Utilities Advisory Commission - February 4, 2026

Commission weighs data center growth with ratepayer protections

The Utilities Advisory Commission took no formal action on data centers, but members requested quantitative analysis of load forecasts, utility costs, water availability and rate effects before the city considers attracting additional facilities. Their comments included support for considering new centers only with protections against higher costs or reduced reliability for existing customers; the commission adopted no consensus or recommendation.

Staff reported that data centers account for about 15% of Palo Alto Utilities’ electric sales, following roughly 10 megawatts of recent load growth. Another 5 to 10 megawatts could be added over the next five to 10 years. The utility averages approximately 110 megawatts of electric load, and staff said a 25-megawatt data center would increase electric sales by roughly 20%. Without recent data center additions, staff estimated that electric rates would be about 5% higher.

At the largest scale discussed, a 50-megawatt facility would connect to the 60-kilovolt system and require a dedicated, customer-funded substation. Staff cited Santa Clara’s $25 million development fees for the grid capacity needed by a 50-megawatt center as a comparison. Members discussed customer-funded infrastructure, minimum-consumption commitments, capacity reservations and flexible-load provisions as possible safeguards against stranded costs.

Several members expressed interest in appropriately sized facilities serving local research and low-latency computing needs. Members and a public commenter also raised concerns about water use, noise, lighting, backup generation and the risk that residents could subsidize grid or fiber investments. Staff said it may coordinate internally on conditional-use-permit expectations, continue responding to customer inquiries and conduct outreach through utility account representatives.

Five-mile gas main project is set to begin in February

Work on Gas Main Replacement Project 2 is expected to begin later in February and conclude in summer 2027, according to the Utilities Director’s report. The project will replace approximately five miles of gas mains and services in the Midtown and St. Francis neighborhoods to improve system reliability.

Staff said the project will use funds from a $16.5 million federal Department of Transportation grant award. The commission took no formal action on the update.

Customer surveys top benchmarks but identify service gaps

Palo Alto’s 2025 residential utility surveys produced average positive ratings of 74.4% for electric service and 80% for water service. Staff reported that the electric utility scored above statewide municipal utility benchmarks in 10 of 11 organizational characteristics, but commissioners focused on weaker results and possible service improvements.

Satisfaction with recent water-service interactions fell nearly five percentage points from 2023, while the reported rate of resolving water inquiries on the first contact dropped by nearly half. Members suggested creating measurable performance indicators for first-contact resolution, billing-related repeat contacts, emergency and drought preparedness, and customer outreach. Council Member Ed Lauing also supported using the findings for performance measures and communicating positive results to customers and the City Council.

The voluntary online surveys received approximately 400 responses each and had a reported margin of error of plus or minus 4.8 percentage points at a 95% confidence level. Commissioners said the samples appeared weighted toward older, male, White, highly educated homeowners and single-family-house residents, raising concerns about representation of renters and multifamily residents. They also questioned the roughly 86-question survey length, income categories and early problems with the survey link.

No formal action was taken. Staff said it will provide the full contractor reports and backup slides in the next meeting packet, work on more representative sampling and survey-link quality assurance, and consider improvements to billing workflows, digital tools, preparedness communications and targeted conservation and electrification outreach. The commission’s discussion will be included in an informational report to the City Council.

Commissioners seek fuller records and earlier meeting materials

Commissioners raised concerns about a possible city shift from summary minutes to action-only minutes, arguing that a shorter record could omit substantive discussions and make commission guidance less accessible to the public and City Council. Videos would remain linked on the city website. No formal action was taken, but staff said it would bring the feedback to the City Clerk’s Office and explore options involving action minutes, summary minutes and transcripts.

Members also objected to receiving presentations on the afternoon of the meeting, including a 28-page data center presentation with two pages of references. Staff was asked to note the concerns about the limited preparation time.

The commission approved its January 7 minutes with amendments clarifying the earlier discussion of the fiber-to-the-premises pilot. The amended language specified that the issue was whether it was worth spending the full $20 million and that the full budget would not be spent before an initial review of pilot results. Staff separately reported that a pilot progress and metrics update is currently scheduled for July, although the timing may change based on customer participation and rollout progress.

Primary sources

Watch the meeting on YouTube · Read the official meeting packet