Seeking to advance its conservation goals and improve reliability of its municipal utilities, Palo Alto is preparing to approve more than $18 million in contracts on Monday to transition all electricity, gas and water customers to "smart meters."
The technology will obviate the need for meter readers and allow the city to introduce new programs aimed at encouraging conservation. The biggest of these is a contract for up to $16.7 million with Sensus USA, a company that will be installing advanced metering infrastructure in Palo Alto starting next year, with the goal of completing all installations by the end of 2024.
For Palo Alto, the quest to adopt smart meters began in 2013, when the city launched a pilot system for about 300 homes. After considering feedback from the program and an economic analysis, the council approved in November 2018 a plan for investing in the new system, which a new report from the Utilities Department calls a "foundational technology that is becoming a standard in the utilities industry."
The new infrastructure, the report states, will improve customer experience, improve system reliability and make it easier for the city to meet its environmental sustainability and resiliency goals. The technology will be able to identify water leaks and nudge customers to charge their vehicles during off-peak times.
But while the council has already endorsed the switch to smart meters, it balked on approving the contracts on the council's "consent calendar," a list of items that get approved without discussion. Instead, council members Lydia Kou, Greer Stone and Greg Tanaka asked to pull the item from the calendar and to hold a full public hearing on the project.
Tanaka pointed to the size of the contract as the reason for holding a full discussion.
"I think it's important when you have contracts of this magnitude that we really try to make sure we get the best pricing possible," Tanaka said.
The list of contracts includes $15.3 million with Sensus USA, as well as authorization for the city manager to executive change orders for up to $1.5 million with the company installing the meters. The council is also scheduled to approve a $1.3 million contract with E Source for consulting services relating to smart meters. The money to fund the project would be transferred from the Utility Department's "Electric Special Projects" reserve, which is intended for major one-time expenditures.
According to the timeline in the plan, the project entails installation of five network poles and 10 collector radios, which will collect meter data continuously and transmit it every 15 minutes. The company will also replace the roughly 30,000 electric meters that are currently in use and retrofit the city's 20,798 water meters and 24,208 gas meters to allow them to transmit data.
If the council approves the staff's plan, the city and Sensus will start installing the network along with some initial meters early next year and then hold a "soft launch" for a limited number of customers in mid-2023. Mass deployment would stretch from June 2023 until December 2024.
Once they are installed, the city will proceed with designing programs that utilize the technology to reward customer conservation and efficiency.
An analysis commissioned by the Utilities Department concluded that the new system would be close to breakeven financially, with little to no impact to utility costs to customers over the 18-year life of the project. Staff also pointed to nonquantifiable benefits such as enhanced customer experience and improved system reliability to support its conclusion that the new system would be a "net benefit to all utility customers, particularly for the electricity and water utility customers."
The Utilities Advisory Commission, which reviewed the proposal in July, concurred with this assessment and voted 5-1 to support staff's plan for converting utility meters. The only dissenting vote came from Commissioner Phil Metz, who urged staff to develop a strategy for how the system will be used before advancing the project.
"I think there are good reasons to do AMI (advanced metering infrastructure) but we should have a concrete plan … in order to justify this program," Metz said.