW
The proposed Resolution correcting clerical errors in three electric rate schedules are not projects subject to environmental review, pursuant to California Public Resources Code Sec. 21080(b)(8) and Title 14 of the California Code of Regulations Sec. 15273(a).
ATTACHMENTS
Attachment A: Resolution Amending Electric Rate Schedules E-16, E-EEC-1, and E-NSE-1 Attachment B: Corrected Rate Schedules for E-16, E-EEC-1, and E-NSE-1 APPROVED BY:
Alan Kurotori, Director of Utilities