HomeMy WebLinkAbout9/3/2019 Item 18, CodronCity of San Luis Obispo, Council Memorandum
Council Agenda Correspondence
Date: September 3, 2019
TO: Mayor and Council
FROM: Michael Codron, Community Development Director
VIA: Derek Johnson, City Manager DJ
SUBJECT: September 3, 2019 Council Meeting Agenda Item 18 – Clean Energy Choice
Program - Retrofit Ready Revisions, Cost Information Update, and Scope of Public
Interest Exemption
ENC: Attachment A – SoCal Gas Data Email
Attachment B – Statewide Cost Effectiveness Study Letter
This memorandum provides updates related to minor recommended amendments, cost
information, and the scope of the Public Interest Exemption.
“Retrofit Ready” Amendments
Following the publishing of the Council Agenda Report, staff received additional minor comments
from the California Energy Commission regarding the water heating retrofit ready amendments
and how they would be interpreted in the field. After consulting with local electricians, staff is
recommending the following changes for clarity :
1. Change the amendments to Section 150(n) to read as follows (Packet Pages 258 and 272)
(n) Water Heating System.
1. Systems using gas or propane water heaters to serve individual dwelling
units shall include the following components:
A. A dedicated 120/240125 volt, 30 20 amp receptacle that is
connected to the electric panel with a 120/240 volt 3 conductor, 10
AWG copper branch circuit, within 3 feet from the water heater and
accessible to the water heater with no obstructions. In addition, all
of the following:
i. Both ends of the unused conductor shall be labeled with
the words “For Future Heat Pump Water Heater” and be
electrically isolated;
ii. A reserved single pole circuit breaker space in the
electrical panel adjacent to the circuit breaker for the
branch circuit in A above and labeled with the words "For
Future Heat Pump Water Heater"[…]
2. Add the following note to 150(n).1.A.iii (Packet Page 258 and 272) and to 150.0(s) (Packet
Page 259 and 273):
Item 18: Clean Energy Choice Program Page 2
NOTE: Appliances shall not be considered “obstructions”
SoCal Gas Offsite Infrastructure, Service, and Meter Cost Information Update
As discussed in the Council Agenda Report, Southern California Gas Company (SoCal Gas)
submitted additional cost information to the City just prior to the publishing of the report. Staff
has evaluated that information and it is attached to this memo as Attachment A. The SoCal Gas
comments provide information related to offsite infrastructure, service, and meter costs from the
local region.
Reach Code Cost Effectiveness
As discussed in the Council Agenda Report, California Energy Code Section 10-106 allows for
local amendments to the State Code if the local governmental agency makes findings, based on
supporting analyses, that the amendments provide energy savings and are cost effective. Staff’s
recommendation provides local amendments in three categories:
1. Requirements for solar panels on nonresidential, high-rise residential, and hotel buildings.
2. Requirements that mixed-fuel, single-family and low-rise residential buildings meet
higher performance standards.
3. Requirements that mixed-fuel nonresidential, high-rise residential, and hotel buildings
achieve higher efficiency standards.
For the proposed amendments as listed above, SoCal Gas comments related to off-site
infrastructure, service, and meter costs have no relevance to these findings. As outlined in the
Council Agenda Report, the City finds the above amendments are cost effective per California
Energy Code Section 10-106.
Offsite Infrastructure, Service, and Meter Costs
The Council Agenda Report presents natural gas construction expenses in two categories: onsite
expenses related to plumbing and venting, and offsite expenses related to main-line extensions,
service costs and meters. Regarding offsite infrastructure costs, on August 9, 2019, Southern
California Gas Company (SoCal Gas) submitted a letter to the City opposing the City’s proposed
local amendments to the California Energy Code. The letter asserts that the data and methods used
in the 2019 Residential Cost Effectiveness Studies is flawed and that the offsite infrastructure costs
used in the residential report are higher than those commonly experienced in SoCal Gas service
territory. In the letter submitted on August 9, 2019, SoCal Gas noted that they expected an average
cost of $4,400 average per “Work Order”.
City staff requested additional information from SoCal Gas, which was provided on August 26,
2019 (Attachment A). In summary, the response from SoCal Gas provides additional detail with
substantially lower offsite residential infrastructure, service, and meter cost estimates. Staff has
not been able to fully examine the figures, as the underlying data was not provided for review.
However, even assuming lower offsite infrastructure costs, as noted on Packet Page 223:
Item 18: Clean Energy Choice Program Page 3
The 2019 Cost-Effectiveness Study: Low-Rise Residential New Construction statewide cost
effectiveness study provides high, low, and typical costs to build all-electric and mixed-fuel
residential units. According to the study, onsite construction costs including increased
rough electrical work, avoidance of costs associated with natural gas plumbing and venting,
and comparable appliances, for a typical 2,400 square foot single-family home would be
$421 cheaper to build than a standard natural gas building and a 780 square foot multi-
family unit would be approximately $221 cheaper to build. When using comparable
appliance comparisons, the range of costs included in the statewide study are consistent
with anecdotal evidence from local builders and electricians.
Staff collected data from a sampling of local builders and electricians related to the average of low
and high onsite incremental costs for all-electric buildings relative to mixed-fuel buildings for
appliances, on-site infrastructure, and additional electrical costs. Although not representative of all
projects built in the City, the supplemental local cost information is well within the high and low
ranges of cost estimates in the 2019 Statewide Cost Effectiveness Study for Low -Rise Residential
New Construction and supports the conclusion that all-electric buildings are cost comparable, and
are typically slightly cheaper to build than the standard mixed-fuel building.
Public Process for Statewide Cost Effectiveness Included SoCal Gas
It is important to note that 2019 Statewide Cost Effectiveness (residential and non -residential)
studies were completed in a public process including public review and involv ing all Investor
Owned Utilities (also known as IOU’s, which included San Diego Gas and Electric, PG&E, SoCal
Gas, and Southern California Edison) with support from consultants. In a response to staff’s
request for more information about the report develop ment process, the consultants that completed
the reports in partnership with the statewide utilities submitted a letter to the City confirming that
each Investor Owned Utility participated and had the opportunity to comment on the final reports
(Attachment B). Key takeaways from the report include:
• As part of the Statewide Codes & Standards Reach Codes Team, the IOUs [e.g, PG&E,
SCE, SoCal Gas, SGG&E], LADWP and other key stakeholders were provided
opportunities to review the report during its development, including the final report before
it was made public. The issues identified in SoCalGas’ letter were not raised in review
comments received by the study authors.
• In the process of developing the study, the authors requested gas infrastructure costs from
SoCalGas. SoCalGas staff replied that the costs are project dependent and provided no
figures.
Public Interest Exemption
As identified on Packet Page 267, proposed new Municipal Code Section 15.50.060 provides a
Public Interest Exemption that allows the authority responsible for entitling or permitting the
project to allow natural gas under certain circumstances, as follows:
15.50.060 Public Interest Exemption.
A. Notwithstanding the requirements of this Chapter and the Council’s Clean Energy Choice
Policy, and other public health and safety hazards associated with natural gas
Item 18: Clean Energy Choice Program Page 4
infrastructure, natural gas may be allowed in a building otherwise subject to the
requirements of this ordinance if the authority responsible for entitling or permitting the
project makes any of the following findings:
1. That current limitations of electric power infrastructure in the vicinity of the project
site make it impossible to serve the project without significant upgrades, such as to
transformers or other distribution equipment, that are outside the scope of the
proposed project and would render it economically infeasible.
2. The proposed project would result in a de minimis use of natural gas that could be
offset in other ways, such as through a sequestration project or other proposal
directly tied to the development project.
3. Consistent with the purpose and intent of these regulations, the authority granting
approval to a project may permit the use of natural gas without requiring compliance
with the offset requirement if it is determined to be necessary to serve public health,
safety and welfare.
As currently presented in the Council Agenda Report, that exemption would only be applicable to
the carbon offset requirement. Staff recommends that the exemption also apply to the building
reach code so that the entitling or permitting authority would have flexibility to exempt projects in
certain circumstances from the reach code in addition to the carbon offset requirement. The
following edits to new Municipal Code Section 15.04.110 (Packet Page 225) are proposed to
accomplish this:
A. Adoption of Codes and Applicability.
1. The City of San Luis Obispo hereby adopts the 2019 California Code of
Regulations, Title 24, Part 6 (California Energy Code) with local amendments. The
provisions of such are hereby referred to, adopted, and made a part hereof as if
fully set out in this Chapter except as modified hereinafter. These regulations will
be known as the City of San Luis Obispo Energy Reach Code.
2. The effective date of this ordinance shall be January 1, 2020 and is applicable
to new construction buildings including those that are built after a demolition. The
amendments contained in 15.04.110 do not apply to Additions, Alterations, or
Attached Accessory Dwelling Units. Residential subdivisions in process of
permitting or constructing initial public improvements for any phase of a final map
recorded prior to January 1, 2020 are exempt, unless compliance is required by an
existing Development Agreement. Additional exemptions and exceptions are
identified below.
3. If a Public Interest Exemption is granted un der Municipal Code Section
15.50.060, the entity making the decision shall also determine if that exemption
applies to the provisions in 15.04.110.
If you have any questions, please contact Chris Read at cread@slocity.org.
1
Read, Chris
To:Caldwell, Alan K
Cc:Tomkins, Sharon; Duran, Marisela; Codron, Michael
Subject:RE: Response to Your Data Request
From: Caldwell, Alan K
Sent: Monday, August 26, 2019 4:36 PM
To: Read, Chris <cread@slocity.org>
Cc: Tomkins, Sharon ; Duran, Marisela ; Codron, Michael
<mcodron@slocity.org>
Subject: RE: Response to Your Data Request
Hi Chris, hope you had a good weekend. As a follow-up to your email, below are responses to the information you
requested:
Direct cost refers to the total company cost for work requisition order. It does not include any allowances
referenced under Rule 20.
Work requisitions can consist of a single service or multiple services per site. The $4,400 cost estimate averaged
work requisitions that were both single service and multiple service.
The work requisitions estimate we provided ($4,400) included main line and lateral services, but not meter.
The $4,400 cost estimate was a 3-year average for orders from 2017-2019 to date.
Please note, the $4,400 cost provided was a conservative estimate across our entire service territory. To provide you
with a cost estimate specific to our San Luis Obispo service territory, please find this data below. This data will be more
accurate for your analysis. Note, these cost estimates (distinguished between single family and multi-family, as
requested), include meter costs in addition to the other services and are average costs for projects between 2017-2019.
Single Family Construction
Total # of
Dwelling Units
Sum of
Contract Cost
Sum of Allowance
Applied
Sum of
Net Cost
Avg Contract
Cost per Unit*
Avg of Net Cost to Builder
per Dwelling Unit (pre tax)**
1045 $ 1,422,566 $ 880,964 $ 515,590 $ 1,361.31 $ 493.39
* Determined by dividing the total contract costs by total number of dwelling units
** Determined by dividing the total net costs (contract costs minus allowances) by total number of dwelling units
Multi-Family Construction (service + meter)
Total
Projects
Total Dwelling
Units
Total Contract
Costs
Total
Allowances
Total Net
Costs
Avg. Cost Per
Project*
Average cost
per unit**
13 158 $87,421 $83,941 $3,088 $6,724.71 $553.30
Avg. Net Cost to
Builder per
Project***
Avg. Net Cost to
Builder per
Dwelling Unit****
$237.51 $19.54
*Determined by dividing total contract costs by total projects
**Determined by dividing total contract costs by total dwelling units
*** Determined by dividing total net costs by total projects
****Determined by dividing total net costs by total dwelling units
Attachment A - SoCal Gas Data Email
2
Multi-Family Construction (main + service + meter)
Total
Projects
Total Dwelling
Units
Total Contract
Costs
Total
Allowances
Total Net
Costs
Avg. Cost Per
Project*
Average cost
per unit**
7 1599 $227,836 $196,572 $24,285 $32,547.94 $1,432.93
Avg. Net Cost to
Builder per
Project***
Avg. Net Cost to
Builder per
Dwelling Unit****
$3,469.29 $152.74
*Determined by dividing total contract costs by total projects
**Determined by dividing total contract costs by total dwelling units
*** Determined by dividing total net costs by total projects
****Determined by dividing total net costs by total dwelling units
August 29, 2019
Chris Read
Sustainability Manager
Office of Sustainability
City of San Luis Obispo
900 Palm Street
San Luis Obispo, CA 93401
Subject: Response to the Request for Information on the 2019 Residential New Construction Cost-
effectiveness Study Process and to SoCalGas’ August 9th, 2019 Letter
Dear Mr. Read:
Background:
Local jurisdictions have the authority to adopt amendments to the California Building Code (Title 24) to
meet local geologic, topographic or environmental conditions. The amendments, if codified as building
code ordinances, must meet certain requirements as established by the CA Building Standards
Commission (CBSC).
Local ordinances (reach codes) that amend the Energy Code (Part 6 of the California Building Code), must
meet two additional requirements: the standards must be cost-effective and must result in a reduction in
energy use. Cost-effectiveness is typically demonstrated via documenting the impacts of installing a
package of non-preempted measures that yields greater economic benefits over time than the cost of the
investment relative to a code-compliant home.
As the analysis can be resource intensive and complex, the Statewide Codes & Standards Program often
completes the analysis on behalf of local government partners. PG&E, SCE, SDG&E, SoCalGas, and to
some extent LADWP, participate in the subprogram as a Statewide Team, although it is classified as a local
program. In Fall 2018, approximately 30 local jurisdictions submitted a request to the Statewide Team
requesting analysis of the cost-effectiveness of exceeding the new 2019 code for both residential and
nonresidential new construction. Given the high level of interest in the analyses, in addition to regular
internal team meetings, the Reach Codes Team established an informal technical advisory team including
utility and local jurisdiction staff, the California Energy Commission, and other interested stakeholders,
who met periodically throughout the analysis development. The Reach Codes team released drafts of the
reports based on research versions of the California Energy Commission compliance software in March
2019 and received comments from several stakeholders, which were incorporated into the final reports.
The California Energy Commission does not require that local jurisdictions follow a precise method of
determining cost effectiveness. Rather, determining the cost-effectiveness of a proposed ordinance
requirement is the authority of the local jurisdiction. Cost-effectiveness results of the 2019 residential
Attachment B - Statewide Cost Effectiveness Study Letter
2
new construction study completed this year are provided in two formats: the “On-Bill” and TDV 1
perspective. The TDV method is used by the California Energy Commission for Title 24, Part 6 code
development, and the On-Bill perspective was included to provide valuable information for cities
considering a reach code as to how the requirements may directly impact residents.
Specific Responses to SoCalGas’ August 9th, 2019 Letter:
• General
o SoCalGas states that the reach code report “concludes that all-electric building models for
both residential and non-residential new construction to be the most cost-effective and
energy efficient building options”. This conclusion is not made in the report.
o As part of the Statewide Codes & Standards Reach Codes Team, the IOUs, LADWP and other
key stakeholders were provided opportunities to review the report during its development,
including the final report before it was made public. The issues identified in SoCalGas’ letter
were not raised in review comments received by the study authors.
• Comment 1: Development infrastructure costs for SoCalGas are overestimated
o It is not clear from the letter whether SoCalGas’ stated $4,400 cost is before or after
applying Utility Gas Main Extensions rule (SoCalGas Rule 15 and PG&E Rule 20) allowances.
CPUC Rule 15 / 20 allows a developer the option to only pay 50% of the total cost for a main
extension after subtraction of allowances for installation of gas appliances. This option
eliminates the uncertainty of potential cost refunds resulting from future new connections.
The $11,836 cited from the study represents the estimated incremental cost of site gas
infrastructure before applying CPUC Rule 15 / 20. After applying CPUC Rule 15 / 20 the cost
in the study is $5,750. In calculating cost effectiveness using the TDV perspective CPUC Rule
15 / 20 was not applied, as this cost better represents the total value. CPUC Rule 15 / 20 was
applied when calculating cost effectiveness using the On-Bill perspective. 2
o In the process of developing the study, the authors requested gas infrastructure costs from
SoCalGas. SoCalGas staff replied that the costs are project dependent and provided no
figures. The cost savings in the published report is estimated at $11,836 (before CPUC Rule
15 / 20 is applied). These savings can be reduced to $9,128 while keeping the TDV B/C ratio
above 1.0 for Climate Zone 5. At $9,128, all climate zones in SoCalGas territory have a TDV
B/C ratio above 1.0. The analysis can be updated in the future using more precise local gas
infrastructure costs if reliable data is provided and the project sponsors approve of the
additional analysis.
1 Time Dependent Valuation (TDV) Methodology: TDV is a normalized monetary format developed and used by the
Energy Commission for comparing electricity and natural gas savings, and it considers the cost of electricity and
natural gas consumed during different times of the day and year. The 2019 TDV values are based on long term
discounted costs of 30 years for all residential measures. The CBECC-Res simulation software outputs are in
terms of TDV kBTUs. The present value of the energy cost savings in dollars is calculated by multiplying the TDV
kBTU savings by a net present value (NPV) factor, also developed by the Energy Commission. The NPV factor is
$0.173/TDV kBtu for residential buildings.
2 See Table 6, Table 6: Incremental Costs – All-Electric Code Compliant Home Compared to a Mixed Fuel Code Compliant
Home, “2019 Cost-effectiveness Study: Low-Rise Residential New Construction”
3
• Comment 2: Analysis relies on deeply flawed E3 Deep Decarbonization Study for exacerbated
utility rate projections
o SoCalGas identifies the incorrect E3 study, referring to the Deep Decarbonization Study
funded by the CEC. The E3 study used for this cost-effectiveness analysis was the
Residential Building Electrification in CA study, funded by SCE, LADWP, and SMUD – not the
Building Decarbonization Coalition as was stated by SoCalGas.
o SoCalGas indicates that the residential gas rate used in the analysis is a seasonal winter rate
reflecting peak rates and it is inappropriate to assume they are constant over the year.
SoCalGas was asked to provide rate details for use in the study. In response to the request,
SoCalGas provided a link to the GR tariff, effective in January 2019. The Statewide Team
subsequently requested 12 months of historical rates from SoCalGas to apply rates on a
monthly basis (i.e. Jan 2019 for Jan and July 2018 for July). SoCalGas did not reply to this
request, thus the January 2019 rates were applied in the analysis for each month.
To investigate the impact of this decision, analysis was done using both the January and
August 2019 rates. The SoCalGas GR rates for August 2019 are ~10% lower than the January
2019 rates. Assuming that the January costs reflect the peak and August the low, a 5%
reduction in annual cost was assumed. The reduction did not significantly impact the results
and it was found that all packages that were previously cost-effective remained cost
effective. Again, the analysis can be updated in the future using more precise rate
information if the Statewide Team sponsors approve.
• Comment 3: Analysis of Time Dependent Valuation values do not reflect societal and
environmental benefits of renewable natural gas or the societal and environmental impacts of
electric infrastructure
o TDV is a foundational element of Title 24, Part 6. The Statewide Team applied the same TDV
approach to cost effectiveness as used by the California Energy Commission for Title 24 code
development. Commentary on TDV reform should be directed to the California Energy
Commission.
Frontier Energy and Misti Bruceri & Associates are pleased to offer this response to your request for more
information on how the cost effectiveness study was prepared and SoCalGas’ comments on the SLO local
amendments to the 2019 California statewide building code. We would appreciate the opportunity to
update the analysis with local gas infrastructure costs and more precise natural gas rate information with
the support and agreement of the of the utility sponsor team in the future.
Sincerely,
Bill Dakin
Director, Engineering – Frontier Energy
Misti Bruceri
Misti Bruceri & Associates