News


Drought could cost Palo Alto $5.46 million

Market-rate power purchases would replace lost hydroelectric power

If California doesn't get more precipitation, Palo Alto could end up paying at least $5.46 million more for energy supplies to make up for lost hydroelectric power, a city official told the Weekly.

California's seasonal forecast shows the state is heading into its driest year on record, and even additional rain won't be able to make up for two straight years of drought, according to the California Department of Water Resources.

A funding reserve the city built up from lower costs during wet years means the city doesn't expect the drought to affect customer rates this year, but a third dry year could change that.

"If we have continuous three years in a row of very critically dry weather, it will be a problem at some point," said Jane Ratchye, city Utilities Department assistant director for resource management.

While most Californians will see the effects of the deficit as lower groundwater, river and reservoir levels, Palo Alto will feel the hurt in its electrical budget, she said.

Hydroelectric power in a normal year accounts for about 50 percent of the city's power supply, and Palo Alto pays the same amount of money for that power no matter how much power it gets, Ratchye said. But in 2014, the city expects that the proportion of power it gets from hydroelectric sources, such as the Calaveras and Shasta dams, will fall by about 10 percent. Purchasing power from other markets to make up for the drop would take a 4 percent bite out of the city's electrical budget.

In addition to hydroelectric power, 20 percent of the city's power came from landfill gas and wind in 2013; it purchased the remaining 30 percent from the open market. The reduction means that in 2014, 40 percent will come from hydroelectric sources, with the balance coming from renewables and the open market, Ratchye said. Palo Alto would purchase the additional power from an existing stable of eight to 10 suppliers, she said.

The city won't know until March if its drinking-water supply, which comes from the Hetch Hetchy Reservoir, will be affected, Ratchye said. But If the drought affects the Sierra snowpack or continues for an extended period, water supply could be impacted. The city has underground emergency-water supplies, she said.

"It's very early in the water year. Supplies in storage are looking OK, and water use has gone down," she said.

Comments

Posted by Wayne Martin, a resident of Fairmeadow
on Dec 27, 2013 at 3:55 pm

> Under its hydroelectric contracts, Palo Alto pays the same amount of
> money for that power no matter how much the city gets,

So .. if the output of the hydro plants were to be reduced to zero--then we would have to be paying millions for nothing? How are the ratepayers actually benefitted by such an arrangement?

So--$5M sounds like a lot of money, but how much is it compared to the total electrical purchases needed to power the city? Keep in mind that commercial use of electricity has historically been over 80%--so the bulk of any cost overruns will be absorbed by the commercial accounts, and 15%-20% absorbed by the residents. Given this use distribution, what is the likely cost increase for a 600 to 900 KWH residential user?





Posted by musical, a resident of Palo Verde
on Dec 27, 2013 at 4:33 pm

That does beg the question of how the hydroelectric contracts are worded. There must be some guaranteed minimum power/energy delivery below which a pro-rated cost reduction is effected. Seems we should have learned something from the good old Enron days.


Posted by Dry Winter, a resident of Another Palo Alto neighborhood
on Dec 27, 2013 at 7:56 pm

Palo Alto's electricity is 100% carbon neutral, the retail rates have not increased since 2009 and are BELOW PG&E rates!

Form the March 2013 Utilities Advisory Commission meeting on Five Year Electric financial forecast:

"Annual Electric expenses totaled $116.1 million in FY 2012, or $15.9 million lower than budgeted."

www.cityofpaloalto.org/civicax/filebank/blobdload.aspx?BlobID=33272


Posted by Dry Winter, a resident of Another Palo Alto neighborhood
on Dec 27, 2013 at 7:58 pm

-correcting typo--

Palo Alto's electricity is 100% carbon neutral, the retail rates have not increased since 2009 and are BELOW PG&E rates!

From the March 2013 Utilities Advisory Commission meeting on Five Year Electric financial forecast:

"Annual Electric expenses totaled $116.1 million in FY 2012, or $15.9 million lower than budgeted."

www.cityofpaloalto.org/civicax/filebank/blobdload.aspx?BlobID=33272


Posted by Left of Boom, a resident of Another Palo Alto neighborhood
on Dec 28, 2013 at 10:19 am

Left of Boom is a registered user.

How about spending $170,000 on renewable energy project within Palo Alto instead of outside the district? Put some solar panels on all these new school buildings for instance? New library roofs?


Posted by Resident with solar, a resident of Crescent Park
on Dec 28, 2013 at 7:28 pm

How about encouraging residents to install solar panels on as many roofs as possible and allowing tree trimming to reduce shading of the panels. The power produced can feed directly into PA's grid.


Posted by Wayne Martin, a resident of Fairmeadow
on Dec 29, 2013 at 12:20 pm

> Palo Alto's electricity is 100% carbon neutral, the retail rates
> have not increased since 2009 and are BELOW PG&E rates!

I got to wondering about this, and then realized that PG&E's rates are set by the CAPUC, and agency of the State of California--not PG&E.

AVERAGE ENERGY PRICES, SAN FRANCISCO-OAKLAND-SAN JOSE–NOVEMBER 2013:
Web Link

The 21.9 cents per kWh San Francisco households paid for electricity in November 2013 was 68.5 percent more than the nationwide average of 13.0 cents per kWh. Last November, electricity costs were 63.0 percent higher in San Francisco compared to the nation. In each of the past five years, prices paid
by San Francisco area consumers for electricity exceeded the U.S. average by at least 58 percent in the month of November.
----

Given the high levels of regulation that PG&E is beset with, it might be interesting if the PUC were to provide some insight as to why they have forced the cost of electricity to be so high for PG&E customers.

Doubtless PG&E has some input into the price-point determinations, but still--a 70% higher price is not readily understandable.

BTW--Palo Alto electricity prices are not really any different in the 300-600 KWH use range, than the national average.


Posted by Gus L., a resident of Barron Park
on Dec 29, 2013 at 9:27 pm

This alone is a good reason to limit population growth in our city..


Posted by resident, a resident of Another Palo Alto neighborhood
on Dec 29, 2013 at 10:17 pm

Anybody think that the City should halt all basement construction which
might require dewatering? Or should we just keep doing what we are
doing and hope for the best?


Posted by NIMBY, a resident of Old Palo Alto
on Dec 30, 2013 at 2:03 am

Hey Gus,

We are dealing with a state water shortage, not a city water shortage. "Limiting population growth in our city" is not a comprehensive solution. I suggest building the Great Wall of California to keep people from entering via Oregon, Nevada, Arizona, or Mexico. We should also kick out everybody not born in California. Once we wall off our state we won't have to worry about the traffic generated by newcomers and we can party like it's 1960.


Posted by boscoli, a resident of Old Palo Alto
on Dec 30, 2013 at 7:30 am

@NIMBY, I know that your post was sarcastic, but there are practical and smart ways of limiting population growth. Don't temper with existing zoning standards to allow larger population density (no more Maybell project -like schemes), don't allow multi families to live in one household, something that's increasingly happening in Palo Alto.


Posted by Happy New Year, a resident of Another Palo Alto neighborhood
on Dec 30, 2013 at 9:37 am

Hi NIMBY,
How about starting 2014 with less vitriol? Your post marked a change in the tone of what had been an interesting discussion.


Posted by Seeds of Change, a resident of Monroe Park
on Dec 30, 2013 at 9:56 am

Whatever happened to seeding the clouds? There was a blurb on CNN recently about how cloud-seeding has become a lot more effective in the last twenty years.

BTW, the basement issue is an important one. I have two neighbors who have large basements, and the water pumps run ten months our of twelve for the last fifteen years! What a waste! Larry P age's new house between Bryant and Waverley also drains water from somewhere several months of the years, and it is sitting on a known aquifer.

A real estate agent recently told me that people add basements because that is square footage that cannot be taxed.


Posted by Robert, a resident of another community
on Dec 30, 2013 at 10:32 am

"don't allow multi families to live in one household"

It was only a matter of time before someone suggested it.


Posted by John, a resident of Barron Park
on Dec 30, 2013 at 12:04 pm

I believe Calaveras Dam is water supply only--no hydro powerhouse. There is nothing on Google to make me believe differently.


Posted by Dry Winter, a resident of Another Palo Alto neighborhood
on Dec 31, 2013 at 8:40 am

"CPAU electric power sources include the Calaveras hydroelectric project, the Western Area Power Administration (Western) hydroelectricontract, long-term power purchase agreements with solar, wind and landfill gas facilities and other short-term contracts from the wholesale market. Western power comes from two sources, the Central Valley Project hydroelectric facilities and from wholesale power contracts with various suppliers in California and the Northwest United States."

Source: Web Link


Posted by Dry Winter, a resident of Another Palo Alto neighborhood
on Dec 31, 2013 at 8:50 am

@Wayne Martin regarding CPAU electric rates compared to US Average retail rates:

The average US electricity rates are based on electricity made from fossil fuels and have very little renewable content. CPAU's electricity is 100% carbon neutral withOUT a cost premium!

The CPUC doesn't force high electric rates upon PG&E. They limit PG&E's requested rate increases to the cost of business plus the allowed profit. Web Link


Posted by SteveU, a resident of Barron Park
on Dec 31, 2013 at 9:08 am

SteveU is a registered user.

We need a utilities 'Shortage Tax' so California can maintain its lead in the Highest rates in the USA, race.

At some point, spending $3500 to replace my $500 tank type water heater with a Tankless (and gas line size upgrade) will actually make economic sense.

At some point, spending $50K to install PV panels on my roof (will need a $$$ structural upgrade to support them)will actually break even before they begin to fail.

We need a LOT more rate increases and users taxes so these highly touted Green retrofit programs make financial sense. Every shortage has resulted in a Rate increase that never completely went away at the shortage end. Another perfect excuse for a rate increase. Go City Hall


Posted by Jane Ratchye, a resident of Downtown North
on Dec 31, 2013 at 11:20 am

John,
Yes, Calaveras Dam in the East Bay is part of the San Francisco's regional water supply system ("Hetch Hetchy" system) which is the source of Palo Alto's potable water supplies. It is indeed a water storage dam with no electric power generated.

The City of Palo Alto is part owner of the Calaveras Hydroelectric Project on the North Fork of the Stanislaus River in Calaveras County (see: Web Link).

Wayne,
You asked to put the $5 million cost in context. The City's FY 2014 budget for the Electric Fund is $138.4 million (see: Web Link) so $5.46 million is about 4% of the total budget. The total budget for energy supplies purchased by the City is $74.5 million plus $9.1 million for debt service on the Calaveras Hydroelectric Project so $5.46 million is about 6.5% of the FY 2014 budget for energy supplies.

Jane Ratchye
Assistant Director of Utilities for Resource Management


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