Committee backs $1.44 million first-year launch of Palo Alto whole‑home electrification program with Franklin Energy contract

The City of Palo Alto Climate and Sustainability Committee on March 21 recommended that the City Council approve a three‑year professional services contract with Franklin Energy to operate a full‑service whole‑home electrification program for single‑family homes and authorized the first‑year budget required under the contract.

Christine Tam, Senior Resource Planner, presented the proposal and said the multi-phase program builds on existing local pilots to expand turnkey services — including customer intake, home assessments, contractor coordination, and on‑invoice rebates — for homeowners who wish to replace gas appliances with electric heat pumps and related upgrades. Tam said the city launched a phase‑1 rebate hub in January and has completed dozens of rebate reservations in a short span; phase 2 would add the full-service delivery model run by Franklin Energy and subcontractors.

Under staff’s recommendation, the contract would be a three‑year agreement with a not‑to‑exceed value of $7,000,000; the committee was asked to authorize the first‑year budget of $1,440,000 because some existing program money covers a portion of year‑one costs. Staff described the $7M ceiling as including setup and operating costs plus pass‑through rebate funding that will be paid on contractors’ invoices; the operating/concilierge portion of the first‑year budget is substantially smaller than the contract ceiling.

Tam said Franklin was chosen by regional clean-energy agencies (Peninsula Clean Energy and Silicon Valley Clean Energy) through a prior procurement and currently provides similar services for those agencies. Staff told the committee the city expects the full‑service program to support roughly 150 homes per year under the base scenario and that the program is sized to learn about homeowner decision-making, contractor capacity, permitting and grid‑upgrade needs, and market transformation ahead of state regulatory timelines.

Committee members asked about timing, customer out‑of‑pocket costs, and how the program will interact with the Bay Area Air District’s upcoming water‑heater and space‑heater rules. Staff said they plan to bring the Franklin contract to Council in April and to begin program startup immediately; the aim is to launch customer‑facing services in early 2026. Staff noted that the Air District water‑heater requirement takes effect in 2027 and space‑heater requirements in 2029 and that the city’s program could be used to accelerate adoption and prepare the contractor and permitting ecosystem.

The committee discussed alternatives including a rebate‑only approach (lower cost but offering less learning and fewer customer conversions), smaller-scale pilots, and optional low‑income components. Staff said the Franklin contract contains an optional low‑income program element and that the city’s existing low‑income contractor is a possible backup; the optional portion will be subject to appropriation and activation if needed.

Tam and other staff emphasized outreach and marketing plans, and said the city is negotiating a separate outside marketing/outreach contract to support enrollment. Public commenters urged broader outreach and faster deployment to prepare for the air‑district regulatory deadlines.

The committee motion to recommend Council approval and to authorize the first‑year budget passed unanimously. Staff will return to Council with contract documents and recommended appropriation language; subsequent years of the contract are subject to annual appropriation and to program refinements based on early results.

Context: staff framed the Franklin contract as the next step in Palo Alto’s building‑sector SCAP work plan: move from pilots to advanced programs that provide turnkey services, build contractor capacity, and produce data to inform broader scale‑up and future budgeting decisions.