Utilities Advisory Commission - November 6, 2024

Commission questions regional water forecasts and drought-planning costs

The Utilities Advisory Commission sought clearer cost, demand and reliability analysis from regional water officials but took no action on plans for future supplies. In discussions with the Bay Area Water Supply and Conservation Agency and San Francisco Public Utilities Commission, commissioners focused on whether declining demand and higher capital costs could make water less affordable as the agencies prepare for severe droughts. Palo Alto receives all of its potable water from the San Francisco Regional Water System.

BAWSCA said wholesale customers have a perpetual right to 184 million gallons per day and pay system costs in proportion to their use. Individual supply guarantees apply under normal conditions and are separate from drought allocations, which the agency said were being renegotiated. A revised drought-allocation formula was expected within the next few months.

Commissioners and public commenters challenged long-term demand assumptions after hearing that the SFPUC Water Enterprise projected 2045 sales of 244 million gallons per day, while its Finance Bureau projected 207 million gallons per day. BAWSCA said it was updating projections to reflect sustained conservation and would incorporate rate elasticity and broader drought scenarios. Regional water use has fallen 32% since 1986 despite a 34% population increase.

The commission also examined why Palo Alto retail water rates were described as about 10% higher than the average for Hayward and Redwood City at median use. Staff said operating expenses, capital investment, rate design, customer mix and growth-related revenue can complicate comparisons. Staff planned to seek more information from Hayward and potentially expand the comparison to other communities.

SFPUC described its Alternative Water Supply Plan as a living planning document that does not authorize construction of any project. Its five-year wholesale-rate projections exclude potential alternative-supply costs, although capital spending, debt service, low sales and balancing-account adjustments were already expected to contribute to a projected 6.5% wholesale-rate increase in 2025. SFPUC said about $12 million had been spent on alternative-supply planning over the previous four years and that it would continue pursuing purified-water projects and hire a program manager for that work.

Some commissioners supported feasibility studies to clarify costs and lead times if droughts exceed current assumptions. Others warned against committing to major investments without transparent modeling, affordability analysis and clearer demand forecasts. SFPUC reported that seven of 10 experts consulted considered its design drought appropriate or potentially not conservative enough, while acknowledging that its climate study did not resolve how drought frequency, intensity or duration could change. Staff said Palo Alto-specific water issues would return to the commission after the first of the year.

Commission shapes search for next Utilities Director

The commission gave city recruitment staff a broad profile for Palo Alto’s next Utilities Director, emphasizing workforce recruitment and retention, strategic vision, financial judgment, climate-goal implementation, transparent finances, electric-grid modernization and fiber-to-the-premises work. The discussion was advisory, and the commission took no formal action.

Members questioned whether one director can effectively oversee Palo Alto’s five-utility portfolio of electricity, natural gas, water, wastewater and fiber. They also differed over whether the position should require an engineering or other specified degree and whether a 20-year experience target would unnecessarily exclude strong candidates. Human Resources said an earlier review of the position’s breadth led the city to create a chief operating officer role, allowing specialized expertise to be distributed among that position and assistant directors.

Staff planned to complete a recruitment brochure and open the search in November. Executive recruitments typically take at least six months and include active candidate sourcing, screening and multiple interview rounds before finalists advance to the City Manager’s Office. Two virtual employee listening sessions had already been held, and Human Resources was preparing an employee survey whose results would be considered with commission and Finance Committee input.

Handover Substation goes online as utility programs expand

The Handover Substation upgrade was completed and brought online in October, utilities staff reported. The commission took no action on the director’s report, which also covered rate adjustments, electrification incentives, electric-vehicle charging and customer water-use tools.

City Council had increased the maximum gas-transportation pass-through charge from 25 cents to 30 cents per therm. The commercial heating and air-conditioning electrification incentive also rose from $650 to $3,500 per ton, with a maximum incentive of $120,000. By late October, 466 residents had either completed heat-pump water-heater installations or signed installation contracts.

Five multifamily electric-vehicle charging stations were installed during the previous three months, bringing program totals to 433 charging points, 73 EV-rated spaces and 814 multifamily units served. Commissioners asked for utilization data and questioned whether city-funded chargers at schools should be open to the public. Staff said school charging infrastructure is generally intended for community access after school hours when site security allows and may return with usage metrics.

About 20% of customers had logged into the WaterSmart portal, compared with a 2025 goal of 30%. Enrolled single-family customers can view hourly water use and receive alerts for qualifying leaks. Commissioners asked how customers who have not enrolled are notified and whether the service covers multifamily properties. Staff said multifamily master-meter facilities can receive facility-level data and that broader multifamily access would be introduced later.

Commission sets written follow-up on annual report

The commission voted 7-0 to submit questions about the fiscal year 2024 utilities report by email and reserve no more than 15 minutes at its next meeting for issues not satisfactorily resolved in writing. Commissioners were asked to send questions within one week, and staff planned to distribute responses to the full commission before the next meeting.

The process followed a commissioner’s concern that the report provided sales and revenue information but comparatively limited month-by-month cost data and lacked annual totals for some utility measures. Staff described the document as a high-level, nonfinancial performance report and said staffing constraints had prevented compilation of more utility-fund-specific financial detail.

Primary sources

Watch the meeting on YouTube · Read the official meeting agenda