Utilities Advisory Commission - September 3, 2025

Commissioners seek broader review of gas-transition risks

The Utilities Advisory Commission generally supported moving forward with a planned study of how high electrification could affect Palo Alto’s gas utility, while pressing for more analysis of customer rates, equity, legal constraints and potential funding strategies. The commission took no formal action, and staff plans to incorporate the feedback into the study scope.

The study carries an estimated consulting cost of $150,000—$60,000 for a gas model and $90,000 for rate analysis and scenario simulations—plus an estimated 0.3 full-time-equivalent of staff time. It will model gas-sales reductions of 20%, 40%, 60% and 80%, comparing block-level gas-system retirement with service-by-service abandonment and assessing financial, operational and safety effects. Initial scenarios will exclude electrification of large medical and industrial buildings.

Staff said space and water heating account for an estimated 80% to 90% of city gas use, while approximately 60% of gas-utility costs are variable. Commissioners discussed how declining sales could affect rates and different customer classes, as well as whether areas with aging PVC or steel mains could be targeted for block electrification to avoid replacement costs. They also raised customer holdouts and system-flow constraints as potential barriers.

Staff expects preliminary results in the next few months to help inform the 2026-27 SCAP work plan. A report for policymakers is expected in early 2026 rather than late 2025.

Panel backs five-year GoGreen term despite limited use

The commission voted 5-0 to recommend that City Council extend Palo Alto’s agreement with the California Alternative Energy and Advanced Transportation Financing Authority from two years to a five-year total term. The amendment would continue residents’ access to the GoGreen Home Energy Financing Program for electrification and energy-efficiency projects.

The agreement’s budget would remain $300,000 and could support approximately $2 million in loans or loan guarantees. Staff said the money comes from restricted natural-gas cap-and-trade funds rather than utility rates.

Only one Palo Alto loan was processed during the initial two-year term: $25,000 at 3.98% interest over 30 months for a heat-pump space-heating project. Staff also reported a $4,757 startup administrative cost and a $1,250 contribution to the loan-loss reserve for that loan.

Commissioners questioned the low participation and whether contractor payment requirements could discourage use. Staff said more than 100 contractors serve Palo Alto or Santa Clara County and argued that whole-home electrification incentives launched in 2025 would provide a more meaningful test of the financing option. City Council will consider the proposed extension.

Advanced meter conversion reaches 90% as fiber work advances

Palo Alto’s advanced metering infrastructure conversion is approximately 90% complete, with more than 66,000 meters converted for remote reading, staff reported. A new base station was installed on the City Hall roof to improve readings from difficult-to-reach meters.

Staff expects to convert an additional 4,000 meters by the end of 2025, with the remaining difficult meters addressed in 2026. The schedule has been affected by meter supply-chain problems and a decision to shift the remaining work from a contractor to city staff.

The city also approved the permit for a centralized fiber hut associated with its fiber-to-the-premises initiative. Contractor coordination and scheduling remain pending, with a fuller update planned for October and a fiber pilot report scheduled for January 2026. Staff separately said undergrounding of electric lines serving areas west of Highway 280 is expected to be completed by the end of 2025.

Hot-water heat-pump rebates reserve $280,000

As of Sept. 1, the city had approved 76 hot-water heat-pump rebate applications, reserving a total of $280,000. Individual rebates range from $3,500 to $7,000.

Staff reported continued outreach about residential electrification rebates ahead of the scheduled expiration of federal incentives at the end of 2025. A legislative and regulatory update, including the effects of federal tax-credit changes, is planned for November.

Primary sources

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