When Palo Alto's founding fathers decided more than a century ago to launch a municipal utility, they could hardly have imagined that their venture would eventually evolve into a 250-employee enterprise that deals with electric vehicles, solar panels and smart meters.
Today, these issues are part of a growing workload for City of Palo Alto Utilities (CPAU), which is now in the process of adopting a new strategic plan that will guide its actions for the next five to 10 years. A product of months of brainstorming and refining by utilities staff, the new plan received the official endorsement of the Utilities Advisory Commission earlier this month and is set to be approved by the City Council later this month.
Once in place, it will serve as a blueprint for a department that now finds itself wrestling with a series of challenges, both internal and external. On the former front, the utility is having difficulty recruiting and retaining workers — a product of the city's high housing costs and fierce competition from the private market. On the latter, the organization is contending with a rapidly changing technological landscape and growing customer demands.
The Utilities Strategic Plan tries to address these challenges by identifying four priority areas on which to focus and including measurements tracking the department's progress. The four areas are: workforce, collaboration, technology, and financial efficiency and resource optimization.
By adopting "workforce" as a priority, utilities officials are signaling the need to create new programs that encourage professionals to join — and stay in — the organization. One strategy is the creation of annual "individual development plans" tailored to each employee.
CPAU General Manager Ed Shikada said the program recognizes that for some employees, advancement in the profession isn't always about getting promoted. The department also plans to expand its training and certificate programs to promote employee development.
One of the goals of the strategic plan is to reduce turnover rates in the department to less than 10 percent by 2020, down from the current level of about 13 to 15 percent. Another measurement in the plan calls for filling all "critically identified positions" within 90 days.
The "collaboration" priority refers to both internal teams and external stakeholders, which includes customers who produce, store and sell energy. The plan calls for proactively communicating with the community about capital projects, involving stakeholders on "strategic projects" and supporting customers' needs for "distributed energy resources" — that is, small-scale power sources that could add energy and resilience to the power grid. One strategy calls for the city to make it easier for the community to understand and implement distributed-energy resources such as electric vehicles, solar, storage, energy efficiency and building electrification.
"The ability for us to invite and facilitate partnerships — from at the community level to interdepartmental level to within the department — are not necessarily automatic or top of the mind," Shikada said. "We are institutionalizing the opening of doors, the opportunities to seek collaboration on an ongoing basis."
These distributed-energy resources are expected to play an increasingly central role as the city prepares for a transition to "advanced metering infrastructure," also known as "smart meters." In the "technology" priority, one idea calls for the city to finalize a business case, including cost and benefit analysis, for smart meters by June and to identify "functional and system" requirements for implementing the technology by June 2019.
If things go as planned, the city would launch a "proof of concept" phase with 2,000 to 5,000 smart meters by September 2021, with the ultimate goal of deploying 73,000 electric, gas and water meters by September 2022.
The fourth priority — financial efficiency and resource optimization — calls for the organization to clearly and consistently communicate infrastructure needs, enhance maintenance programs and achieve a "sustainable and resilient energy and water supply." It calls for Utilities to work with other departments to implement a plan for reducing the city's carbon footprint, meeting its water-management goals and engaging the community in creating "resiliency work plans" with targets for recovery times after major disasters.
Then there is the more fundamental goal that has been in place since the utilities early days and that is particularly near and dear to the organization's customer base: safe and reliable service at a reasonable cost. One performance metric calls for the department to keep residential and commercial utility bills within the average of, or below, those of surrounding utilities and communities.
"Facing an evolving utility business environment, aging infrastructure needs and sustainability objectives, CPAU must maintain a competitive position in the market," the plan states in its introduction. "Remaining financially sustainable and competitive in the market while optimizing our resources is key to maintaining and enhancing our value to customers."
Comments
Another Palo Alto neighborhood
on Feb 17, 2018 at 7:55 pm
on Feb 17, 2018 at 7:55 pm
Smart meters have been installed throughout the county for more than a decade now. Why does Palo Alto have to go through a "proof of concept" phase? Why not install these meters now and get on with the other projects that may require some detailed planning?
Downtown North
on Feb 17, 2018 at 9:02 pm
on Feb 17, 2018 at 9:02 pm
Too many buzzwords, too little substance.
They need more "safe and reliable service at a reasonable cost" and less "We are institutionalizing the opening of doors, the opportunities to seek collaboration on an ongoing basis."
Registered user
Embarcadero Oaks/Leland
on Feb 17, 2018 at 11:52 pm
Registered user
on Feb 17, 2018 at 11:52 pm
Yes, lots of buzzwords and no mention of the EXTRA $20,000,000 per year from our inflated utility payments, fees, use taxes etc, etc. that gets funneled from our pockets into the city's General Fund, no mention of the extra 6 months we got stuck paying drought surcharges for a drought that had officially ended, no mention of of all the other billing problems this year, -- all of which undermine our confidence and the PA Utilities' credibility.
Menlo Park
on Feb 18, 2018 at 8:52 am
on Feb 18, 2018 at 8:52 am
Nice propaganda piece. Wonder who actually wrote this and what it cost(s) to retain a firm to write and create a narrative like this one. Truth is... future of government utilities is clearly negative. Solar, battery tech, its all coming, lessening the “employment opportunities” for government employees. Sorry, just the truth. Sure read the nicely written narrative, but realize that change is coming fast and nice words are not slowing this down. Even PG&E while working really really hard to ensure they can capture more and more revenue and control the narrative knows it will be over for them someday. Sure they will pay off enough politicians to drag it out, maybe even years and years...Sadly we will all have to pay for that too. Sorry there is no “bright future” in working from a public eletric utility...
Old Palo Alto
on Feb 19, 2018 at 8:35 am
on Feb 19, 2018 at 8:35 am
Smart city infrastructure is a becoming less complex with more standard open protocols and networks. I would suggest the city look for expertise at www.lora-alliance.org. Truly integrating cities around with world with Power, Lighting, water, gas, and may other services. In a tech centric area this would allow local companies to come up with and compete with new solutions. Large companies like Mueller Systems and others have already invested money in bring this technology to market in the US.
Another Palo Alto neighborhood
on Feb 19, 2018 at 2:58 pm
on Feb 19, 2018 at 2:58 pm
Posted by New guy, a resident of Menlo Park
>> Nice propaganda piece. ... Truth is... future of government utilities is clearly negative. Solar, battery tech, its all coming, lessening the “employment opportunities” for government employees.
Palo Alto has a utility owned by the city. What are the ownership options?
- Keep it like it is
- Sell it to PG&E
- Auction it off to the highest bidder
- Shut it down and let every parcel do its thing
- Other (what?)
So far, I have seen no evidence that the first option isn't the best.
Another Palo Alto neighborhood
on Feb 19, 2018 at 4:11 pm
on Feb 19, 2018 at 4:11 pm
> Sell it to PG&E
Selling the Utility to PG&E could easily bring in more than a billion dollars--which would easily generate $40M (yearly) for the city government. That comes to a lot of money over the next thirty years--when so much of the city's infrastructure will be refurbishment.
Crescent Park
on Feb 19, 2018 at 6:13 pm
on Feb 19, 2018 at 6:13 pm
@ Joe: Seriously? Do you have any idea how much more expensive PG&E is over CPAU --- and that includes the general fund "tax".
And don't get me started on the many, many PG&E blunders over the years... let's start with San Bruno and go from there.
No thank you. CPAU is superior to PG&E in every way.
Another Palo Alto neighborhood
on Feb 20, 2018 at 12:04 pm
on Feb 20, 2018 at 12:04 pm
> Seriously? Do you have any idea how much more expensive PG&E is over CPAU ---
> and that includes the general fund "tax".
You need to think outside your own little "box". The city has billions of dollars of future costs, depending on how irresponsible future councils might be. Who do you think will pay those costs? You and all of the other ratepayers here in Palo Alto will pay--through higher fees, fines and parcel taxes.
Now--I doubt very many people in Palo Alto have the slightest idea how much more expensive PG&E is over PAU. Natural gas, for instance, is often more expensive here than in PG&E territory. Moreover, there is the Utility Users Tax which goes up every time the city raises its rates.
Now--if the city were to sell the Utility for say $1B, it could invest that money so that upwards of $40M-$50M a year in returns could be possible. This money could be used to pay for the infrastructure refurbishments needed in the coming years.
When the city uses ad velorem taxation--then people are required to pay based on the value of their property. So, depending on the size of the bonds issued, the cost for the average homeowner here in Palo Alto could easily be in the hundreds of dollars per year--much of which would be used to pay the financing charges of the bonds.
So, the town is looking at the difference in costs between possibly somewhat higher PG&E utility costs and the much higher costs of paying for bonds to refurbish the city's future capital needs.
Perhaps you have a problem paying less money to PG&E over the years, than you would if the Utility were sold and that money used to pay for our future needs through clever investment (not to mention that the principal could be tapped if needed).
Sorry, but looking at your own wallet as the only criteria to consider when dealing with the very high future costs of living in this town is not the right way to look at such matters.
Palo Verde
on Feb 20, 2018 at 12:58 pm
on Feb 20, 2018 at 12:58 pm
"Joe" suggest selling our city utilities to PG&E and investing the money. He claims we could get a billion dollars from PG&E. First of all, PG&E is only gas and electric. Our city utilities include water, sewer, refuse, and fiber-optic lines. PG&E won't buy those, so we still need to keep our local utility. Secondly, is this billion dollar valuation realistic? Here's a quick back-of-the-envelope calculation. From the City of Palo Alto Utilities and PG&E websites, we get these numbers of customers:
Palo Alto: 29,136 electric customers and 23,362 gas customers
PG&E: 5.4 million electric customers and 4.3 million gas customers
From Wikipedia, total PG&E assets for 2016 were valued at $68.6 billion.
Just using the ratio of electric customers, Palo Alto has 0.537% of PG&E's customer base. As a first order approximation, PG&E would pay 0.537% of its current asset value to acquire the electric and gas system of Palo Alto. That comes out to $370 million. Now "Joe's" proposed investment payout drops to only $10 million per year. Meanwhile, if we sell off our electric and gas to PG&E, we lose much of the "rent" paid by the utilities to the general fund - about $20 million per year as noted above. So the investment payout is wiped out by the loss of this rent. And we get to individually pay more for our electricity from PG&E to boot! Doesn't sound like a good economic proposition to me.
Greenmeadow
on Feb 20, 2018 at 3:52 pm
on Feb 20, 2018 at 3:52 pm
On what Palo Alto planet is there fiber optic? Definitely NIMBY! Maybe in Phil Farrell's area. I'd like me some of that fiber optic, too.
That being said, no interest in PG&E from this rate-payer. Gas explosions, wildfires, no thanks.
Registered user
Embarcadero Oaks/Leland
on Feb 20, 2018 at 5:33 pm
Registered user
on Feb 20, 2018 at 5:33 pm
No interest in PG&E either but it would be nice if PA Utilities stopped inflating their rates and treating us like cash cows to fund other city activities. They're now funneling more than $20,000,000 in over-charges into the General Fund, an amount that keep rising each and every year.
Another Palo Alto neighborhood
on Feb 21, 2018 at 2:23 pm
on Feb 21, 2018 at 2:23 pm
“Phil Ferrell” has taken the time to think through a rebuttal to the suggestion of selling the Utility. Unfortunately, his back-of-the-envelope calculation is not how an asset valuation of a municipal utility would be made. Moreover, he seems to fail to see that all of the “rent” paid by the Utility to the 250 Hamilton for property already owned by the city is just another ruse to raise the rates for utility customers—rather than keeping the rates as low as possible.
The issue of the “return on investment” from the current operation is worthy of review. The 2018 budget reminds us:
“In FY 2009, the Council adopted a change to the methodology, effective starting in FY 2010, used to calculate the equity transfer from Utilities Funds to General Fund. Under this methodology, the equity transfers are based on the asset base in the Electric and Gas Funds, along with the rate of return for each utility, which is based on Pacific Gas and Electric's (PG&E) rate of return on equity as approved by the California Public Utilities Commission (CPUC). “
So, if there were ever to be any realistic consideration for the sale of the Utility or any of its components, then certainly there would be a known asset base, as well as a well-documented revenue stream, to take to the negotiating table. (Interesting that the PAU’s ROI is directly tied to PG&E’s ROI.)
It pays to remember that private company asset valuations are different than municipal operations—particularly since not many municipals have been all that interesting to private investors in the past. So, there isn’t a lot of data to use to make comparisons. (The $1B suggestion was a starting point in a discussion, however.)
Nonetheless, it would not be unwise for the City to periodically review this possibility, and have a reasonable asset valuation of the Utility established and published. Oh, and let’s not forget all of the pension obligations that are outstanding for the employees of the Utility.