Utilities Advisory Commission - September 2, 2026

Split vote removes rate-stabilization reserve from recommendation

The Utilities Advisory Commission voted 5-2 to send City Council, through the Finance Committee, a revised reserve recommendation that retains a capital-improvement reserve target but removes the proposed rate-stabilization reserve. The motion kept a five-year timeline and a target tied to one year of average annual cash-funded, non-grant-funded capital improvement budgets, while calling for further analysis of stabilization reserves and related policy questions.

Debate centered on whether the reserve rules were sufficiently developed and affordable. Several commissioners questioned creating a separate stabilization reserve before analyses of hydroelectric, supply-cost and wastewater reserves are complete. They also requested cumulative five-year customer rate impacts, utility-specific risk scenarios, reserve-transfer rules and clearer evidence of credit-rating benefits. Other commissioners and staff argued that separate reserves serve distinct capital, liquidity and cost-volatility purposes.

Staff’s original package set the rate-stabilization target at 10% of operating expenses over five years. Staff estimated that the package as presented would add 0.5% annually to gas rates, with electric and water impacts of less than 1 percentage point. The revised first-phase recommendations are expected to reach the Finance Committee and then the council for anticipated consideration in January. Staff also plans further work on supply-side and wastewater reserves, with a reserve-management policy targeted for council consideration by June 2027 alongside fiscal year 2028 rates.

Battery costs keep long-duration outage planning in monitoring mode

The commission voted 7-0 to support staff’s continued-monitoring approach to long-duration electric resilience, adding that future work should focus on what Palo Alto Utilities should do to improve long-term resilience. Staff reported that local utility-scale storage and microgrids remain too costly relative to their expected benefits.

Staff estimated that a 4-megawatt, four-hour battery could supply about 300 single-family homes for 24 hours. The battery alone would cost an estimated $5.4 million, potentially declining to about $2.4 million by 2035. Recharging it during an extended outage would require local generation; staff estimated that a corresponding solar installation could need about 20 acres and cost $12 million to $15 million.

Commissioners sought clearer resilience objectives, risk scenarios, cost and equity analysis, and consideration of batteries alongside local generation. Staff will carry the commission’s advice to the Climate Action Sustainability Committee and City Council, incorporate hazard mitigation into capital planning and revisit local renewable generation and storage during Integrated Resource Plan work expected to begin in mid-to-late 2027.

Updated wildfire plan advances to state review

The commission voted 7-0 to recommend submitting Palo Alto’s updated Utility Wildfire Mitigation Plan to the California Wildfire Safety Advisory Board by Oct. 2. The plan continues measures intended to prevent utility-caused fires, including vegetation management, inspections, customer notifications and updates to public-safety power-shutoff procedures.

Staff said nine miles of primary high-voltage lines in the wildfire-threat area have been placed underground and energized. Remaining low-voltage service drops are targeted for completion by the end of 2026. Staff will also finalize inspection, vegetation-clearance and shutoff procedures for the underground system; the next wildfire mitigation report is due in October 2028.

Primary sources

Watch the meeting on YouTube · Read the official meeting agenda