City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Utilities
Meeting Date: November 3, 2025
Report #:2506-4906
TITLE
Approval and Authorization for the City Manager or Designee to Execute Purchase Orders as Needed with the Okonite Company for Underground Cable for the Utility's Electric Underground System in an Annual Amount of $800,000 for a Total Not-to-Exceed Amount of $4,000,000 for a Period of Five (5) Years. CEQA Status: Not a Project.
RECOMMENDATION
Staff recommends that Council approve and authorize the City Manager or their designee to execute purchase orders as needed with the Okonite Company (Okonite) in an amount not-to- exceed $800,000 annually in each of the next five years, for a total not-to-exceed amount of $4,000,000 from January 1, 2026 through December 31, 2030 for new and replacement cable within the City’s electric underground system.
BACKGROUND
Palo Alto’s electric distribution system is comprised of overhead wires and underground cable throughout the City. These wires are necessary to provide power to residential and commercial customers. For the underground portion, CPAU’s underground cable technical specification covers the physical and electrical requirements for operation on the City’s medium voltage (4,000 and 12,000 Volts), 60 Hertz, 3-phase, and 3 or 4 wire systems. Cables used in CPAU operations must meet this cable specifications and industry standards.
The City’s underground cable specification ensures a high-level performance and reliability. Over the past 20 years, utility staff have installed Okonite underground cable without a cable failure.
Any exceptions to the underground cable specification by any cable manufacturer are always reviewed, but Okonite is the only cable manufacturer that fully meets the City’s specification for both cable insulation and a manufacturing process that ensures quality and reliability.
The equipment standardization with Okonite for medium voltage underground cable for the utility’s electric underground system was approved pursuant to Section 2.30.900 of the Palo Alto Municipal Code by the City Manager or their designee to ensure continued reliability, cost- efficiency, and compatibility with existing electric infrastructure. Equipment standardization will
minimize material costs and spare parts while promoting efficient design, construction, and maintenance practices.
Emergency supply and spare parts would be minimized.
As the City uses some of the same cable as PG&E, Okonite keeps stock on hand and can meet the City’s short lead time delivery requirements. Okonite maintains a minimum stock of the cables used by the City for emergency requests. Okonite offers the City the ability to order reels cut to length for specific projects to help manage inventory and reduce unusable cable segments. Okonite’s factory (Santa Maria, CA) is located relatively close to Palo Alto and can expedite delivery of cable if needed for emergencies.
Maintenance and replacement.
Palo Alto takes advantage of the bulk pricing discounts achieved when using the same cable as PG&E.
Standardizing existing equipment facilitates efficient construction and maintenance practices by helping City employees to more consistently plan, design, identify, and work with existing utility infrastructure.
By using a standard product CPAU staff can implement a consistent maintenance and replacement program.
In 2015, the City issued a formal solicitation and Okonite was deemed the lowest responsible bidder (Staff Report #61311). Cable shipments have never been missed and there have been no quality issues associated with Okonite cable. In addition, Okonite has provided excellent customer service to engineering and operations staff with training and technical support.
ANALYSIS
Okonite is the only manufacturer that fully meets the City’s cable specifications and has demonstrated proven reliability. Okonite is also a supplier of PG&E. The cable standardization and alignment with PG&E’s specifications provides supply redundancy and resiliency for unforeseen or emergency events and allows the City to receive discounted bulk pricing from Okonite. This purchase order authorization is based on an exception to the City's competitive solicitation requirements due to the approval of the equipment standardization, consistent with Section 2.30.360(e) of the Palo Alto Municipal Code.
Medium voltage cables are used in residential and commercial underground circuits for the distribution of power. Utilities underground electric system designs include 4 standard cable sizes that are regularly stocked; 1) 1100 kcmil, 25kV, 2) 750 kcmil, 15kV rated, 3) 600 kcmil, 25kV rated, and 4) 1/0 AWG, 25kV rated. Often, utilities must make unplanned repairs, so it is important to 1 City Council, October 19, 2015; Staff Report 6131: https://www.paloalto.gov/files/assets/public/v/1/agendas- minutes-reports/reports/city-manager-reports-cmrs/year-archive/2015/final-staff-report-id-6131_purchase-of- medium-voltage-underground-cable-from-the-okonite-company-over-5-years.pdf have standardized material and a supplier who has demonstrated the ability to ensure product quality, uniformity of manufacture, ready availability, timely delivery, and can accommodation CPAU requirements to maintain staff familiarity with the product and maintain electric system reliability and resiliency.
Additionally, the City of Palo Alto’s Grid Modernization Project involves the replacement and upgrade of aging electric infrastructure to support future energy demands. As electric loads are projected to increase—driven by the growing adoption of electric vehicle charging and the community’s transition from gas to electric appliances—certain segments of the City’s underground electric cable require upgrades to increase ampacity and to accommodate the additional load. Other cable segments will be replaced due to reaching the end of useful service life, which is approximately 30 years. In 2023 and 2024, expenditures for underground cable work totaled approximately $537,911 and $448,619, respectively.
Base Pricing & Purchase Order Authority: Okonite has provided the City with a base price for CPAU’s four standard cable sizes for the first 12 months. For each consecutive year, adjustments in metals may rise but cannot increase higher than the CPI-W index3. The price adjustments will be applied to the current base price of copper at $2.00/lb and aluminum at $1.00/lb with a maximum increase of 5% and minimum of 3%. Adjustments in metals may decrease and the City would receive that pricing benefit. New or adjusted tariffs will impact the price per foot of cable. Changes to Okonite’s material sourcing due to tariffs will be applied, up or down, and passed through to the City. To date, Okonite has absorbed cost increases due to new tariffs by limiting price increases to 1%. Future invoices will include a separately stated charge for any tariff-impacted components.
Staff requests authorization to set the purchase limit at $800,000 for each fiscal year based on historical expenditures ($500,000 annually) and future projections ($800,000 annually). As the Grid Modernization Project shifts its focus from overhead to underground infrastructure, staff anticipates increased underground construction activity including upgrade of underground cables. Any unspent funds will be returned to reserves or the capital improvement program as part of the year end procurement process.
FISCAL/RESOURCE IMPACT
Funding for this material purchase is available from the FY 2026 Capital Budget in the Electric Fund Project EL-24000 (Grid Modernization) and EL-98003 (Electric System Improvements).
Funding for subsequent years for the blanket purchase order are subject to City Council approval of annual appropriations. The term agreement format means the City enters an agreement for an unspecified number of units, up to a maximum expenditure amount per year (PAMC 2.30.110) and items are ordered as needed, based on standard prices provided by the vendor. 3 Published by the United States Department of Labor, Bureau of Labor Statistics The City’s purchase order template permits the City to terminate without cause or for convenience by providing written notice to the contractor. In the event the City finds itself facing a challenging budget situation, and it is determined that City resources need to be refocused elsewhere, the City can terminate for convenience. Other options include amending the purchase order to reduce the cost, for example, by reducing the quantity of items purchased.
STAKEHOLDER ENGAGEMENT
This agreement for materials does not directly impact customers that would require community outreach.
ENVIRONMENTAL REVIEW
This purchase order authorization does not meet the definition of a project pursuant to Section 21065 of the California Public Resources Code and is otherwise categorically exempt from California Environmental Quality Act (CEQA), under Section 15301 (repair or maintenance of existing facilities), and Section 15302 (replacement or reconstruction of existing structures and facilities) of the California Code of Regulations Title 14 (the “CEQA Guidelines”).
APPROVED BY:
Alan Kurotori, Director of Utilities