Utilities Advisory Commission - January 7, 2026

Commission favors demand-driven grid upgrades, with no formal vote

Utilities commissioners generally favored staff’s proposal to pace 12-kilovolt distribution upgrades according to customer electrification, permit activity, smart-meter data and localized transformer loading rather than rebuild the system broadly in advance. The commission took no formal action, and the proposed schedule remains subject to the fiscal year 2027 capital budget process and City Council approval.

Staff estimated five-year spending of $156 million under the recommended approach, $117 million less than the $273 million estimate for an accelerated strategy. Present-value estimates through fiscal year 2034 were $342 million with upgrades paced to customer participation and $443 million if all 12-kilovolt upgrades were completed before then. Commissioners said pacing the work could avoid stranded assets and reduce near-term rate and borrowing pressures while preserving the ability to accelerate construction if electrification increases.

The paced distribution schedule would not suspend reliability work. Staff proposed reconductoring roughly three miles of overhead 60-kilovolt line, converting a legacy 4-kilovolt system serving about 2,900 customers and reconstructing four substations. A fiscal year 2025 pilot increased capacity for about 900 homes at a cost of roughly $10 million.

The commission did not endorse a residential peak-demand threshold or a policy for charging individual customers for unusually large capacity upgrades. Staff estimated residential electrification peaks of 8 to 19.5 kilowatts, compared with historical average demand of 1 to 2 kilowatts, and described potential customer-funded incremental upgrades in the $10,000 to $20,000 range. Commissioners requested more smart-meter analysis and comparisons with other electrified communities before considering such a policy. Broader rate effects will be evaluated as the capital plan is formalized.

Fiber pilot targets March launch as commissioners seek financial tests

Palo Alto staff is targeting March 2026 to begin accepting subscribers for its municipal fiber pilot, although promotional rates and final infrastructure work remain pending. The pilot route passes about 1,200 homes, approximately 845 of which are considered serviceable. Weather permitting, staff planned to install the fiber hut and pilot-area cable by the end of January.

The pilot is expected to cost about $5 million and offer 500-megabit and 1-gigabit service. Staff discussed promotional prices ranging from $50 to $65 but had not finalized them. No motion or vote followed the update.

Several commissioners asked staff to define results that would support, delay or halt further investment, including subscriber take rate, customer satisfaction, installation speed, cost per passing and cash-flow projections. Staff said the City Council had already authorized Phase 1 and characterized the pilot as a technical subset of that phase, not a formal financial go-or-no-go test. Some commissioners said they had understood the pilot to provide a decision point before additional spending. No performance thresholds were adopted.

Commissioners also differed over the broader business case. Supporters cited the fiber backbone’s value for grid modernization, emergency services and other city functions, while skeptics questioned competition with incumbent providers, technology risk and a reported 35-year payback scenario. All three public commenters opposed or raised substantial concerns about city-operated retail fiber service. Staff said it would return to the commission, the Finance Committee and the council with pilot take-rate, customer-feedback, cost and financial data, but the timing of that report was not settled.

Staff outlines limited time-of-use test before summer rollout

Utilities staff reported plans to test time-of-use electric rates with a small group of customers during the first two quarters of 2026 before a broader summer rollout. Enrollment was expected to begin at roughly a dozen customers per month and reach approximately 100 customers in the second quarter. The commission took no action on the update.

Commissioners asked how participants would be selected and why the initial rollout was so limited. One suggested comparing each participant’s time-of-use and standard-rate bills and using the lower amount during data collection. Staff said the utilities call center would initially prepare customer-specific savings estimates, with automation planned as enrollment grows. Marketing materials are expected to return to the commission in the coming months.

Separately, staff said a change in utility bill-printing vendors is expected to save approximately $150,000 annually, about 25% of the previous cost.

Primary sources

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