Utilities Advisory Commission - May 7, 2025

Fiber pilot rate caps advance on a 6-1 vote

The Utilities Advisory Commission voted 6-1 to recommend that City Council approve maximum monthly rates of $95 for 1-gigabit municipal fiber service and $175 for 2-gigabit service. Staff emphasized that the figures are ceilings rather than confirmed launch prices and said the roughly 25-block pilot is expected to begin with a 1-gigabit offering. The planned service would be month-to-month with no data caps.

The vote followed disagreement over whether the city’s offering would be competitive enough to draw customers from established providers. Staff reported that AT&T fiber is available in about 90% of the pilot area and Xfinity’s 2-gigabit service in about half. Commissioners suggested lower prices, faster tiers, introductory incentives and included security and parental-control features, while staff said the city would emphasize symmetrical speeds, transparent pricing, reliability and local customer service. The dissenting commissioner cited an unclear pricing strategy and said the $95 level appeared uncompetitive.

Commissioners also differed over what the pilot must demonstrate before expansion. Staff set a target take rate of about 20% for the pilot and at least 33% for Phase One, with operating break-even projected in the third or fourth year at the larger scale. The analysis does not include repayment of capital costs. Some commissioners said demand should be proven before expansion, while others viewed Phase One as the minimum scale needed to test construction, marketing, installation and customer service. Questions also arose about whether the affluent, well-served pilot area would represent citywide demand or advance affordability goals.

Phase One is planned to reach roughly 6,000 premises passed within an initial $20 million budget funded from fiber reserves. The rate vote did not resolve whether that expansion must wait for pilot results. Staff said no Phase One construction had been issued and an evaluation could occur after the pilot is completed. Permitting remained underway, and staff anticipated fiber construction beginning in summer 2025 but had not established a service launch date. An update could return to the commission before December.

Commission sends FY2026 utilities budget forward with corrections

The commission recommended that City Council approve the proposed FY2026 Utilities Department operating and capital budgets, subject to corrections identified by staff. Staff described operations as largely unchanged, although expenses would rise because of capital improvements, commodity purchases, customer-efficiency programs and support for launching fiber service. No new full-time positions were requested.

Grid Modernization was the largest focus of the capital discussion. The FY2026 proposal includes about $52 million for the initiative, while staff placed the current overall project estimate at approximately $300 million. Commissioners questioned that figure in light of previous estimates; staff said $300 million is the current vetted amount but remains subject to long-term cost volatility.

The completed Grid Modernization pilot has cost $10 million and connected 93 homes, according to staff. The planned next phase would include approximately 500 transformers, 600 poles and 272,000 feet of secondary cable.

Staff said the budget would be corrected to include previously omitted electric bond-financing revenue for fiscal years 2027-28 and the second half of a federal gas grant in FY2027. City Council budget adoption is expected June 16.

Split vote backs 10-year electric-efficiency targets

The commission voted 5-2 to recommend City Council adoption of electric-efficiency targets for 2026 through 2035. The proposed annual savings range from 2,000 to 4,500 megawatt-hours, producing cumulative savings equal to a projected 2.8% of forecast electric load by the end of the 10-year period.

The two opposing commissioners said the presentation did not adequately connect the targets to technical potential, specific programs and proposed actions. Commissioners also questioned how traditional energy-efficiency goals fit with electrification and the city’s growing focus on peak demand and grid management.

Staff described the targets as realistic forecasts for utility-funded programs rather than aspirational goals and said detailed program information appears in the city’s annual state efficiency report. Gas savings from electrification are tracked separately and are not counted toward these electric-efficiency targets.

A conservation voltage reduction program is expected to begin in 2028 and ramp up through 2032, contingent on deployment of advanced meters. Staff expects to bring the targets to City Council in early June before submitting them to the California Energy Commission. Commissioners also requested a future discussion of efficiency programs and strategy.

Gas-rate proposal remains under Finance Committee review

The commission took no action on gas rates. Staff reported that the City Council Finance Committee’s current direction is to base FY2026 rates on the FY2025 schedule with a one-year escalation, provide a climate credit to one customer class and continue analyzing the latest cost-of-service study.

The Finance Committee was expected to discuss the proposal with City Council at a study session and return May 20 for a formal recommendation. Under the current approach, implementation of the 2025 cost-of-service analysis would move to 2027 rates. A commissioner questioned the delay, and staff said the analysis is expected to return to the commission after the summer for additional rate-design work.

CAISO weighs second Palo Alto transmission connection

Staff reported that the California Independent System Operator is considering a proposed 112-kilovolt transmission line from the NASA area in Mountain View to Palo Alto. The second connection is intended to improve the city electric system’s reliability, capacity and redundancy.

PG&E would build the line, while costs would be allocated through CAISO transmission access charges across its service territory. The project remains proposed and is scheduled for consideration by the CAISO Board of Governors.

Primary sources

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