COUNCIL AGENDA: 10/3/23
FILE: 23-1 326
ITEM: 6.1
TO:
HONORABLE MAYOR FROM: Kip Harkness
AND CITY COUNCIL
S
UBJECT: SEE BELOW DATE: September 28, 2023
Approved Date
9/ 29/23
SUPPLEMENTAL
S
UBJECT: ORDINANCE AMENDING TITLES 2, 4, AND 26 AND ADDING TITLE 28
TO THE SAN JOSE MUNICIPAL CODE TO ESTABLISH A MUNICIPAL
UTILITY FOR ELECTRIC SERVICE
REASON FOR SUPPLEMENTAL
T
his supplement to the memorandum dated July 24, 2023, titled “Ordinance Amending Titles 2, 4, and 26 and Adding Title 28 to the San José Municipal Code to Establish a Municipal Utility for Electric Service”, provides additional public information on issues raised during briefings and at the August 15, 2023 City Council meeting. City staff is not proposing any changes to the proposed ordinance itself nor to the recommendations in the July 24, 2023 memorandum. This memorandum details the additional stakeholder engagement that was completed as well as provides more information on the new transmission lines being constructed in San José.
E
xploratory Phase and Stakeholder Engagement
T
he City is exploring whether to provide Municipal Utility for Electric Service in very limited areas of the city and select City facilities. Adopting the recommended Title 28 is required for staff to gather data needed to continue this exploratory phase. City staff seek to ask and answer four key questions during the exploratory phase. If the City were to provide Municipal Utility for Electric Service in limited areas of the city, could that be done in a way that would:
1. Reduce electricity energy costs for the consumer?
2. Allow the development of more innovative and energy efficient buildings, such as envisioned in the planned Downtown West development?
HONORABLE MAYOR AND CITY COUNCIL
September 28, 2023
Subject: Supplemental - Ordinance Amending Titles 2, 4, and 26 and Adding Title 28 to the San José Municipal Code to Establish a Municipal Utility for Electric Service
3. Increase the electrical resilience of the City of San José and critical infrastructure for both climate change and emergency response?
4. Enable the City to attract and retain the skilled and trained talent required to perform this work effectively and reliably?
Over the past two months, City staff have met with both Pacific Gas and Electric (PG&E) and the International Brotherhood of Electrical Works (IBEW) to better understand their perspectives and concerns and to identify common interests and areas for future collaboration.
PG&E
Over the past two years, City staff and PG&E have engaged in extensive constructive cooperation with a particular emphasis on emergency preparedness and response and PG&E’s reorganized corporate structure that emphasizes regional engagement. In the last few weeks, the City met twice with PG&E, working to broaden this collaboration and better understand its concerns and perspective.
The City’s working relationship and interests in PG&E covers a broad range of areas, including 1) emergency response, 2) electrical connections to development, 3) resilience and innovation, 4) electrical distribution and transmission, 5) load forecasting and future planning, 6) energy generation, and 7) the exploration of potential Municipal Utility for Electric Service. Along that continuum with PG&E, the City’s relationship ranges from partnership in areas such as emergency management, to the City’s lead in electrical generation, and to potential competitors in serving customers in San José.
Of the seven areas discussed, the City believes that it can improve coordination and collaboration across the board. It is important to note that the City needs and wants PG&E to be successful.
Even if the City moves toward Municipal Utility for Electric Service in limited areas, PG&E will continue to own and maintain the electrical distribution systems for the vast majority of the city and will continue to be a daily partner in electrical connections for new development and a core partner in the City’s emergency preparedness and response. The City should continue to strengthen regular collaboration with PG&E, even though there will inevitably be areas of conflict and disagreement, in particular, as it relates to community choice aggregation policy issues and potential Municipal Utility for Electric Service.
HONORABLE MAYOR AND CITY COUNCIL
September 28, 2023
Subject: Supplemental - Ordinance Amending Titles 2, 4, and 26 and Adding Title 28 to the San José Municipal Code to Establish a Municipal Utility for Electric Service
Over the coming year, the City desires to continue maintaining the high level of partnership with PG&E on:
(1) Emergency response and preparedness.
And, the City intends to constructively engage in deeper cooperation on upgrading and expanding the physical electric distribution infrastructure:
(2) Partnering on electrical connection for new development and permitting. (3) Exploring opportunities to improve resilience and drive innovation. (4) Working together on upgrades to PG&E’s distribution infrastructure. (5) Improving the timeliness and accuracy of load forecasting and future planning.
PG&E is currently working on a complete overhaul of its distribution planning process. It is not only PG&E’s planning function that is being overhauled, but, critically, the process whereby plans are approved by regulators and translated into budgets and projects are timely and efficiently executed. The City and PG&E need each other to achieve success in this vital exercise.
In one area, the City will lead as the primary provider of choice and PG&E as backup for:
(6) Energy generation (community choice aggregation).
And, the City will likely remain competitors with PG&E as we explore:
(7) Limited San José Municipal Utility for Electrical Service.
The City sees its relationship with PG&E as multifaceted, and there are more areas where the City and PG&E have aligned interests, than not. In the areas where the City and PG&E’s interests diverge, staff feel it is worth continuing to explore the tradeoffs as explained in the August 15, 2023 City Council Memo.
Discussions with IBEW
IBEW represents a broad range of electrical workers from utility lineman, cable splicers, instrument control technicians, and electricians. IBEW workers will be critical to the success of any future Municipal Utility for Electric Service in the City of San José. While a wide range of
HONORABLE MAYOR AND CITY COUNCIL
September 28, 2023
Subject: Supplemental - Ordinance Amending Titles 2, 4, and 26 and Adding Title 28 to the San José Municipal Code to Establish a Municipal Utility for Electric Service
trades, professions, and expertise will be needed to design, build, operate, and maintain a new Municipal Utility for Electric Service, the trained and skilled electrical workers represented by IBEW will form the backbone and vital core of both the initial construction and ongoing operations and maintenance of the new electric service.
Staff would not recommend proceeding with scaling up a Municipal Utility for Electric Service until staff is assured of being able to attract and retain skilled and trained electrical workers needed to ensure success. Staff met with IBEW twice over the last month to understand issues and ensure the City is better prepared to work collaboratively with labor partners to ensure the success of this potential new line of service.
IBEW shared the significant challenges of finding skilled workers and training enough new workers to meet increased demand and it provided details of recent bargaining agreements that address the high cost of living in the Bay Area (see Attachment). This information has helped deepen staff’s understanding of the complexity of attracting and retaining labor. The costs associated with recruiting and onboarding skilled employees will be built into the modeling and analysis of a potential Municipal Utility for Electric Service.
IBEW also invited staff to tour its amazing new training facility on September 18, 2023. This spacious and well-appointed facility provides classrooms and a state of the art hands-on workshop to allow hundreds of apprentices to learn the entire range of skills, from pipe bending to splicing and instrument controls and wiring; skills required to be certified in the State of California. IBEW commits to covering the costs for the multiyear training undertaken by apprentices and invests approximately $70,000 per each successful graduate of its program.
During the meeting at the IBEW training facility, staff discussed three key areas of potential partnership:
(1) Improve permitting in the City of San José, especially for the most common forms of electrical connection and work,
(2) Workforce development to prepare the next generation of skilled and trained electrical workers and how to attract people at an early age to consider and enter the trades, (3) Small business development to enable the creation of electrical small businesses that can meet needs that larger businesses might ignore but are nevertheless vital to our green electric future.
Stakeholder Engagement Going Forward
The cordial and productive initial discussions with both PG&E and IBEW have provided invaluable information to improve the City’s modeling and analysis of a potential Municipal Utility for Electric Service and have opened a range of important issues for ongoing collaboration. Staff intends to continue this stakeholder engagement with both groups throughout the exploratory phase to better inform the City’s work and to begin to take action on the other areas of potential collaboration identified.
HONORABLE MAYOR AND CITY COUNCIL
September 28, 2023
Subject: Supplemental - Ordinance Amending Titles 2, 4, and 26 and Adding Title 28 to the San José Municipal Code to Establish a Municipal Utility for Electric Service
City staff does not now know what the outcome of this exploratory phase will be or if staff will recommend moving beyond exploration to the City Council for direction. However, staff’s analysis and ultimate recommendation will only be strengthened by engaging with stakeholders with deep expertise and diverse viewpoints such as PG&E and IBEW. Staff recognizes, that in the end, staff may not agree with PG&E and IBEW on the final recommendations, but understands the deep value of continued collaboration in the many areas where the City’s interests align.
Transmission Lines and Interconnection Requests
Transmission lines are the large high voltage power lines that carry electricity from the places where electricity is generated, such as a solar farm or nuclear power plant, to the distribution network. The 27,000 miles of transmission lines in California are coordinated by the non-profit California Independent Systems Operator (CAISO).
The City of San José is about to receive two new
High Voltage Direct Current transmission lines.
LS Power was recently selected to construct both
of the new high voltage transmission lines and
connect them to the existing grid. LS Power is
contracted by CAISO and this project will
proceed regardless of any action the City Council
takes regarding Title 28.
Over the past year, the City pulled together a
multi-departmental team led by the City
Manager’s Office to ensure effective coordination with LS Power in siting of facilities and utility lines and support the success of its work while minimizing the disruptive effects of these massive construction projects. LS power has been highly responsive to the City’s interests and requests and is well on its way to a successful project launch. The City will continue this high level coordination with LS Power through the duration of the design and construction of these transmission lines.
The interconnection points where the transmission lines will end are the locations where San José’s potential future distribution network could be connected to the transmission lines. By adopting Title 28, the City has the ability to explore connecting to the grid at these new interconnection points. Directly connecting the transmission lines at these interconnection points would be significantly cheaper and faster if planned during the design phase and before construction is underway. Title 28 preserves the option for the City to connect directly to these points in the future but does not commit the City to doing so.
HONORABLE MAYOR AND CITY COUNCIL
September 28, 2023
Subject: Supplemental - Ordinance Amending Titles 2, 4, and 26 and Adding Title 28 to the San José Municipal Code to Establish a Municipal Utility for Electric Service
City of San José Electrical Plan of Service Exploratory Phase
Adopting Title 28 allows the City to explore the option to provide electrical service. To reduce capital costs, the Administration recommends limiting the area where the City would provide electric service near the new transmission lines. The sites under consideration are critical City facilities and potentially new development in North San José and near the Diridon Station area.
The Administration does not recommend taking over existing PG&E distribution infrastructure due to the cost and liability that the City would incur.
As part of the exploratory phase, the City will need to develop a “Plan of Service” to forecast how much electricity the City would need for these limited new service connections. The Plan of Service will be developed by staff prior to start of construction of the LS power facilities currently scheduled for early 2026. Permitting of the new LS Power facilities will commence in early 2024
1. The City will be a party to that proceeding.
Developing the Plan of Service and preparing an “Interconnection Agreement” for signature does not commit the City to proceed with construction of a Municipal Utility for Electrical Service.
City Council approval would be required prior to committing construction funds for any new City-owned facilities that would flow from signing an Interconnection Agreement with LS Power and the CAISO. Staff will develop that Plan of Service over the next three years.
The conceptual Plan of Service includes two potential interconnections:
1. Substation San José B at Guadalupe Parkway and Coleman Avenue
2. North San José/Regional Wastewater Facility Lands for Future Development
Substation San José B
The interconnection at Substation San José B could include new developments in a swath of territory east of the rail right of way from south of Diridon Station and north to the City of Santa Clara line. City utility service could potentially serve:
• The planned new multi-modal Diridon Station, including the optional relocation of the Rail Maintenance Facility,
• The Downtown West project,
• The San José Mineta International Airport, including the planned new terminal building and extensive electric vehicle charging facilities for on-site parking, and • The planned expansion of new data centers north of the airport.
North San José
In North San José near Alviso, a new interconnection could serve new development, including:
• Potential water purification or brackish water desalination facilities, • Expansion of data center(s) under construction in the area,
1 The permitting public process is known as a “Certificate of Public Convenience and Necessity” and is conducted by the California Public Utilities Commission as the lead agency.
HONORABLE MAYOR AND CITY COUNCIL
September 28, 2023
Subject: Supplemental - Ordinance Amending Titles 2, 4, and 26 and Adding Title 28 to the San José Municipal Code to Establish a Municipal Utility for Electric Service
• Zoned manufacturing and industrial development, and
• Potential solar plus battery storage and generation in the region.
Conclusion
In conclusion, the City is exploring whether to provide Municipal Utility for Electric Service in very limited areas of the city and select City facilities. Adopting the recommended Title 28 and related actions in the original memorandum from August 15, 2023 is required for staff to gather the data needed to continue this exploratory phase. City staff seek to ask and answer four key questions during the exploratory phase. If the City were to provide Municipal Utility for Electric Service in limited areas of the city, could that be done in a way that would:
1. Reduce electricity energy costs for the consumer?
2. Allow the development of more innovative and energy efficient buildings such as envisioned in the planned Downtown West development?
3. Increase the electrical resilience of the City of San José and critical infrastructure for both climate change and emergency response?
4. Enable the City to attract and retain the skilled and trained talent required to perform this work effectively and reliably?
City staff intends to continue stakeholder engagement with both PG&E and IBEW and others throughout the exploratory phase to both better inform the City’s work and to begin to take action on areas of potential collaboration.
City staff will return to City Council with the results of this exploratory phase to provide additional information and analysis and to seek approval, direction, and guidance on any recommended actions.
/s/
KIP HARKNESS
Deputy City Manager
For questions, please contact Erica Garaffo, Lead Resilience Strategist, at [email protected].
Attachment: Side Letter Labor Agreement between IBEW Local 1245 and PG&E Attachment - Side Letter Labor Agreement between IBEW Local 1245 and PG&E
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