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City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Utilities
Meeting Date: June 1, 2026
Report #:2501-4065
TITLE
Adoption of a Resolution Amending Utilities Rules and Regulations Numbers 02 (Definitions and Abbreviations), 03 (Description of Utility Services), 04 (Application for Service), 05 (Service Contracts), 09 (Disconnection, Termination and Restoration of Service), 10 (Meter Reading), 11 (Billing, Adjustments and Payment of Bills), 18 (Utility Service and Facilities on Customer Premises, 20 (Special Electric Utility Regulations), 21 (Special Water Utility Regulations), 22 (Special Gas Utility Regulations), 23 (Special Wastewater Utility Regulations), and Utility Rate Schedule C-4 (Residential Rate Assistance Program), and Repealing Rule 15 (Metering Equipment); CEQA Status – Not a Project
RECOMMENDATION
Staff recommends that Council adopt the attached Resolution (Attachment A) amending Utilities Rules and Regulations 02, 03, 04, 05, 09, 10, 11, 15, 18, 20, 21, 22, 23, and Utility Rate Schedule C-4, and Repealing Rule 15 (Metering Equipment); as attached.
EXECUTIVE SUMMARY
Utilities Rules and Regulations (Rules) are updated as needed to ensure current procedures are in place to continue City of Palo Alto Utilities (CPAU) operations. The recommended changes to the various Rules and Regulations add new provisions, remove outdated sections, update language for clarity, and reflect changes to applicable regulations, business practices and procedures. The proposed expansion of the City’s Rate Assistance Program of increasing the number of eligible participants and changing the residential discount rate from 25% to 35% for electric services (under Utility Rate Schedule C-4 - Residential Rate Assistance Program) was vetted and approved by the Utilities Advisory Committee and Finance Committee as part of the FY 2027 budget meetings. The new gas fees (under Rule and Regulation 22 – Special Gas Utility Regulations) for unauthorized and unscheduled gas disconnection which requires staff time was approved by Finance Committee during the Municipal Fee section of the budget hearing.
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In addition, the staff has updated the Rules to align with the State of California’s new laws on Accessory Dwelling Units (ADU) and the State Water Resources Control Board Cross-Connection Handbook on customer responsibilities, testing requirements, and enforcement actions to safeguard the public drinking water system.
BACKGROUND
Utilities update the Rules and Regulations on a periodic basis to reflect current operational procedures and provide language clarification. The Rules and Regulations were last updated in April 2023. The proposed changes do not impact long range planning, policies, or programs. The changes mainly reflect daily operational changes and procedures that are currently in place.
ANALYSIS
Twenty-nine Utilities Rules and Regulations (Rules) set forth the conditions under which the City provides utility services from both the Utilities Department (electric, natural gas, water, wastewater, fiber optic) and the Public Works Department (refuse, storm drain). The Rules are updated on as-needed basis to reflect current standards and business practices, to streamline language to make the rules more user-friendly and provide for ease of administration. Each of the Rules below includes changes reflecting this approach; key edits are described below and redlined copies showing each individual edit are available online, with links provided on the last page of this report.
Utilities Rules and Regulations (02, 03, 04, 05, 09, 10, 11, 15, 18, 20, 21, 22, and 23) Senate Bill (SB) 1211, Assembly Bill (AB) 2533, and Senate Bill 1077 The recommended amendments to Rules 05, 10, 20, 21, 22, and 23 are to provide clarification on when additional electric, gas, water, wastewater, and stormwater services are required for accessory dwellings units and junior accessory dwelling units. California‘s Housing and Community Development added Senate Bill (SB) 1211, Assembly Bill (AB) 2533, and SB 1077 passed on January 1, 2025. These bills contain new requirements that apply to all local ADU ordinances. The proposed changes require separate electric, gas, water, wastewater, and stormwater services to be constructed once the ADU is sold or separated from the primary residence.
Utilities Rule and Regulation 02 (Definitions and Abbreviations) Rule and Regulation 02 describe commonly used industry acronyms and the definitions of various terms used throughout Rules. Terms not previously defined are now included, and definitions for accessory dwelling unit, cross connections, fiber-to-the-premises, and rate assistance programs have been added.
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Utilities Rule and Regulation 03 (Description of Utility Services) Revisions to the Electric section improve clarity and ensure consistency with current operational practices. The recommended amendments require transformers above 75 kVA to be pad-mounted, removes references to reflect the discontinuation of the City‘s 4kV distribution system and aligns the primary service thresholds, updating the lowest three phase service to 480V. In the Water section, outdated narrative about water quality reporting was removed and replaced with a reference directing customers to the Annual Water Quality Report. Terminology within the Cross-Connection Control and Backflow Prevention requirements was standardized, and the Rule clarifies that customers are responsible for installing, testing, and maintaining required assemblies in accordance with state regulations.
The update also aligns with the State Water Resources Control Board's Cross-Connection Control Policy Handbook.
Utilities Rule and Regulation 04 (Application for Service) The revisions to Rule 04 clarify the scope of services covered by the application process and provide more detailed requirements for both residential and commercial applicants. The updated Rule explicitly distinguishes between metered and unmetered Utility Services and adds new language acknowledging services such as Dark Fiber licensing and Fiber Broadband Internet subscriptions. Several application information requirements have been expanded, including clearer identification of customer contact information, account security identifiers, and responsible parties authorized to manage an account. For residential customers, the Rule more clearly outlines how spouses, domestic partners, or designated responsible parties may be added to an account, as well as the steps required in cases of incapacity or death. For commercial customers, the revisions expand the list of required business information and reinforce compliance with backflow protection standards by incorporating the Hazard Survey into the Water Service application process. The rule also refines provisions related to Submetering and Master-Metering by reaffirming the prohibition on utility resale while allowing cost allocation under specified conditions.
Utilities Rule and Regulation 05 (Service Contracts)
The edits to Rule 05 clarify that CPAU may require written contracts for customer-requested installations, relocations, upgrades, or modifications involving CPAU-owned or maintained infrastructure, expanding the language for consistency and broader applicability. The list of services that may require contracts is updated, described as illustrative and non-exclusive, and expanded to include long-term service agreements, loans or leases for efficiency or reliability improvements, distributed generation and Energy Storage Facility projects, dark fiber services, reservation of electric capacity, installation of additional service or lateral connections, and fiber internet services.
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Utilities Rule and Regulation 09 (Disconnection, Termination and Restoration of Service) The proposed changes clarify that customers must provide written notice at least three days before the requested termination date and confirm that CPAU will prorate final bills. Language describing internal tracking processes was removed, and wording was adjusted to ensure consistency—such as specifying that a forwarding address requirement belongs only in the subsection addressing service cancellation rather than service transfer.
For CPAU-initiated termination or disconnection, revisions focus on accurately distinguishing procedures that apply to non-payment from those that apply to other violations. The document clarifies that 10-day and 48-hour notices are specific to non-payment cases and removes extraneous or duplicative clauses. Additional edits refine the list of violations that may lead to termination or disconnection and strengthen language describing unsafe conditions, improper equipment, and customer impacts on the electric distribution system. Several operational clarifications were added, including processing timelines for mailed or third-party payments and emphasizing the need for customers facing imminent disconnection to use methods that post payments immediately.
The section on remote disconnect/reconnect was updated to improve readability and to reflect CPAU’s deployment of AMI-enabled meters. Criteria for selecting locations for these meters were clarified, as well as the customer’s responsibility to ensure equipment safety upon reconnection. The restoration-of-service section preserves the distinction between disconnection for non-payment and termination for other causes, and it outlines the conditions under which service will be restored once financial, physical, or safety issues have been resolved.
Utilities Rule and Regulation 10 (Meters and Meter Reading) Rule 15 (Metering Equipment) has been consolidated with Rule 10 (Meters) and staff proposes repealing Rule 15. Consolidating the rules together into Rule 10 reduces potential conflicts between the two rules and presents related information in a more concise format. Proposed changes include updated language for master metering requirements and the “Customer Reads Own Meter” program. The update provides requirements for Customers who may elect to opt out of the Advanced Metering Infrastructure (AMI) program for electric and gas meters, including self-reporting of monthly meter readings to CPAU Customer Service. Water meters are not eligible for opt-out because water meters are generally located in the public-right-of- way.
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Utilities Rule and Regulation 11 (Billing, Adjustments and Payments of Bills) The proposed edits streamline language, standardize terminology, and clarify billing and payment procedures. Mandatory wording was unified, defined terms were consistently capitalized, and descriptions of payment methods were updated for accuracy, including hours, payment types, and rules for third-party payments and credit card limits. Several sections were reorganized for clarity, including delinquency rules, dispute processes, and the Budget Billing Payment Program. Customers served with AMI water meters are not eligible for water leak adjustments because such Customers can receive email notifications based on City-set thresholds to alert them of unusually high water flows and/or potential leaks. The edits removed the maximum credit card payment of $5,000 per account and cost recovery fee for credit card payments over $5,000, since the City will be implementing a new credit card service fee for cost recovery. Billing adjustments for water leaks remain capped at $2,500. Maximum billing for undercharges will no longer be subject to the $500 dollar per Account, per incident, for cost recovery. The retroactive billing adjustment (back bill or refund) shall not exceed three years. If requested, CPAU will offer payment arrangement or budget billing for retroactive back bill adjustments.
Utilities Rule and Regulation 15 (Metering Equipment) Repeal Rule 15 (Metering) is proposed to be repealed, with relevant sections consolidated in Rule 10 (Meters).
Utilities Rule and Regulation 18 (Utility Service and Facilities on Customer Premises) Service connection requirements language covering property access has been updated for consistency with the other Rules.
Utilities Rule and Regulation 20 (Special Electric Utility Regulations) The recommended edits consolidate requirements for new developments, existing services, and relocations, clarifying that Customer/Applicant and CPAU responsibilities are the same across these scenarios. Requirements for service configurations are updated to specify that single-family residential services in wildfire-risk areas must be underground whenever CPAU determines elevated threat levels. Rules governing number of services reinforce the “one Point-of-Service per lot” standard, while retaining CPAU discretion to allow additional service points and clarifying cost responsibility. Edits across protective device and equipment sections reaffirm Customer/Applicant responsibility for installation, maintenance, and compliance with CPAU standards, including protective coordination, short-circuit rating alignment, and safe operation of generation equipment. CPAU retains discretion to require agreements and conditions under which CPAU will install and maintain such facilities. 6 4
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Utilities Rule and Regulation 21 (Special Water Utility Regulations) Proposed edits in Rule 21 further clarify and strengthen the City’s requirements for maintaining reliable backflow protection across the water system. The revisions reinforce that Customers are responsible for installing, testing, and maintaining approved backflow prevention assemblies in accordance with State Water Resources Control Board requirements and the City’s Cross Connection Control Program, which is administered under the California Health and Safety Code. The Program documents and tracks all Customer-owned devices to ensure they meet annual inspection and testing standards that safeguard the potable water supply from cross-contamination. If a Customer fails to submit the required annual test report within 90 days, the City may arrange for inspection and testing at the Customer’s expense, and may curtail or terminate water service if compliance is not achieved. A new section was added for development that impact the City’s water infrastructure. Developers may be required to provide a fire flow test to quantify fire flow and domestic water demands as part of a capacity study. All costs associated with the capacity study and Applicant’s share of necessary water system improvements are the full responsibility of the Applicant.
Utilities Rule and Regulation 22 (Special Gas Utility Regulations) The revisions to Rule 22 add a new section barring unauthorized construction activity near service lines, adding a defined 10-foot buffer and clearer consequences for proceeding without CPAU permission, including potential service disconnection and responsibility for related fees.
The proposed fee will be included in the Municipal Fee Schedule as discussed during the FY 2027 Proposed Budget meetings with the Finance Committee. A new section was added for development that impacts the City’s gas infrastructure. Developers may be required to provide a capacity report to quantify the project’s demands as part of a capacity study. All costs associated with the capacity study and Applicant’s share of necessary gas system improvements are the full responsibility of the Applicant.
Utilities Rule and Regulation 23 (Special Wastewater Utility Regulations) In addition to adding new ADU language, a new section was added to address development that impact the City’s wastewater infrastructure. Developers may be required to provide a sewer capacity and flow monitoring report to quantify the project’s demands. All costs associated with the capacity study and Applicant’s share of necessary wastewater system improvements are the full responsibility of the Applicant. 6 4
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Utility Rate Schedule C-4 (Residential Rate Assistance Program) Staff is recommending changes to the Rate Assistance Program (RAP) to improve the affordability of Utilities service to low-income households and increase consistency with other California public and private electric utilities. Both the Finance Committee and Utilities Advisory Committee were supportive of the RAP changes.
Changes include a) increasing the residential electric rate discount from 25% to 35%; and b) increasing the qualifying income level from 50% (Very Low Income) to 80% (Low Income) of the Santa Clara County Area Median Income (AMI); and c) including the Homekey facility. There were 850 program participants at the end of 2025. The proposed changes are estimated to increase the number of program participants by 25%.
The residential natural gas rate discount will remain at 25%. The 25% residential water discount and 20% Storm Drain discount were discontinued due to passings of California’s Proposition 218 and Stormwater ballot measure.
FISCAL/RESOURCE IMPACT
Approval of changes to Utilities Rules and Regulation 2, 3, 4, 5, 9, 10, 11, 15, 18, 20, 21, 22, and 23, will not result in a significant change in net operating revenues or expenses. Changes to Utility Rate Schedule C-4 of increasing the electric rate discount rate from 25% to 35% and expanding the number of eligible participants for the rate assistance program will cost approximately $300,000 and $80,000 from the electric and gas public benefit funds respectively.
STAKEHOLDER ENGAGEMENT
On May 6, 20261, staff presented the FY 2027 Utilities Budget to the Utilities Advisory Committee (UAC), recommending two changes in the City’s residential rate assistance program. The changes include a) increasing the residential electric rate discount from 25% to 35%; and b) increasing the qualifying income level from 50% (Very Low Income) to 80% (Low Income) of the Santa Clara County Area Median Income (AMI). On March 25, 2026, staff presented the changes of the rate assistance program to the UAC Budget Subcommittee. Given rising affordability concerns, both the UAC and subcommittee were supportive of the proposed changes to the rate assistance program.
1 Utilities Advisory Committee Meeting on May 6, 2026:
https://cityofpaloalto.primegov.com/viewer/preview?id=0&type=8&uid=7833047e-6411-4548-8b9e- c22862b8bd11
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On May 5, 2026 3, staff presented the FY 2027 Utilities Budget to the UAC, recommending two changes in the City’s residential rate assistance program. The changes include a) increasing the residential electric rate discount from 25% to 35%; and b) increasing the qualifying income level by approximately 50% for entire rate assistance program. Finance Committee expressed support for the proposed expansion of utility assistance programs for lower-income residents and emphasized the importance of communicating those benefits to the public. Additional comments noted that the revised income thresholds would also apply to S/CAP-related assistance programs.
On May, 20264, staff introduced the new gas disconnection fees for non-scheduled gas service or disconnection call during after-hours and weekends. These fees reflect the Utility’s cost to disconnect gas service prior to construction to discourage unsafe or hazardous construction activities within 10 feet of a live gas service or meter. The responsible party will be responsible for the disconnection and/or removal fees and penalties. Finance Committee tentatively approved of the proposed FY 2027 municipal fees including the new gas fees.
ENVIRONMENTAL REVIEW
The adoption of the resolution amending Utility Rules and Regulations does not meet the definition of a “project” under Public Resources Code 21065 or CEQA Guidelines Section 15378(b)(2), thus no CEQA review of this action is required.
ATTACHMENTS
Attachment A: Resolution
Attachment B: Table of URLs
APPROVED BY:
Alan Kurotori, Director of Utilities
3 Finance Committee Meeting on May 5, 2026:
https://cityofpaloalto.primegov.com/viewer/preview?id=0&type=8&uid=1c90c2b7-8128-4dab-8581- e7d87c08a1c7
4 Finance Committee Meeting on May 6, 2026:
https://cityofpaloalto.primegov.com/viewer/preview?id=0&type=8&uid=09639f78-ff3b-4b7e-9877-c6ef67e46219