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Home My WebLink AboutCouncil Agenda - 2023-12-11 S1 KiTc�ivER Special Council Meeting Agenda Monday, December 11, 2023, 4:30 p.m. Council Chambers - Hybrid City of Kitchener 200 King Street W, Kitchener, ON N2G 4G7 People interested in participating in this meeting can register online using the delegation registration form at www.kitchener.ca/delegation or via email at delegation(a)kitchener.ca. Please refer to the delegation section on the agenda below for registration in-person and electronic participation deadlines. Written comments received will be circulated prior to the meeting and will form part of the public record. The meeting live -stream and archived videos are available at www.kitchener.ca/watchnow *Accessible formats and communication supports are available upon request. If you require assistance to take part in a city meeting or event, please call 519-741-2345 or TTY 1-866-969-9994.* Pages 1. Commencement This meeting will begin directly following the Audit Committee meeting at approximately 4:00 p.m. The meeting will begin with a Land Acknowledgement given by the Mayor. 2. Disclosure of Pecuniary Interest and the General Nature Thereof Members of Council and members of the City's local boards/committees are required to file a written statement when they have a conflict of interest. If a conflict is declared, please visit www. kitchener. ca/conflict to submit your written form. 3. Delegations Pursuant to Council's Procedural By-law, delegations are permitted to address the Committee for a maximum of five (5) minutes. All Delegations where possible are encouraged to register prior to the start of the meeting. For Delegates who are attending in-person, registration is permitted up to the start of the meeting. Delegates who are interested in attending virtually must register by 2:30 p.m. on December 11, 2023, in order to participate electronically. 4. Staff Reports 4.1 Phase 1 Report and Guiding Principles -Kitchener Utilities (KU) 3 Transition Strategy, INS -2023508 (Staff will provide a 5 -minute presentation on this matter.) 5. Mayoral Business and Updates - Mayor B. Vrbanovic 6. In -camera Meeting Authorization Note: Any member of Council may question the appropriateness of a listed in - camera item. This may be done during the special Council meeting or at the beginning of the in -camera session. Council is asked to enact the following resolution to authorize an in -camera meeting: "That an in -camera meeting of City Council be held immediately following the special council meeting this date two matters related to land acquistion and/or disposition and one matter related to a position, plan, procedure, criteria, or instruction to be applied to negotiations as authorized by Sections 239 (c) and (k) of the Municipal Act, 2001, respectively." 6.1 Affordable Housing Strategy - Land Acquistion 25 m (Land Acquistion Section 239 (2) (c), DSD - 2023 -550 Staff will provide information and seek direction on this matter. 6.2 Recreational Facility Development (Section 45 m 239 (2) (k)), CSD -2023-534 Staff will provide information and seek direction on this matter. 7. Adjournment Page 2 of 55 Staff Report r NJ :R Infrastructure Services Department www.kitchener.ca REPORT TO: Special Council DATE OF MEETING: December 11, 2023 SUBMITTED BY: Greg St. Louis, Director Gas & Water Utilities, 519-741-2600 ext. 4538 PREPARED BY: Kate Daley, Senior Strategist, Carbon and Energy Planning, 519-741- 2200 ext. 4246 WARD(S) INVOLVED: All DATE OF REPORT: November 10, 2023 REPORT NO.: INS -2023-508 SUBJECT: Phase 1 report and guiding principles for the Kitchener Utilities Clean Energy Transition Strategy RECOMMENDATION: That Council endorse the guiding principles for the project, as outlined in Table 2 of report INS -2023-508. REPORT HIGHLIGHTS: • The purpose of this report is to conclude Phase 1 of the KU Clean Energy Transition Strategy project, and to seek Council endorsement of the guiding principles identified in Table 2. • The key finding of this report is that extensive engagement has led to a set of guiding principles for the project. The guiding principles are: [1 ] Make responsible, accountable, and financially rewarding business decisions; [2] Serve customers as an affordable and reliable partner in the energy transition; [3] Contribute to a thriving community; and [4] Plan for multiple energy futures with flexibility and focus. Each guiding principle is accompanied by a stated intention and three more specific objectives. These principles will form the foundation of future project phases. • There are no financial implications for the Operating Budget or Capital Budget of the recommendations. • Community engagement included extensive consultation with customers, community members, stakeholders, Kitchener committees, staff, and councillors, through workshops, an online survey, meetings, and drop-in sessions, as outlined in Attachment A. • This report supports Cultivating a green city together by developing a clean energy transition strategy. BACKGROUND: Kitchener Utilities' natural gas delivery business needs to evolve, both to respond to ongoing changes in the global, national, provincial, and local energy context as the clean energy transition continues, and to align with the City's and the community's climate change commitments. As part of its endorsement of the TransformWR community climate action *** This information is available in accessible formats upon request. *** Please call 519-741-2345 or TTY 1-866-969-9994 for assistance. Page 3 of 55 strategy, Council devoted staffing resources toward developing a strategy to guide Kitchener Utilities through the energy transition. The phases of the Kitchener Utilities Clean Energy Transition Strategy Project were endorsed by Council on May 15, 2023 (INS -2023-199), as outlined in Table 1. Table 1: Project Phases Project Timing Focus on... Achieved With key outputs of... Phase through... Phase 1 2023 building relational - Engagement summary results relationships engagement with - Discussion paper framing results and Council, staff, and next steps understanding stakeholders, - Preliminary option evaluation around values, community framework for Phase 2 goals, and members, and - Progress report to Council scope of the customers strategy Phase 2 2024 determining the detailed, - Public report assessing the full way forward collaborative option range of options and identifying a together assessment and recommended approach recommendation of concurrently an approach - Summary of Phase 2 engagement results - Report to Council recommending an approach and next steps, including 2025 budget needs Phase 3 2025 building developing a - Phased long-term implementation consensus on phased long-term strategy to 2050, including outlining the implementation phases of work to 2050, and key implementation strategy to 2050 metrics and approaches to plan to 2030 and a detailed first adjusting and course corrections phase - Detailed first phase implementation implementation plan with details to 2030 plan to 2030 REPORT: This report concludes Phase 1 of the Kitchener Utilities Clean Energy Transition Strategy project. Since relational engagement has been the primary focus of this phase, staff conducted extensive engagement with customers, community members, stakeholders, Kitchener committees, staff, and councillors. Engagement tools were focused on real-time workshops, an online survey, meetings, and drop-in sessions, as summarized in the section below and as outlined in detail in Attachment A. Page 4 of 55 Based on this engagement, as well as a high-level environmental scan, the Project Team has developed and refined the following guiding principles, which are each accompanied by an overarching intention and three more specific objectives. Table 1: Guiding Principles As we evolve our energy business to continue to be financially successful and provide valued services throughout the energy transition, we will... Guiding Principles Our intention Objectives 1: Make responsible, "We will work to responsibly 1.1: Follow sound business practices accountable, and position our community- 1.2: Take action quickly to manage risk and financially rewarding owned business for success maximize opportunity business decisions as things change around us." 1.3: Assess value holistically to find our best contribution 2: Serve customers "We will work to empower 2.1: Pursue affordable, reliable, and as an affordable and customers and community predictable energy services reliable partner in the members as their trusted 2.2: Empower customers with choice and energy transition partner in the energy with trustworthy, accessible information transition.' 2.3: Bring people along as things change 3: Contribute to a "We will work to make our 3.1: Collaborate with partners thriving community community even stronger." 3.2: Do our part to address climate change 3.3: Use clear metrics and align them with community -scale goals 4. Plan for multiple "We will work to prioritize 4.1: Rely on safe bet technologies and energy futures with solutions that can adapt to prepare for long shot technologies flexibility and focus and provide value in all 4.2: Prepare for a broad range of net -zero energy futures." carbon futures 4.3: Iterate, experiment, and learn These guiding principles will form the foundation of future phases of the project and guide the evaluation of specific business options in Phase 2. The principles are discussed in detail, along with a high-level environmental scan, in Attachment B. STRATEGIC PLAN ALIGNMENT: This report supports Cultivating a green city together by developing a clean energy transition strategy. FINANCIAL IMPLICATIONS: The recommendation has no impact on the Capital Budget or Operating Budget. COMMUNITY ENGAGEMENT: This report has been posted to the City's website with the agenda in advance of the council / committee meeting. This report, and all of its appendices, have been shared on the Engage Kitchener page for the project, which can be found at engagewr.ca/KUtransition. Page 5 of 55 Extensive consultation has taken place with customers, community members, stakeholders, Kitchener committees, staff, and councillors during Phase 1 of the project. Public engagement included workshops with self-selected participants, and workshops with participants who were recruited to be demographically representative, as well as a public drop-in session and an online survey hosted on the Engage Kitchener platform. Engagement was also conducted through meetings, workshops, or drop-in sessions with stakeholders, Kitchener committees, staff, and councillors. The key themes that were identified within engagement discussions were: • Cost and affordability • Reliability • Change • Kitchener Utilities as a business • Information, education, and awareness • Trust and responsibility These themes, and the engagement activities within which they emerged, are reviewed in detail in Attachment A. PREVIOUS REPORTS/AUTHORITIES: • INS -2023-199 Kitchener Utilities Clean Energy Transition Strategy Update • DSD -2021-94 Community Climate Action Plan — TransformWR Strategy APPROVED BY: Denise McGoldrick, GM Infrastructure Services ATTACHMENTS: Attachment A — What we heard: Phase 1 engagement summary for the Kitchener Utilities Clean Energy Transition Strategy project Attachment B — Guiding principles: Phase 1 discussion paper for the Kitchener Utilities Clean Energy Transition Strategy project Page 6 of 55 Clean Energy Transition Strategy W, What we heard: Phase 1 engagement summary for the Kitchener Utilities Clean Energy Transition Strategy project November 2023 Page 7 of 55 Clean Energy Transition Strategy Acknowledgements This engagement summary was created by the KU Clean Energy Transition Strategy Project Team and the project's public engagement consultant, under the guidance of the project's Advisory Team. Project Team members are subject matter experts providing critical support to advance this project. Members of the Project Team are: • Greg St. Louis, Director, Gas and Water Utilities • Khaled Abu-Eseifan, Manager, Gas Supply and Engineering • Adam Hustwitt, Manager, Business Development and Customer Experience • Tammy Gerber, Marketing Strategist • Michele Kamphuis, Business Development and Conservation Strategist • Ruth -Anne Goetz, Budget Analyst • Anna Marie Cipriani, Corporate Sustainability Officer, Development Services • Kate Daley, Senior Strategist Carbon and Energy Planning (project manager) Advisory Team members represent key City departments and provide feedback and advice at key milestones of the project. Members of the Advisory Team are: • Denise McGoldrick, GM Infrastructure Services • Justin Readman, GM Development Services • Jonathan Lautenbach, CFO & GM Financial Services The public engagement consultant has provided considerable expertise and support for Phase 1 of the project. The consultant is Patrick Boot of VCT Group, with graphic design support provided by other members of the VCT Group team. The Project Team, Advisory Team, and consultants would like to thank staff, customers, residents, stakeholders, partner organizations, committee members, and councillors for their thoughtful engagement throughout Phase 1 of the project. The insights in this paper and the Guiding principles document are built on their diverse perspectives. What we heard: Phase 1 engagement summary p. 2 Page 8 of 55 PM Glean Energy Transition strategy T Contents Acknowledgements................................................................................................................................... 2 Introduction..................................................................................................................................................5 Section 1: Engagement details and profiles..................................................................................................5 PublicWorkshops......................................................................................................................................5 RecruitedWorkshops............................................................................................................................6 Self -Selected Workshops...................................................................................................................... 6 PublicDrop -In Session..............................................................................................................................7 PublicOnline Survey.................................................................................................................................7 Stakeholder engagement workshop.........................................................................................................7 Kitchener committee engagement...........................................................................................................8 StaffEngagement......................................................................................................................................8 Councillorengagement.............................................................................................................................9 Section 2: Engagement results by theme.....................................................................................................9 Theme 1: Cost and affordability................................................................................................................9 Oncustomer costs................................................................................................................................9 On personal benefit and future generations......................................................................................10 Onequity and affordability.................................................................................................................11 Theme2: Reliability................................................................................................................................12 On consistent energy supply...............................................................................................................12 On reliability of the energy system.....................................................................................................12 On reliability of service for individuals................................................................................................12 On reliable utility providers................................................................................................................13 Theme3: Change....................................................................................................................................13 On financial costs of change...............................................................................................................13 On complexity and cognitive costs of change.....................................................................................13 Onthe pace of change........................................................................................................................14 On the changing role of natural gas....................................................................................................15 On reconciling things that seem to be at odds...................................................................................16 Onmindset..........................................................................................................................................16 Onbuy-in.............................................................................................................................................16 Onstaff................................................................................................................................................17 What we heard: Phase 1 engagement summary p. 3 Page 9 of 55 1 )�' Clean Energy Transition Strategy .,, Theme 4: Kitchener Utilities as a business..............................................................................................17 Onthe risks of not changing...............................................................................................................17 Onleadership......................................................................................................................................18 On assets and infrastructure...............................................................................................................18 Onpartnerships..................................................................................................................................19 Theme 5: Information, education, and awareness.................................................................................19 On trusted and timely information.....................................................................................................19 Ondivisiveness....................................................................................................................................20 On accessible information..................................................................................................................20 On accurate technical information..................................................................................................... 21 Theme 6: Trust and responsibility..........................................................................................................22 Communitytrust.................................................................................................................................22 Staff responsibility for community trust.............................................................................................22 Policyresponsibility............................................................................................................................23 Conclusion................................................................................................................................................... 23 What we heard: Phase 1 engagement summary p. 4 Page 10 of 55 1p Clean Energy T ransitian Strategy Introduction This document summarizes what we heard during Phase 1 of the Kitchener Utilities Clean Energy Transition Strategy project. In this first phase of the strategy project, in 2023, we have focused on engagement and building relationships and understanding around values, goals, and scope of the strategy. This part of the process has been about inviting everyone into a problem -solving conversation with us. As outlined in detail in Section 1, our engagement has taken place through a number of formats, in order to include and accommodate a broad range of voices. Specifically, we have facilitated: • demographically representative recruited public and customer workshops; • self-selected public and customer workshops; • a public drop-in session; • a public online survey; • a stakeholder workshop; • agenda items at Kitchener committees; • staff engagement through meetings and drop-in sessions, and; • councillor engagement meetings. With the support of the Phase 1 public engagement consultant, we have identified six main themes that encompass what we heard in Phase 1. These themes are based on what arose in the discussions, rather than using a pre -identified list of categories, and are outlined in Section 2 of the document. We have also identified and included illustrative comments from the public engagement under each theme, to give a flavour of the varied conversations and ideas that arose across different groups. This document is a companion to the document Guiding Principles: Phase 1 discussion paper for the Kitchener Utilities Clean Energy Transition Strategy prosect. What we have heard in Phase 1 engagement has been critical to the development of those guiding principles for the project. We are grateful for thoughtfulness of engagement across all groups that were consulted. In Phase 2 of the project, scheduled for 2024, we will be identifying and evaluating specific options for our business. We look forward to continuing to engage with customers, community members, stakeholders, Kitchener committees, staff, and councillors through future phases. Section 1: Engagement details and profiles We used a diversity of engagement mechanisms, in order to include and accommodate a broad range of voices. These mechanisms are outlined in this section. Public Workshops Four public workshops were held. All of them included a presentation by the engagement consultant of some contextual information, followed by group -based discussion. Participants were asked about their concerns about the clean energy transition, opportunities connected to the transition, and about their broader perspective as discussion developed. What we heard: Phase 1 engagement summary p. 5 Page 11 of 55 Clean Energy I rransition Strategy To begin and end each session, participants were encouraged to capture their thoughts on a worksheet, and both physical and digital options were available. In order to allow for fulsome discussion and participation, each session was limited to a maximum of 15 participants, and the sessions lasted approximately 1.5 hours. Different formats and recruitment approaches led to different profiles of each discussion. Recruited Workshops Two sessions were recruited by a research consultant agency to be a demographically representative mix of Kitchener Utilities customers, as would be done for a more traditional focus group. Recruited workshops were held: • September 19, 2023 — 5:30-7:OOpm (in person - 15 participants) • September 19, 2023 — 7:30-9:OOpm (in person - 14 participants) Participants represented a range of ages and neighbourhoods, and there was a mix of home owners and renters. The two recruited sessions were both visually and socio -economically diverse. In the first session, everyone spoke at least once, and about half of participants engaged consistently. In the second session, there were 4 or 5 participants who quietly took in the information while others participated. Self -Selected Workshops The other two workshops were comprised of people who decided to attend the workshop after hearing about it on Engage Kitchener or through print or online advertising. One was held in-person, and another was held online, to allow for people to choose the option that was most accessible to them. Self-selected workshops were held: • September 21, 2023 — 7:00-8:30pm (in person - 10 participants) • September 26, 2023 — 7:00-8:30pm (online - 9 participants) Demographics were less diverse in the self-selected sessions than they were in the recruited sessions. While a demographic survey was not administered, it appeared the majority of participants in the in- person session were male -identified, and appeared to be older, on average, than in the recruited sessions. This group seemed more informed and knowledgeable than recruited participants, and were looking for action. Participants routinely referenced professional or academic experience, which was overlayed onto individual personal experiences and perspectives. Everyone spoke at least once, and six or so participants did most of the speaking. While gender appeared to be more evenly mixed in the online session, a few participants shared and turned their cameras on when speaking, and a few remained muted with screens off throughout. This group also seemed to possess more subject matter knowledge than recruited participants, though participation seemed to come from a place of "me as a resident." What we heard: Phase 1 engagement summary p. 6 Page 12 of 55 1p Clean Energy T ransitian Strategy Public Drop-In Session As a more informal in-person engagement opportunity, a drop-in session was held on September 28, 2023 from 3:30 to 6:30 pm at the Downtown Community Centre. This session was advertised on the Engage Kitchener platform, as well as through Kitchener Utilities bill inserts and a newspaper ad. Contextual information was displayed on the walls for attendees to review. During the session, participants were encouraged to capture their thoughts on a worksheet package, for which physical and digital options were available. Guests engaged with staff and the consultant on a one-to-one basis. We heard from those living in both detached homes and condos. While attendance numbers were low, totaling about 5 attendees, those who did attend had in-depth discussions with the consultant and members of the project team, and their engagement level was generally high. Public Online Survey A public survey was live and open for responses from August 15 to October 1, 2023 on the Engage Kitchener platform. Links to the survey were promoted through the City of Kitchener's social media accounts, and responses were open to registrants and non -registrants of the Engage platform. In total, 255 responses were received. Most responses (219 in total, or 85.9% of responses) were from people who identified themselves as Kitchener Utilities customers. The following supporting text was provided to frame the survey to possible participants: "We want to know what you believe is important to consider when thinking about the future of energy. The comments you share as part of this survey will be considered as part of the feedback from a range of online and in-person conversations happening throughout Phase 1 of the Kitchener Utilities Clean Energy Transition Strategy work. Should you choose to take part in this survey, you have the option of doing so anonymously." The tone of the online survey differed from the real-time workshop sessions. In some instances, the tone of the responses in this online, anonymous engagement format enabled more emboldened, aggressive, and abrupt language from a variety of perspectives. Stakeholder engagement workshop A workshop for key stakeholders was held on June 16th, 2023 from 1:00 to 4:00 pm. Throughout the session, participants were encouraged to capture their thoughts on a worksheet package. The session included presentation of contextual information, and focused on table -based group discussion of: risks and opportunities; assets and obstacles, and; relevant vision and values for tackling the clean energy transition. Attendance was limited in an effort to provide opportunities for in-depth discussion. Attendees included representatives from the following organizations: • Aire One Heating and Cooling KW • City of Kitchener • Conestoga College What we heard: Phase 1 engagement summary p. 7 Page 13 of 55 11P 1 )�* Clean Energy Tfansition Strategy .., • Enbridge Gas • Enbridge Sustain • Enova • Giant Factories Inc. • Grand River Energy • Kitchener Housing • Kitchener Utilities • Reep Green Solutions • Region of Waterloo • Sustainable Waterloo Region • Waterloo Region District School Board • Waterloo Region Home Builders • WR Community Energy Kitchener committee engagement We attended a number of meetings with the diverse and thoughtful advisory committees within the City. We delivered a brief presentation in advance of discussion. Specific meetings were: • Climate Change and Environment Advisory Committee (June 2023) • Economic Development Advisory Committee (June 2023) • Homebuilders Liaison Committee (July 2023) • Equity and Anti -Racism Advisory Committee (September 2023) Staff Engagement Engagement with Kitchener Utilities staff in the Gas and Water Division during Phase 1 of the project has included: • April2023 o Presentations to each team to introduce the project o Meeting with union representatives • July 2023 o Dedicated meeting with managers • August 2023 o Dedicated meeting with supervisors and managers • September and October 2023 o Discussion with the Director of Gas and Water Service and General Manager of Infrastructure Services for each team o Dedicated meeting of staff representatives from each area o Two informal staff drop-in sessions with the Project Team Since we have been able to attend individual team meetings focused on different roles within Kitchener Utilities, and also provide additional options like the meeting of representatives and drop-in sessions for What we heard: Phase 1 engagement summary p. 8 Page 14 of 55 Clean Energy Transition Strategy those who wished to attend, discussions have been possible with a diverse mix of staff across the Gas and Water Division. An internal repository of information for staff has also been created within the City's internal KHub intranet system. Councillor engagement We brought a report to Council on May 15, 2023. This was an opportunity for councillors to ask preliminary questions of staff regarding the project. We held individual and small -group meetings with councillors over the summer, to provide an additional opportunity to share their insights with staff to inform the development of the Phase 1 deliverables. Section 2: Engagement results by theme This section focuses on themes of the Phase 1 engagement. Since Phase 2, in 2024, will be focused on identifying specific solutions, an exhaustive list of suggested business approaches and options have not been included here, though suggestions made in Phase 1 will be a resource for us in the next phase of work. We expect to conduct further engagement on more specific options as part of Phase 2. In this section, we have included illustrative comments from the public engagement under each theme, where appropriate, to give a flavour of the varied conversations and ideas. These comments should not be interpreted as the full list of comments received, but all comment submitted have been recorded and reviewed, and will be considered as the project moves forward. Theme 1: Cost and affordability On customer costs The most common thing we heard in the engagement was concern that changing where the community gets its energy from will cost a lot, and that customers will bear the brunt of those costs. Across all groups, there was significant concern for the dire financial situations many community members are facing due to current economic conditions, and for any negative financial impacts that this work could have on them. Many people told us they want transparency on these costs, and some community members feel this transparency would be enough to feel included and on board with the change. For staff, a primary concern was the costs to customers of any changes that may be made, particularly with current rates of inflation and the rising cost of living and the strain that these are putting on many. This was connected to the importance that staff place on serving customers and community members. At the same time, stakeholder and committee groups, in particular, also told us that the status quo can also be a challenge for affordability, particularly due to policy and regulation, and changing industry conditions. From the public: o "What about all my gas products? My hot tub, water heater, barbecue! Do we need to buy all new appliances now?" What we heard: Phase 1 engagement summary p. 9 Page 15 of 55 Clean Energy Transition Strategy o "If you want to change a gas car to an EV but it's $90,000... Heat pump is $20,000 ... It is a cost premium. If the cost of transition really reduced the premium to where the heat pump and furnace is the same." o "What can we do to replace natural gas is my anxiety."; "I am nervous about electric because bills keep going up. Doesn't seem like there is a solution." o Would need "a winning lottery ticket" to make a personal clean energy transition. o "Cost, mostly. Every day, it gets harder to maintain a place in the region because of the cost of living. My wife and I were priced out of affording a home several years ago and assumed we'd be renting until we died. Now, we're unclear on how long that will last and it becomes a question of when, not if, we become homeless despite having two full- time jobs." o "As natural gas depletes, how is my bill going to change?"; "Will electric rates go up?"; "Will they raise the rates if almost all go electric?" [implication that electric utilities will increase rates in response to demand increases] o "Our house is currently very gas -reliant. We have gas hot-water radiators, gas stove, and gas fireplaces, gas water heater (Kitchener rental). My biggest concern is definitely the cost of switching over our Veissman boiler to something electric. We'd like that change, but can't afford it." On personal benefit and future generations Even though, cognitively, community members tended to understand the need to do better for the environment and were concerned about recent wildfires and other effects of climate change, many participants largely seemed to think the fruits of a transition to clean energy would be felt by their kids, future generations, or simply not them. They told us that people are interested in change that benefits them personally, and it is more difficult to foot the bill for a change they do not think they will experience. Within the overwhelming collection of all the things one must care about and take care of, there was a perception that embracing and taking action on clean energy will require tools like incentives and reminders. This also resonated with some staff, who told us that financial strain and the costs of change takes priority for customers over any other concerns they might have, such as environmental concerns. Some members of the public also told us that they feel a sense of responsibility to future generations, such as their grandchildren, despite the challenges of making changes. From the public: o "What's in it for me?" o "I embrace things that benefit me, and I reject things that don't." o "It's really hard to even enter the housing market. I want to do the right thing, but I can't afford it." o "Could KU incentivize using less gas? Eg. when your cell phone provider sends you a data use reminder, it changes my behaviour and helps me use less." o Give customers a dividend as a rebate, and it could help customers invest. Or give them a consumer points card or kickbacks. What we heard: Phase 1 engagement summary p. 10 Page 16 of 55 Clean Energy Tfansition Strategy o "With hydro you pay more when you use more, so, do that with gas to penalize those for using excessive gas instead of providing lower rates for larger users." o Responding to the question 'What stood out most about what we talked about', one participant wrote "the participants were mostly thinking about cost to themselves." o "People will not wean off natural gas if its more inexpensive than alternatives." o "Cost, as well as incentive programs. As a renter, I want my landlord to be incentivized to make these updates without me nagging or it being "too expensive" for his rental when I'm the one living in it." o "Why fix something that isn't broken? You'll get people mad, because you'll add more costs on them. We won't be [alive] in the future." o We need a different mentality, "it's not about me, now, but taking care of the next generation"... about our kids' future. On equity and affordability We also heard about considerations beyond financial cost and future benefits for community members. Kitchener committees, in particular, had rich discussions on quality of life considerations related to energy. In particular, we heard that energy equipment and building design are connected to comfort and safety and have mental and emotional costs when threatened, and that this is more of a concern for those whose financial resources are limited. Both community members and stakeholders expressed concerns about the impact the transition will have from an equity lens. Some noted the intersectional nature of this work, particularly as it relates to housing affordability, which reinforced the necessity of continuing to bring people with diverse expertise, perspectives, and considerations to the table. Committees also told us that renters need to be included in the public engagement process, since they form a significant part of the community. Members saw the different needs of those groups, and urged us to consider transition needs for rental properties. More specifically, multiple groups also raised the "split incentive problem," where landlords or homebuilders select and pay for the heating equipment, but renters or homebuyers usually pay the utility bills. This means that renters and homebuyers have more limited control over their current and future energy costs, as they cannot make the decision to benefit from long-term savings in exchange for higher up -front equipment costs. Some staff also told us about complex equity concerns regarding long-term cost implications of decisions made during the strategy development process. They told us it is important to consider possible future increases in the cost of natural gas, as well as the impact of changes on rates over time, and that we need to make sure that rates today are equitable and not disadvantaging future customers in favour of current ones. From the public: o "As those who can disconnect from gas, who will remain? Those who can't afford to pay to transition. This shrinking user base could be left to pay higher prices to finance the transition." What we heard: Phase 1 engagement summary p. 11 Page 17 of 55 Clean Energy Transition Strategy o The first people to switch off gas are the affluent people; and then the people left paying the future higher gas prices with carbon taxes are the lower class whose rates will increase, and who can't afford the investment in transition costs. o "[1 hope KU is considering] How to engage and work with low-income families and how an already high cost of living is affecting so many residents. Looking forward to the strategy development!" o "[My biggest concerns is] That we won't do it quickly enough and that it won't be equitable." Theme 2: Reliability On consistent energy supply Consistent with our longstanding priorities, both customers and staff told us that energy reliability as a central concern. Space heating and water heating, and increasingly space cooling in light of a changing climate, are critical for both comfort and life safety, and we heard that significant interruptions to energy supply are not an acceptable outcome of changes in our systems. On reliability of the energy system From a system reliability perspective, some members of the public and staff expressed concern for whether the electricity grid would be capable of handling the major increase in electricity use resulting from electrification of more of our energy uses. From the public: o "IESO is underestimating demand from EV vehicles. The grid will not be sufficient in the future, so KU could produce power locally." o Sense that infrastructure isn't set up for everyone to have an EV and everything to electrify. That we can have AC or we can have EVs, but not both. o "Alberta's energy regulator issued two grid alerts within less than a week as the province's electricity infrastructure struggles to keep up with heavy demand and low output from renewable energy sources like solar and wind. It is critical that Alberta add more base -load power from natural gas and other sources to our electricity grid to protect the reliability and affordability of power for Albertans. This is a warning for us. Natural Gas is a necessity. We need energy to be reliable and affordable." On reliability of service for individuals From an individual reliability perspective, several groups told us they were concerned about the reliability of electricity, and about the potential for interruptions to electricity service to disrupt their home heating if electric equipment like heat pumps is used. Many staff and some customers told us that they prefer to rely on a range of sources of energy, rather than just on one source like electricity. Many told us they saw value in having natural gas for reliability purposes, or as a backup fuel. Some noted that the cost of retaining natural gas for backup purposes only may be substantial, since the cost of providing the distribution system to those customers cannot be covered through their fuel use. What we heard: Phase 1 engagement summary p. 12 Page 18 of 55 Clean Energy Transition Strategy We also had a few conversations where the possibility of improving reliability were raised. Some told us about the benefits of newer clean energy technologies, such as smart systems and battery storage, for improving energy reliability. Some staff told us that they are currently aware of households whose energy needs are not being well met, such as due to crowding in some rental accommodations, and were concerned about what could be done for them. From the public: o "It has to work better than what you have now." o "I have Generac Generator that uses natural gas, in the event of a power failure. Paid $12,000 for it. My wife has health concerns, so we need reliable power. If there is no natural gas, that is concerning." On reliable utility providers We also heard from stakeholder groups that reliability of utility governance structures is an important aspect of the reliability of energy. This was seen as a priority by homebuilders, in particular, who told us they want a reliable utility provider for any new types of utilities that might serve new neighbourhoods, such as district energy system providers. They felt that that this is a gap that the public sector could fill. Theme 3: Change On financial costs of change Overall, people most often associated change with cost, and had substantive questions about who will be financing the upfront financial costs of the energy transition. They also mentioned structural and considerations that reinforce the status quo and high energy usage, with its associated costs. From the public: o "There's no way it won't cost money." o "Everyone is going through tough financial times right now, give us some time so hopefully it's better economic times. Maybe prices get better, then have plans and ease people into it." o "We are putting too much stock on EV's. We use too much energy at a personal level." o We have big houses and with basements we don't use. Different than in other countries. "Most of us have really big houses and don't use most of them." On complexity and cognitive costs of change We also heard that costs are not just financial, but include the effort required to change behaviour or disrupt western societal perspectives. Across groups, the people we spoke with were at various stages of their change journey on this topic. For many community members, this topic was not top of mind, especially when life seems to have gotten more overwhelming, complex and challenging. For those thinking about it, the scale of this change in our energy systems is challenging. Some found it very difficult to imagine a future as different as the futures we are anticipating. Some told us that the complexity of this topic makes it confusing. For some, a clean energy transition is off their radar of things to consider—especially when life seems to have gotten more overwhelming, complex and challenging. Some suggested that other areas were more deserving of the City's attention. What we heard: Phase 1 engagement summary p. 13 Page 19 of 55 11P 1 )�* Clean Energy Tfansition Strategy .., From the public: o "What is the clean energy transition? o "Everyone's got tough times... affordability and inflation." o "It's hard not to feel like we can't make an impact"; "what's the point, as no one else is working on this"; it's overwhelming. o "I would love to pay X dollars a month including a water heater and solar panel." o "I think it's great [that this work is happening]. It's not something I even really thought about. Global warming always gave [me] huge anxiety so I tried not to think about it." o "How do you expect people to put this as a priority with the increasing cost of energy?"; "Why would people choose this over anything else?"; "How do you get people to make it a priority?" o "How much does the average person know about any of this?"; "I don't have time to learn about all this." o "Do you not have MUCH better things to work on? How about the homeless situation you are ignoring as hard as you can? Obviously y'all have too much time on your hands - or you're too busy thinking of ways to WASTE money doing everything except something that would actually improve the lives of your constituents."" On the pace of change A lot of discussion, particularly with staff, focused on the pace of change. Many people, especially staff, emphasized the gradual nature of these changes. They noted that 2050 is a long time from now, and that the changes we're talking about will happen slowly over decades. Some community members told us that the next generation would address this change. Others were focused on the decision points that arise for making these sorts of shifts, such as when their furnace reaches the end of its life. At the same time, we heard that there are two main reasons for acting quickly. A number of members of the public told us that urgent action was important to avoid the worst impacts of climate change. Many others told us that acting quickly is important for protecting Kitchener Utilities' future business interests. It was noted that the conversation is changing quickly in the gas industry and elsewhere, and that it needs to be clear that planning for these changes in our energy systems is critical for protecting our business. From the public: o "It will take some time to make the transition, so we need to start now so the policies are here for 20 years out." o "It's critical to start with now or it will take decades." o "There is optimism and many great ideas around the table. We need to move fast... Keep an open mind and GO FOR IT!"' o "We are seeing climate change effects now, which we thought may actually happen 20 years out. We have to act NOW, and we have to act fast."; "We're the first generation to see [the effects of climate change] but the last generation to be in a position to do something about it." What we heard: Phase 1 engagement summary p. 14 Page 20 of 55 Clean Energy I rransition Strategy �► o "My biggest concern is all this time you're wasting with consultations and surveys and presentations instead of *actually doing what's needed*. You're a decade or more behind where you should be on transitioning to low -carbon alternatives, and you do not have time to be slow -walking it now. The lack of leadership from municipal leaders is appalling." o "Spending a year to figure it out seems unreasonable, this is not fast enough." o "Go big. Go quick. Focus on what will make the biggest impact (reduced CO2) at lowest cost and adverse social impacts." On the changing role of natural gas One aspect of change that was discussed across groups was the changing role of natural gas in a clean energy transition. This topic seemed to be unsettling for some, particularly in the first recruited customer session. It was perhaps their first time wrestling with the cognitive dissonance that this situation presents, since natural gas is deeply integrated into our ways of life without being overtly obviously present, and it is an energy source that helps us while also causing harm. A few participants expressed concern about the health impacts of natural gas, and more broadly, CO2. Some participants expressed their love of using gas and of the gas -powered products they use. Based on the discussion, the engagement consultant believes this is partially about the sunk cost into these items, also about the cognitive weight of undertaking a switch, and finally about a belief in the superior quality and reliability gas provides. From the public: o "I was raised that natural gas was the cleanest fuel. Now we are hearing otherwise. The industry has hidden information from us for years." o "Immigrants have been raised to cook with gas." o "We are not changing the role of gas; we are eliminating it." o "What are you going to do to replace it [natural gas]?" o "Firstly that it works reliably in all weather, especially in extreme cold, but an important second consideration is the impact it has on my family's health. I hate having to use natural gas because I know we're breathing it and that it will cause respiratory problems, not to mention the climate impact." o "30 years ago, thought gas was the way to go." o "No real plan for cost transition and battery cost and recyclability! Hydro bills will skyrocket! Gas will be cheaper!" o "Leave GAS alone when used for home heating - nothing else compares' o "Reliability and affordability. Natural Gas is reliable and affordable, it is not weather dependent. Natural Gas brings in $$$ to City treasury and helps finance some city obligations. It is wrong and totally irresponsible of City Council to have voted to scrap Natural Gas plants. Wind and solar can NEVER replace reliable caseload like nuclear or Natural Gas." What we heard: Phase 1 engagement summary p. 15 Page 21 of 55 Ip Clean Energy Tfansition Strategy •.�� On reconciling things that seem to be at odds Many members of the public were juggling and reconciling aspects that seemed to be at odds with each other. This was particularly evident in online survey responses to the survey question about what is important to you when you think about heating in your home. From the public, on what is important to them about home heating: o "Efficient, cost saving, on demand when needed." o "That it is efficient, uses less energy, does not pollute and is cost-effective to me." o "Maintaining a comfortable heat level, both day and night, while using the greenest energy source possible and available to us." o "Reliable and affordable. Clean and safe." o "comfort, low emissions, reliability" o "Cost effectiveness. Environmental friendliness. I realize these two things are currently at odds with each other." o "Energy bills, better insulation standards" o "Efficient, lowest cost possible, greenest energy possible while keeping costs low (costs include purchase of furnace/fuel source/maintenance) On mindset We also heard varied discussion about the role of mindset in this kind of change. Stakeholders, in particular, told us that a lot of the success of energy transition work comes down to mindset, and to and how opportunities and risks are framed. Some members of the public stressed the importance of involving youth in this process, because they seem to be quite inspired by environmental sustainability, because they'll be the ones impacted, and also because there's a sense older generations are more resistant to change. From the public: o "You need one generation to die off for change to happen." o "It's my son and his friends who are most energized about changing the future. Capitalize on their energy and knowledge." o "Target young people for the transition with investment payoff." On buy -in Many groups shared their perspectives with us on the importance of public buy -in. Committees, in particular, told us that government mechanisms like building standards are key tools. To enable broader public buy -in, many people across groups told us about the importance of story -telling and examples, as discussed under Theme 4. They also told us that they needed timely support when faced with decisions about their heating and cooling options, and that it is important to foster a sense of self-worth and agency. Staff also discussed barriers to public buy -in, including provincial, national, and international political movements and GHG emissions profiles. At the same time, some noted that we have already seen a few customers making the switch off gas. What we heard: Phase 1 engagement summary p. 16 Page 22 of 55 Clean Energy Transition Strategy On staff We heard a lot of concerns, from staff and for staff, about how these changes will impact the work that our staff members do. This ranged from broad concerns about the potential for job losses, to specific concerns such as the training and trades ticket requirements for work in other related specialties that may become more relevant to our future business offerings. Given concerns about impacts to staff's work, staff consistently expressed the importance of clear communication throughout the strategy development process. It needs to be clear to staff that we are committed to continuing to be a trusted energy provider well into the future, and to bring staff along with us. We heard that staff need to hear this from senior leaders in the organization, and that consistent channels of communication are important throughout the project. Theme 4: Kitchener Utilities as a business On the risks of not changing A number of community members, and other groups, made the connection that if KU doesn't change, the business could decline. There was concern, particularly from community members/customers and stakeholders, that this would have negative effects on the City's finances and create community liability for costs. We heard that we should be agile and focus on opportunities and not just risks while we assess future potential business lines. This flexibility is supported by our unique position as a small community -owned utility. From the public: o "If we assume demand for natural gas is going to decline, 85% of current base is only set to decrease over time. What is the timeline that KU is seeing the drop off? Then we'll have a very small base. Gradual, then plummet to industrial base?" No longer feasible to operate a company. o There will be a point not to even operate as a company that doesn't service anyone. "Do we want to get rid of KU?" o "Kitchener has an incredible opportunity and big problem, because why would they want to put themselves out of business? They need to start selling heat pumps and other products or they'll be out of business." o "The only solution right now is making more hydro. How does KU exist then?" Only making more hydro? Make cleanly?" o KU started with coal gas, so they need to shift, and need to take 'natural' gas out as of 2030. Could rename the company to "Kitchener Energy". o "KU is in a tricky spot with net -zero future. Continuing to do business as usual, we don't have a lot of time to adapt to the extreme weather situation." There's an opportunity for KU to move forward and help the community move towards a net zero future. o There's an opportunity to take advantage of existing business model of renting out appliances. Extend to electrical appliances and switch out to electrical water heaters, and replace gas furnaces with heat pump. Arrange for bulk purchasing of units and make it easier and more convenient for customers. Take similar activities in the gas world and switch it over to electrical appliances and leverage that opportunity. Focus on What we heard: Phase 1 engagement summary p. 17 Page 23 of 55 Clean Energy Tfansition Strategy ease of use and experience for customers who then don't have to go out and do that research. On leadership We heard across groups that many see us as potential leaders in the energy transition. There was considerable discussion of the positive and unique role Kitchener Utilities could play in new energy opportunities. Some community members suggested that they would look to us for guidance about what they should be doing as part of the transition. By -and -large, participants across the sessions seemed encouraged that KU is thinking about this and planning in this way. There was a sense that KU and the City of Kitchener could take a lead, be a model for other cities, and that this could potentially lead to new revenue. From the public: o "I really can't believe they [The City or Kitchener/Kitchener Utilities] are taking all this time and planning to try to help the environment. I think they are a great company and I'm proud to live in Kitchener." o "There really are opportunities here, even outside the carbon reductions." o "I might invest in KU."; "A private corporation for profit—we could invest in that." o "Give customers a dividend as a rebate, and it would help customers invest. Even points or kickbacks would work."; "People need to know their actions are having the positive impact we need." o "Hydro is not here today!" (i.e. no rep from Enova here at the meeting) – "I don't see anyone at the wheel." o "be brave in the face of opposition - climate emergency requires bold action." o "Money is a concern, but I'd pay a few bucks more if it was making a positive impact." o "[1 hope KU is considering] something that is useful and would not require constant change—a longterm solution." o "The biggest opportunity is to be a leader, both in renewables, but also in equity and ensuring those most affected by climate change and already marginalized can be well supported. There is so much opportunity to invest in long term lower cost heat and equitable pricing. There is also an opportunity for Kitchener Utilities to demonstrate the business case for the necessary energy transition to utilities across Canada and around the world." On assets and infrastructure We heard several times, in our conversations with staff, about the connections between asset management, rates, and capital planning for our infrastructure. These are critical elements of utility business planning that could be affected by the clean energy transition. We heard we need to innovate on our existing practices to prepare for changing future needs. What we heard: Phase 1 engagement summary p. 18 Page 24 of 55 Clean Energy Transition Strategy On partnerships We heard a lot of support across all groups for partnerships with other organizations, such as utilities, governments, industry, research, and community organizations. There was particular interest in partnerships with Enova, the local electricity distributor. There was also keen interest in Enbridge's plans related to the energy transition, as well, given their central role in distributing natural gas in the province and to Kitchener Utilities directly. This was, in part, a recognition of the fact that the energy services we provide are part of a broader energy system, with a range of important capacity holders, such as electricity system planners, that influence how the system will work in the future. Theme 5: Information, education, and awareness On trusted and timely information We consistently heard across groups that there is concern about a lack of trusted information related to the energy transition. Some participants told us they were uncertain about various alternative energy sources and technologies, or skeptical about their reliability and ability to meet our energy demands, and that they were therefore hesitant to put money into these courses of action for fear of the opportunity costs of being wrong. There seemed to be a hunger for real, honest information. While conversations with community members often included an openness to embracing change, some feel they do not have the right information at the time when these decisions happen, such as when a furnace fails and needs to be replaced quickly. From the public: o "Keep us updated. There's no one trusted source of information anymore." o "[1 need to see] data to support the necessity of these changes. Invest in this and you'll see X,Yand Z." o "Are we on track to meet targets? And what is KU's role in this? How are we moving towards those climate targets at a local level?" o "Residents are the largest component of sales and residents need to be engaged and educated." o "Do we even have a choice?" "It's such a big topic. I learned a lot tonight. I will definitely be thinking more about this ... how I can save energy and help the environment." o "I just replaced my water heater, and no one told me an electric one was an option." o "Show people the data — what's the savings? And how long? What's the impact on the environment? Provide info on long-term savings AND impact—focus on the positive." o "We need to have realistic forecasting of future electricity demand in the Region of Waterloo." o "A clean energy transition will be difficult at the local level, when most electrical generation & distribution is on the provincial level. I'm not sure what tools a municipality has to make big impacts..." What we heard: Phase 1 engagement summary p. 19 Page 25 of 55 Clean Energy I ransitian Strategy -Aw q4 eilaim,10 On divisiveness Of course, it was also clear in public engagement that the energy transition, and its connections to climate change, can be a divisive topic. Subtly in a few of the in-person workshops, and more directly in the online survey and social media contributions, some suggested that they do not believe that climate change exists, or that it is not human caused. Some were suspicious about the global forces and motivations behind the energy transition. o "[My biggest concern is] That your green energy agenda will double our price of energy, like the Ontario liberals have." o "Do not give in to fear and climate alarmism. We need technology that is not available yet. Be a leader in reliable and affordable energy. Tell the truth about the costs and use science to back up every idea. Black outs and brown outs will be you failing the people of this city. Reliable and affordable base load power must be maintained." o "The biggest opportunity we have is to acknowledge that carbon dioxide does not contribute to climate change and stop all this nonsense. Solar flares are the main thing impacting the earth's climate." o "A net zero carbon goal is impossible to attain. Humans give off carbon naturally as does so many other things. It's a hoax and as taxpayers we shouldn't be buying fake carbon currency." o "Biggest opportunity is for the investors who get rich, while the regular hard working people are forced to use something they don't want." o "Listen to the "real" experts not those making profit from unreliable tech." On accessible information Members of advisory committees identified a number of opportunities for education and literacy, particularly around home heating and cooling systems and options for adjusting them. One committee highlighted the importance of providing information in multiple languages, and providing support for newcomers adjusting, in some cases, to very different climate control systems than they may be used to from other parts of the world. People across groups told us about the importance of telling a compelling yet educational story. People are eager to see case studies and hear from people with direct experience of newer energy technologies. This kind of storytelling was seen as a key tool for bringing people along with changes in our energy systems. People were also interested in seeing the impacts of changes they make in a concrete way. From the public: o "Bring the excitement back! Get me excited about the future. And get feedback on what happens if you do change. Send us information on how we contributed to a positive change. I know, but I don't feel personally connected in a positive way." o "Make people aware of the kWh consumption on their bill so they can work out the cost themselves for converting to electricity -powered equipment. Use metrics that people can relate to. Convert gas/methane and gasoline to kWh for direct comparison." What we heard: Phase 1 engagement summary p. 20 Page 26 of 55 Clean Energy Tfansition Strategy o "Promote how KU and its customers can give back to the city more. For example, even if they are maybe $5 more, I'd rather pay that and support local." o Tell the story about how we invest more in the city. o "The story is needed to give the consumer a reason to be interested." On accurate technical information Staff conversations about information gaps often focused on technical questions. Some indicated that they did not have the information they needed to believe that non -emitting energy sources could meet heating needs, particularly in Kitchener's climate conditions. By far, the most common area of technical interest for staff was heat pumps, particularly air -source heat pumps, given their growing role in space heating. Some expressed that they want to see real-world case studies with data on energy costs, with some suggesting that Kitchener Utilities should do local tests of these technologies ourselves. There was also consistent interest in low -carbon gaseous fuels, and how changes in gaseous fuel mixes might impact our operations and the gas delivery system. This was an interest shared with some members of committees. These technical considerations also arose with members of the public. Some participants expressed uncertainty about various alternative energy sources and technologies, related skepticism about their reliability and ability to meet our energy demands, and related hesitancy to put money into these courses of action for fear of the opportunity costs of being wrong. When people told us that they lacked reliable information on clean energy alternatives, it was often connected to their hesitation about the technical and practical feasibility of those solutions. Broadly, we heard that many in the public are looking for information and guidance about the changes they can make. From staff, we heard that providing accurate and reliable information to customers regarding their heating and water heating options was extremely important to them. From the public: o This transition is "a long way off until they get hydrogen going." o "Batteries have a high cost to make and a high environmental impact." o "I priced out a heat pump and it's not even worth it." o "You forgot nuclear. This isn't a binary decision." o "I don't think there will be a financial savings from cleaner energy." o "Regarding sustainable alternatives like solar, wind, geothermal. Does KU have any say in developing those kind of things?" o "RENEWABLES ARE NOT SUSTAINABLE OR VIABLE NOR ARE THEY PROVEN TO BE EFFECTIVE. JUST LOOK AT EUROPE, SO STOP THIS GREEN BULLSHIT." o "[My biggest concern is] That Kitchener utilities doesn't understand by using Canadian energy you're already using clean energy. Whereas the 'clean energy' you're promoting in solar, wind, and electric take massive amounts of already clean Canadian energy." What we heard: Phase 1 engagement summary p. 21 Page 27 of 55 Clean Energy Transition Strategy Theme 6: Trust and responsibility Community trust Many participants indicated that they see us as a reliable provider of energy services, and that they value this role that Kitchener Utilities plays. A number of customers told us they see Kitchener Utilities as a trusted provider of information, and would look to us for guidance about their energy decisions, especially since trusted information is hard to find. At the same time, we heard some mistrust, especially arising out of questions about our motivation behind transition work, especially at this early stage where we have questions rather than answers. As a community owned business, the community is literally invested, and this means that these public conversations about the future of the utility need to happen long before decisions have been made. Some members of the public seemed to engage differently when they processed that Kitchener Utilities is part of the City of Kitchener, and understood the reality of community ownership. From the public: o "You've got trust going for you. You're viewed reliably." o "Trust factor for KU is BIG! KU is more reliable, this is BIG!"; "We have a dedicated customer following — a trusted choice for water heaters, and that won't go away easily." o "[What stood out most about the session was] The honesty; it's good to see that you all are concerned about the future of your company and our supply of gas and water admin." o "The utility is in a great position to make these opportunities happen." o "Why is KU looking into this—because KU wants to make a lot of money on this?" They make money now, so why do they want to do this? o "[My biggest concern is] The more money you take out of my pocket while pretending to do good." o "Is KU willing to say they are willing to be a much smaller utility? Are we going to become a much smaller business to hit targets?"; "This is the elephant in the room." o "We [citizens] have a vested interest in the gas utility ... I feel foolish I didn't realize this." o "[1 hope] That they will do what is best for the city even if it means less profit for the company." Staff responsibility for community trust Arising from the trust that many in the community have in us, staff consistently prioritize the value of the trust customers place in them and Kitchener Utilities, and are committed to honouring that through words and actions. This was seen to be important to maintain confidence in Kitchener Utilities as a brand, as well. Staff told us that it is critical that this work aligns with customers' best interests while enabling them to make meaningful choices to help them meet their diverse needs. There was a lot of apprehension about the possibility of forcing customers to make changes that they do not want or that are not in their best interest. Some staff also mentioned the importance of ensuring we provide options that customers are looking for, such as with the rental program. What we heard: Phase 1 engagement summary p. 22 Page 28 of 55 Clean Energy Transition Strategy Policy responsibility All groups highlighted the various policy tools that are needed to enable clean energy while addressing climate change, and the responsibility that means for different levels of government. Examples included changes to the building code, incentives for builders, and infrastructure policies. From the public: o "How to reduce my carbon footprint? — Build my home correctly! Who is holding the builders accountable for their new builds?" o "New builds shouldn't have gas, we shouldn't be expanding with natural gas service." o "We need to be cutting down on natural gas; we can't keep expanding" o "The city needs to put in the building code, no gas furnaces." o "My biggest concern is that no new natural gas connections be built — why build out the infrastructure to new neighbourhoods if the goal (the plan?) is to get everyone off natural gas within the next decade or two? o Building code is antiquated and needs to move into a Step Code like Vancouver which is progressive on how much energy you can use, similar to Europe. Provide a maximum amount of energy per property, Sweden has something similar to this — leads to super insulated buildings." o "Incremental change and bridge tech — NO. No more gas hookups, eliminate sales of gas stoves, furnaces, etc."' Conclusion These discussions about cost, reliability, change, business, information, and trust will continue through future phases of the project. What we heard in Phase 1 engagement has been critical to the development of guiding principles for the project, which are available in Guiding principles: Phase 1 discussion paper for the Kitchener Utilities Clean Energy Transition Strategy project. We are incredibly grateful to everyone who shared their time and their insights with us in the first phase of the project. In Phase 2, scheduled for 2024, we will be identifying and evaluating specific options for our business. We look forward to continuing to engage with customers, community members, stakeholders, committees, staff, and councillors through future project phases. What we heard: Phase 1 engagement summary p. 23 Page 29 of 55 Clean Energy Transition Strategy Guiding principles: Phase 1 discussion paper for the Kitchener Utilities Clean Energy Transition Strategy project November 2023 Page 30 of 55 Clean Energy Transition Strategy Acknowledgements This discussion paper was created by the KU Clean Energy Transition Strategy Project Team, under the guidance of the project's Advisory Team. Project Team members are subject matter experts providing critical support to advance this project. Members of the Project Team are: • Greg St. Louis, Director, Gas and Water Utilities • Khaled Abu-Eseifan, Manager, Gas Supply and Engineering • Adam Hustwitt, Manager, Business Development and Customer Experience • Tammy Gerber, Marketing Strategist • Michele Kamphuis, Business Development and Conservation Strategist • Ruth -Anne Goetz, Budget Analyst • Anna Marie Cipriani, Corporate Sustainability Officer, Development Services • Kate Daley, Senior Strategist Carbon and Energy Planning (project manager) Advisory Team members represent key City departments and provide feedback and advice at key milestones of the project. Members of the Advisory Team are: • Denise McGoldrick, GM Infrastructure Services • Justin Readman, GM Development Services • Jonathan Lautenbach, CFO & GM Financial Services The Project Team and Advisory Team would like to thank staff, customers, residents, stakeholders, partner organizations, committee members, and councillors for their thoughtful engagement throughout Phase 1 of the project. The insights in this paper and the What we heard document are built on their diverse perspectives. Guiding principles: Phase 1 discussion paper p. 2 Page 31 of 55 Clean Energy Transition Strategy Table of Contents Acknowledgements................................................................................................................................... 2 Executivesummary............................................................................................................................5 Part1: Project context.......................................................................................................................7 1.1: Project background............................................................................................................................7 1.1.2: Project initiation..........................................................................................................................7 1.1.3: Project scope and related work at the City of Kitchener............................................................7 1.1.4: Project Phases.............................................................................................................................8 1.2: High-level environmental scan..........................................................................................................9 1.2.1: Evolving climate science and commitments...............................................................................9 1.2.2: Evolving policy and regulatory environment..............................................................................9 1.2.3: Evolving industry environment and consumer options............................................................10 1.2.4: Evolving energy reliability context............................................................................................11 1.2.5: Evolving costs and cost trends..................................................................................................11 1.2.6: Evolving City of Kitchener policy context..................................................................................12 1.3 Key Characteristics of Kitchener Utilities..........................................................................................12 1.3.1: Current energy services............................................................................................................12 1.3.2: Structure and oversight............................................................................................................13 1.3.3: Values and commitments.........................................................................................................13 1.3.4: Strengths and opportunities.....................................................................................................14 1.3.5: Vulnerabilities and risks............................................................................................................14 Part 2: What we heard in Phase 1.....................................................................................................16 2.1: Engagement activities and audiences..............................................................................................16 2.2: Key insights from Phase 1 engagement...........................................................................................17 2.2.1: Cost and affordability................................................................................................................17 2.2.2: Reliability...................................................................................................................................17 2.2.3: Change......................................................................................................................................18 2.2.4: Kitchener Utilities as a business................................................................................................18 2.2.5: Information, education, and awareness...................................................................................18 2.2.6: Trust and responsibility.............................................................................................................19 Part 3: Guiding principles for future phases......................................................................................20 Guiding principles: Phase 1 discussion paper p. 3 Page 32 of 55 Clean Energy Transition Strategy Guiding Principle 1: Make responsible, accountable, and financially rewarding business decisions ....20 Objective 1.1: Follow sound business practices................................................................................. 20 Objective 1.2: Take action quickly to manage business risk and maximize opportunity ................... 20 Objective 1.3: Assess value holistically to find our best contribution ................................................ 21 Guiding Principle 2: Serve customers as an affordable and reliable partner in the energy transition ..21 Objective 2.1: Pursue affordable, reliable, and predictable energy services for our customers ....... 21 Objective 2.2: Empower customers with choice, and with trustworthy, accessible information ...... 22 Objective 2.3: Bring people along as things change...........................................................................22 Guiding Principle 3: Contribute to a thriving community.......................................................................22 Objective 3.1: Collaborate with partners............................................................................................23 Objective 3.2: Do our part to address climate change....................................................................... 23 Objective 3.3: Use clear metrics and align them with community -scale goals..................................23 Guiding Principle 4: Plan for multiple energy futures with flexibility and focus....................................24 Objective 4.1: Rely on safe bet technologies and prepare for long shot technologies ...................... 24 Objective 4.2: Prepare for a broad range of net -zero carbon futures ................................................ 25 Objective 4.3: Iterate, experiment, and learn.................................................................................... 25 Part4: Next steps.............................................................................................................................26 4.1: Expected components of Phase 2....................................................................................................26 4.2: What you'll see next........................................................................................................................ 26 Guiding principles: Phase 1 discussion paper p. 4 Page 33 of 55 Clean Energy Transition Strategy Executive summary In this discussion paper, we summarize what we have learned this year, through Phase 1 of the Kitchener Utilities Clean Energy Transition Strategy project. The global clean energy transition brings both risks and opportunities for the City of Kitchener as an energy provider, as well as for customers and community members. This strategy will guide us as we evolve our energy business to continue to be financially successful and provide valued services throughout the energy transition. The first phase of the strategy project in 2023 has focused on engagement and building relationships and understanding around values, goals, and scope of the strategy. In this phase, we have worked to invite people into a problem -solving conversation with us. During Phase 2, in 2024, we will assess possible approaches and make recommendations, and Phase 3 will be focused on accelerating implementation planning in 2025. This project focuses on the City of Kitchener's community energy businesses, which are housed in the Gas and Water Division of the Infrastructure Services Department. The discussion paper is therefore written from the perspective of Kitchener Utilities as the community energy service provider at the City, but it considers the broad context of work happening across City divisions and departments to related to the community's energy transition. In Part 1 of this discussion paper, we summarize the project context, provide a high-level environmental scan, and describe key characteristics of Kitchener Utilities that inform this work. In Part 2 of the paper, we briefly describe what we have heard through public engagement during Phase 1 of the project, which is outlined in more detail in a companion document, called What we heard: Phase 1 engagement summary for the Kitchener Utilities Clean Energy Transition Strategy. We have had in-depth conversations with customers, community members, stakeholders, Kitchener committees, staff, and Council, through a variety of formats. In those conversations, we have heard diverse insights about the importance of cost and energy reliability, as well as the role that information, education, and awareness plays in supporting customers through the changes that are underway. We also heard important insights about Kitchener Utilities as a business, and about the trust that customers and the community have in us. This adds to our responsibility to our community to live up to that trust. These diverse conversations have led us to develop a set of guiding principles to form the basis of future phases of work on this project, and these are the focus of Part 3 of the discussion paper. We have four guiding principles, and each of those has a stated intention, as well as three more specific objectives. These principles are discussed in depth in the paper, but a summary table is provided here for ease of reference: Table 1: Guiding principles Guiding principles: Phase 1 discussion paper p. 5 Page 34 of 55 Clean Energy Transition Strategy As noted in Part 4, preliminary project planning for Phase 2 of the project is underway, and in that As we evolve our energy business to continue to be financially successful and provide valued services throughout the energy transition, we will... Guiding Principles Our intention Objectives 1: Make responsible, "We will work to responsibly 1.1: Follow sound business practices accountable, and position our community -owned 1.2: Take action quickly to manage risk and maximize financially rewarding business for success as things opportunity business decisions change around us." 1.3: Assess value holistically to find our best contribution 2: Serve customers "We will work to empower 2.1: Pursue affordable, reliable, and predictable energy as an affordable and customers and community services reliable partner in members as their trusted partner 2.2: Empower customers with choice and with the energy transition in the energy transition." trustworthy, accessible information 2.3: Bring people along as things change 3: Contribute to a "We will work to make our 3.1: Collaborate with partners thriving community community even stronger." 3.2: Do our part to address climate change 3.3: Use clear metrics and align them with community - scale goals 4. Plan for multiple "We will work to prioritize 4.1: Rely on safe bet technologies and prepare for long energy futures with solutions that can adapt to and shot technologies flexibility and focus provide value in all energy 4.2: Prepare for a broad range of net -zero carbon futures futures." 4.3: Iterate, experiment, and learn phase, our work will include identifying and assessing new potential business offerings or program expansions. It will also include assessing our existing businesses under a broad range of potential future conditions and scenarios, including the range of potential impacts on our assets, rates, and revenues. We are expecting to bring recommendations arising from Phase 2 of the project to Council in late 2024 or early 2025. Guiding principles: Phase 1 discussion paper p. 6 Page 35 of 55 Clean Energy Transition Strategy Part 1: Project context LI: Project background Kitchener Utilities' natural gas delivery business needs to evolve, to respond to ongoing changes in the global, national, provincial, and local energy context as the clean energy transition continues, and to align with the City's and the community's climate change commitments. These changes bring risks and opportunities for Kitchener Utilities, its customers, and community members. As a community -owned energy utility, KU is a unique asset to the community's energy transition. This project aims to develop a multi -decade business strategy that will guide us as we evolve our energy business to continue to be financially successful and provide valued services throughout the energy transition. The strategy will align with the City's and the community's 2021 commitment to TransformWR, including achieving transformational change to accomplish the energy transition through work that will also build an equitable, prosperous, resilient low -carbon community. 1.1.2: Project initiation Through active participation in the ClimateActionWR collaborative of municipalities and non-profit organizations, in 2021, Kitchener committed to reduce community greenhouse gas emissions 50 per cent by 2030, and 80 per cent by 2050. As a partner in the ClimateActionWR initiative, the City has also endorsed the TransformWR community climate action strategy, which is centred on Six Transformative Changes that must be made by 2050 to address local GHG emissions while building an equitable, prosperous, resilient low -carbon community through the transition off fossil fuels. A key transformative change that will impact Kitchener Utilities significantly in TransformWR is that, "by 2050, businesses and homes no longer use fossil fuels for space heating and cooling, and water heating." As part of its endorsement of TransformWR, Council devoted staffing resources toward developing a strategy to guide Kitchener Utilities through the energy transition. This work also aligns with the City's and Kitchener Utilities' participation in WR Community Energy, a unique collaborative partnership between the three cities, the Region of Waterloo, and local electric and natural gas utilities to support the community's energy transition. 1.1.3: Project scope and related work at the City of Kitchener This project focuses on preparing Kitchener Utilities, as the City's energy utility, for the clean energy transition. Other key City divisions and departments are conducting critical work related to the energy transition that is proceeding in parallel. This includes: Table 2: Related work Guiding principles: Phase 1 discussion paper p. 7 Page 36 of 55 Clean Energy Transition Strategy Project Lead Lead Division Status Dept. Corporate Climate Action Plan DSD Office of the GM of Development Part 1 in Progress (CorCAP) 2.0 Services/Sustainability Office Downtown Kitchener District DSD Planning In Progress Energy Feasibility Study Green Development Standards DSD Planning (with WR Community Energy In Progress partnership) Dividend/Reserve Fund Reviews FIN Office of the CFO Upcoming Various external partnership Various WR Community Energy; Various initiatives ClimateActionWR; Enova Since this strategy project is part of the City's influence over community emissions, the KU Transition Strategy is also a subset of the work that will be addressed in Part 2 of CorCAP 2.0, and part of the City's work to implement the TransformWR strategy, as outlined in Figure 1. Figure 1: Community and corporate responsibility for climate change mitigation and adaptation Community Responsibility City of Kitchener Corporate Responsibility Community Emissions and Energy Transition I Community Adaptation I TransformW R Community Climate Adaptation Plan City of Kitchener Corporate Emissions and Energy Transition City of Kitchener Adaptation Corporate I Corporate Influence on Corporate I Corporate Muence on Emissions Community Emissions Adaptation Community Adaptation CorCAP 2.0 - I CorCAP 2.0 - Part 2 I CorCAP 2.0 - Part 3 Part 1 KU Transi ion Strategy 1.1.4: Project Phases The first phase of the strategy project, in 2023, has been focused on engagement and building relationships and understanding around values, goals, and scope of the strategy. This part of the process has been about inviting everyone into a problem -solving conversation with us. Phase 1 of the project is intended to inform Phase 2 of the project in 2024, which will assess possible business options and recommend an integrated approach. Project Phase I Timing I Focus on... I Achieved through... Guiding principles: Phase 1 discussion paper p. 8 Page 37 of 55 Clean Energy Transition Strategy Phase 1 2023 building relationships and relational engagement with Council, understanding around values, staff, stakeholders, community goals, and scope of the members, and customers strategy Phase 2 2024 determining the way forward detailed, collaborative option together assessment and recommendation of an approach Phase 3 2025 building consensus on the developing a phased long-term implementation plan to 2030 implementation strategy to 2050 and a detailed first phase implementation plan to 2030 While developing a robust strategy to guide Kitchener Utilities for the next 30 years will take some time, during the strategy development project, staff continue to advance work that maintains KU's options and act on time -sensitive items. 1.2: High-level environmental scan The discussions we have had in Phase 1 of the project have taken place as the context around us continues to evolve. Decisions that we make as a community -owned business are heavily informed by a variety of factors, particularly those related to industry conditions and government policies. We review a number of the ways that these contexts are evolving, as this provides critical context for the decisions that will be under consideration in future phases of this project. 1.2.1: Evolving climate science and commitments Cross -sectoral agreement on energy transition objectives has grown as the City's involvement and participation in corporate and community climate and energy transition work has progressed. There is broad global agreement on the need to achieve net -zero emissions, where we no longer add more and more GHGs to the atmosphere from human activities, by mid-century. Canada has also joined countries around the world that have committed to achieving net -zero carbon emissions by 2050, and to reduce emissions to 40-45% below 2005 levels by 2030. 1.2.2: Evolving policy and regulatory environment In the context of federal and international commitments, as well as industry changes, climate- and emissions -related policies are likely to be a continuing and growing feature of the policy and regulatory landscape in the coming decades. Policies are expected to evolve over time, which highlights the need to be adaptable as the regulatory environment changes. The federal carbon pricing pollution benchmark is arguably the most influential of current policies for Kitchener Utilities' business, because it applies to our customers. Kitchener Utilities is required to collect the relevant amount through utility bills and transfer it to the federal government. Current carbon pricing is $65 dollars per tonne of GHGs, and it is scheduled to rise by $15 dollars per year, reaching $170 dollars in 2030. We estimate that a typical residential customer using 2000 cubic metres of natural gas per year will spend about $248 dollars this year on federal carbon pricing. The federal government Guiding principles: Phase 1 discussion paper p. 9 Page 38 of 55 Clean Energy Transition Strategy currently provides direct rebates on carbon pricing to individuals and families in Ontario, intended to offset the cost of the charges on fuels such as natural gas and gasoline, and to help support investment in clean energy options. Polluter -pay approaches to emissions, such as the federal carbon charge, are generally considered by the federal government to be among the most efficient and therefore low-cost policy approaches to addressing GHG emissions. This is because the policies price the impacts of current environmental practices while incentivizing the use of alternatives. While other policy approaches are possible in different contexts or under future governments, the costs to natural gas customers from addressing GHG emissions under alternative policy regimes are unknown, and they may be higher than they are under the current pollution pricing system. At the same time as pollution pricing policies have become a more significant factor in the energy sector, governments at various levels are increasingly investing in and funding the transition. Clean energy technology development has become more of a factor for various levels of government. Provincial policies and investments enabling the development of clean tech industries, such as EV battery manufacturing, have been increasing as well. There have also been changes in other jurisdictions to the regulatory landscape of natural gas delivery businesses. Some jurisdictions in North America, including and Montreal and New York State, are prohibiting new natural gas connections after specified dates. Other jurisdictions, such as the Province of Quebec and Nanaimo, BC, are prohibiting the installation of new fossil fuel -based heating equipment on announced timelines. While the number of jurisdictions with constraints on fossil fuel heating are growing, at this time there are no similar rules in place affecting the Kitchener Utilities' service territory. 1.2.3: Evolving industry environment and consumer options Other utilities and major players in Ontario's energy systems are undertaking planning associated with changes in technology and efforts to achieve net -zero emissions. The Independent Electricity System Operator (IESO) is beginning planning for the simultaneous decarbonization and considerable expansion of the provincial electricity system. The Ontario branch of Enbridge Gas has recently identified pathways to a net -zero carbon future, emphasizing a diversified approach that relies on electrification tied with deployment of low- or zero -carbon gases, including renewable natural gas (RNG), hydrogen, and natural gas with carbon capture. From a consumer standpoint, competitive electric options for space and water heating are becoming increasingly available, and this is a significant factor in the shifting business landscape for Kitchener Utilities. In particular, over the last number of years, there have been significant developments in heat pump technologies that are used for space and water heating. Heat pumps work on the same premise that refrigerators and freezers do, and they use electricity to move heat energy instead of generating directly. Recent analyses found that air source heat pumps, which run on electricity, are cost - competitive in most parts of the country for most residential buildings. Despite higher initial equipment and installation costs, the high efficiency that comes from moving heat with electricity instead of generating it means that, in many buildings, there are cost savings over the full lifecycle of the Guiding principles: Phase 1 discussion paper p. 10 Page 39 of 55 Clean Energy Transition Strategy equipment from installing a heat pump with electrical or natural gas back up heat instead of a standard furnace and air conditioner. A number of Kitchener Utilities customers are beginning to install heat pumps, particularly in light of current federal Greener Homes Grant funding, which reduces up -front costs for homeowners. While some customers are disconnecting gas service to their homes, it is much more common to maintain natural gas service. Many heat pumps are being installed as part of hybrid systems, where heat pumps serve primarily as a more efficient replacement for an air conditioner. In these cases, the furnace system is maintained to provide heating below a particular set temperature, and the heat pump provides heating above that temperature. Heat pump water heaters are also becoming more available, and provide options to electrify water heating with more efficiency than standard electric water heaters. 1.2.4: Evolving energy reliability context The context in which our energy systems must provide reliable, stable services is changing as well, both with regards to service interruptions and supply chain exposure. For all providers of energy services, it is a high priority to avoid interruptions to service, given the critical role that electricity and natural gas play in the community's comfort, productivity, and safety. System reliability is expected to be challenged by the increasing frequency of extreme weather events as a result of climate change, with the potential for disruptions from more ice storms affecting electric infrastructure, for example. At the same time, both electricity and natural gas service are generally fairly reliable in Waterloo Region. Though natural gas experiences fewer interruptions than electricity, overall interruptions in supply are rare and short when they do occur, and while they affect convenience, their short duration means that they do not typically affect safety from heat or cold temperatures. Because natural gas infrastructure is underground, it is less vulnerable to damage and disruption from weather conditions. While there are considerably more interruptions in electricity service than gas service, these two energy sources have different geographic risk profiles. Like other fossil fuels, natural gas is provided from outside of Ontario, and subject to national and sometimes international market pressures. These led, for example, to a spike in rates for Kitchener Utilities gas customers in 2022, since natural gas supplies were more expensive due to global forces. While electricity generation equipment is subject to potential global supply chain disruptions, such as were experienced at stages of the recent pandemic, increasing diversity of smaller scale options for locally generating and storing electricity, such as solar panels and battery storage, mean that there is growing potential for building increased resilience to global market forces. 1.2.5: Evolving costs and cost trends Currently in Ontario, natural gas prices are lower than in many jurisdictions in Canada, and electricity prices are higher. These prices are, however, subject to change over time, depending on changing conditions. Recently, natural gas supply costs have fluctuated significantly due to continental and global supply chain factors, and natural gas prices are forecast to increase somewhat in the coming years in the Guiding principles: Phase 1 discussion paper p. 11 Page 40 of 55 Clean Energy Transition Strategy event that Liquified Natural Gas (LNG) exports become more prominent, increasing North America's exposure to global gas market trends. There are also more explicit price changes scheduled as part of the phase-in of federal carbon pollution pricing. Pollution pricing is planned to increase from 12.39 cents per cubic metre of natural gas today to 32.4 cents per cubic metre in 2030. This means that, while a residential customer expecting to use 2,000 cubic metres of natural gas per year would pay $248 this year on pollution pricing, this number would increase to $648 in 2030. These changes mean that, while future gas costs continue to be uncertain, changing costs may be a significant factor for customers considering different energy sources for their space and water heating. 1.2.6: Evolving City of Kitchener policy context In addition to the energy services it provides to the community through Kitchener Utilities, the City of Kitchener is also the largest shareholder in Enova, the electricity distribution utility serving Kitchener, Waterloo, Wellesley, Wilmot, and Woolwich, and has oversight roles through board representation and receives dividends as a shareholder. As a division of the City of Kitchener, Kitchener Utilities also shares the City's broader goals for community wellbeing. The City's most recent strategic plan, approved this year, highlights five strategic goals for 2023-2026 and related work under each goal, specifically: 1. Building a connected city together (housing, transportation, active transportation, land use planning) 2. Cultivating a green city together (CorCAP 2.0, this strategy, district energy, tree canopy, parks strategies, parkland acquisition) 3. Creating an economically -thriving city together (business approvals, innovation campus, creative industries school, events and festivals strategy, entertainment venue management, Arts and Culture Master Plan) 4. Fostering a caring city together (Truth and Reconciliation, municipal newcomers strategy, engagement practices, community center operating model, recreation and leisure program review, Leisure Facilities Master Plan update, community grants review) 5. Stewarding a better city together (Digital Kitchener strategy, city-wide data strategy, employer identity/value proposition, psychologically safe workplace, procurement innovation) 1.3 Key Characteristics of Kitchener Utilities 1.3.1: Current energy services Kitchener Utilities is a division of the City of Kitchener and is one of two gas utilities in Ontario that is municipally owned. For 120 years, Kitchener Utilities has delivered water and gas services to our community. Our services include water delivery, natural gas delivery, stormwater and sewer services, and rental water heaters. While water, sewer, and stormwater operate on a cost recovery basis, profits from the natural gas delivery and rental water heater programs are reinvested into City of Kitchener services. Guiding principles: Phase 1 discussion paper p. 12 Page 41 of 55 Clean Energy Transition Strategy The natural gas provided through Kitchener Utilities is primarily used for two, very different, purposes. About 85% of the natural gas sold goes to residential and commercial customers, and is primarily used to produce low-temperature heat for space and domestic hot water heating. The remaining natural gas is used by industrial customers, who may use some natural gas for space and domestic water heating, but who often use significant amounts of natural gas to produce high-temperature heat as part of industrial processes. Kitchener Utilities owns and operates approximately 1,118 kilometres of gas infrastructure, and delivers reliable fuel for space and water heating to approximately 73,300 homes, 4,140 businesses, and 385 industrial customers. In 2002, our customers used 270,000,000 cubic metres (m3) of natural gas. Using this gas produced about half -a -million tonnes of greenhouse gas emissions. Natural gas use contributes about 1/3 of the annual community GHG emissions from within Kitchener. 1.3.2: Structure and oversight Kitchener Utilities is one of two gas utilities in Ontario that is municipally owned. Natural gas delivery and rental water heaters provided by Kitchener Utilities operate within the Gas and Water Utilities division of the City, housed within the Infrastructure Services Department. 124 FTEs provide planning, operations, maintenance, and capital services to ensure the safe and reliable provision of gas and water services to customers. As part of a City division, oversight and accountability to the public on utility decisions, such as setting annual natural gas rates, is provided by the City's elected Council. Other natural gas and electric utilities, operating as separate business entities, do not have this form of oversight, and they are instead regulated through the Ontario Energy Board through a different administrative process. The profits provided by the natural gas delivery and rental water heater programs contribute revenues to the annual operating and capital budgets. For 2023, for example, approximately $17.7 million in revenue from the gas and water heater rental businesses was used to fund tax -based operating programs and capital programs. These contributions to City finances reduce reliance on property taxes to fund City services. Kitchener Utilities operates with the support of staff from across the City, including diverse business units such as Finance, Fleet, and Corporate Communications. 1.3.3: Values and commitments Kitchener Utilities' core principles from 1903 remain the same: to deliver reliable, safe services at a fair price to meet customers' needs. Our longstanding formal vision statement has been to "anticipate and adapt to political and technological change to enhance the quality of life for our customers and our community." The mission statement has been that "Kitchener Utilities is operated by a highly skilled and experienced team who provide a continuous and safe supply of water and gas services that exceed the expectations of our home and business customers." Guiding principles: Phase 1 discussion paper p. 13 Page 42 of 55 Clean Energy Transition Strategy As these statements were developed many years ago, and in light of the changes made during a 2018/2019 review of the City's utilities structures, work began a few years ago to begin updating the vision and mission statement. While this work is not yet complete, draft text developed through that process identified a revised approach, centered on the role that energy and water services play in the quality of life of the community. Specifically, the draft vision identified was that "Our community's quality of life is enhanced by a locally - owned, sustainable, trusted provider of energy and water services." The draft mission was to "Provide safe, reliable energy and water services at stable, affordable rates; consistently exceeding customer expectations while helping the community achieve environmental and economic sustainability." 1.3.4: Strengths and opportunities Kitchener Utilities' greatest asset is our skilled staff dedicated to customer service, who are the foundation of the strong relationships that we have built with customers and the community. With our location inside the City, Kitchener Utilities is in a unique position to build on its strong foundation and enable energy opportunities that are ideal for multi -solving, which could contribute to the City's work to strengthen the community in various ways, as outlined in the recent Strategic Plan highlighted above. Through recent participation in WR Community Energy, an innovative collaboration between municipalities and electric and natural gas utilities in Waterloo Region, both the City of Kitchener and Kitchener Utilities have built strong relationships with local partners working to advance community energy goals. Kitchener Utilities has a long history of energy innovation through change, and has served people in Kitchener for more than a century through considerable changes in energy systems. When the Town of Berlin purchased in the Berlin Gas Company in 1903, it had just over 500 customers, and generated its gas from coal. The gas was used for street lighting, and the company generated electricity with it to sell, in addition to providing flammable gas directly to customers. Over the next century, the utility oversaw its customers' transition to more affordable hydro -electric power, and the transition from its original coal gas production to more reliable carburetted water gas production, and eventually to providing more efficient natural gas. The energy transition brings significant opportunity for new business offerings, services, and revenue streams for energy utilities. Kitchener Utilities is in a strong position to provide leadership in local efforts to advance the energy transition while building an even stronger Kitchener. Potential business opportunities for Kitchener Utilities that provide new services could add considerable value for the community. We could play a significant role in supporting customers and community members with transitioning their energy use in the future, in order to achieve their climate goals while future -proofing their energy use. 1.3.5: Vulnerabilities and risks Natural gas distribution utilities are recognizing a variety of business risks associated with the clean energy transition. As the energy transition progresses, it is expected that more customers will select higher more efficient and increasingly available decarbonized options, such as electric heat pumps, to Guiding principles: Phase 1 discussion paper p. 14 Page 43 of 55 Clean Energy Transition Strategy meet their low-temperature space heating and water heating needs. Because most of Kitchener Utilities' customers are using natural gas for low-temperature needs, Kitchener Utilities and other gas distributers could face significantly lower revenues and increasing operating and capital costs from a smaller customer base. Since the costs of natural gas delivery are paid by current natural gas customers, fewer customers could mean higher distribution costs per customer, which along with rising carbon costs could affect affordability, and also influence customer fuel switching decisions. All of the different ways that net -zero emissions could be achieved over the next few decades include a significant decrease in the amount of conventional natural gas used within building space and water heating applications. Low -carbon gaseous fuels, such as hydrogen and renewable natural gas, are expected to play an important role in different energy futures, particularly to meet high-temperature heat needs in industrial settings. There are significant limitations on the availability of these fuels, however, and so they are not expected to replace current levels of natural gas use. This means that natural gas, and likely gaseous fuels in general, are expected to play a very different role in a net -zero future than they play today. For high-temperature uses, industrial customers will continue to need reliable means of sourcing high- temperature heat. This will require different solutions than those used for low-temperature heat, and is likely to include a continuing need for low -carbon gaseous fuels such as renewable natural gas and low - carbon hydrogen. Meeting these evolving industrial energy needs while addressing future changes in residential and commercial gas usage is a significant consideration for natural gas utilities. Guiding principles: Phase 1 discussion paper p. 15 Page 44 of 55 Clean Energy Transition Strategy Part 2: What we heard in Phase 1 In this section, we briefly describe what we have heard through public engagement during Phase 1 of the project. For an in-depth assessment of engagement results, please see What we heard: Phase 1 engagement summary for the Kitchener Utilities Clean Energy Transition Strategy project. 2.1: Engagement activities and audiences The engagement we conducted in Phase 1 has included conversations with staff, stakeholders, Council, customers, and members of the public. In particular, engagement was comprised of: • Customers and members of the public o Engage Kitchener online survey (August 24 to October 1— 256 responses) o Demographically representative recruited in-person workshops (September) o Self-selected in-person workshop (September) o Self-selected virtual workshop (September) • Stakeholders o In-depth stakeholder workshop (June) • Kitchener committee meetings o Climate Change and Environment Advisory Committee (June) o Economic Development Advisory Committee (June) o Homebuilders Liaison Committee (July) o Equity and Anti -Racism Advisory Committee (September) • Council o Council report (May) o Meetings with councillors (July to September) • Staff o Team project introduction presentations (April to May) o Meeting with union representatives (April) o Managers meeting (July) o Managers and supervisors meeting (August) o Team meeting discussions with Kitchener Utilities leadership (General Manager and Director— September and October) o Staff meeting of representatives from each area (September) o Staff drop-in sessions (September) An Engage Kitchener page was created to serve as the central online presence for the project. A project page on the City's internal KHub platform was created for staff. As part of the engagement, three key resources were developed to help build the conversation. These resources were made available on the Engage Kitchener page, and were used as supporting resources in various engagement workshops and meetings. They are: • A PDF resource on Preparing for a Net -Zero Future, explaining the project context • An infographic-style timeline of Kitchener Utilities' 120 Years of Energy Innovation Guiding principles: Phase 1 discussion paper p. 16 Page 45 of 55 Clean Energy Transition Strategy ),i., • An infographic-style resource highlighting key features of Possible Pathways to Clean Energy in our Community 2.2: Key insights from Phase 1 engagement Throughout our engagement, we heard a range of diverse insights focused on six main themes: [1] cost and affordability; [2] reliability; [3] change; [4] Kitchener Utilities as a business; [5] information, education, and awareness; and [6] trust and responsibility. 2.2.1: Cost and affordability The most common concern expressed, from both community members and staff, was that that changing where the community gets its energy from will cost a lot, and that customers will bear the brunt of those costs. There was significant concern for the dire financial situations many community members are facing due to current economic conditions. There was also concern expressed, particularly in stakeholder groups, that the status quo could also be a challenge for affordability, particularly due to policy and regulation, and changing industry conditions. There were also equity concerns expressed by all groups. This included concerns about the inclusion of renters and transition needs for rental properties. This is because both renters and homebuyers face the "split incentive problem," where landlords or homebuilders select and pay for the heating equipment, but renters or homebuyers usually pay the utility bills, and cannot choose to benefit from long-term savings in exchange for higher up -front cost. Some staff also highlighted the connection between equity and utility rates, highlighting long-term cost implications of decisions made during the strategy development process. This includes considering possible future increases in the cost of natural gas, as well as the impact of changes on rates over time, and the importance of ensuring that rates today are equitable and not disadvantaging future customers in favour of current ones. 2.2.2: Reliability Consistent with Kitchener Utilities' longstanding priorities, both customers and staff identified energy reliability as a central concern. Space heating and water heating, and increasingly cooling in light of a changing climate, are critical for both comfort and life safety, and significant interruptions to energy supply are not an acceptable outcome of changes in our systems. In particular, there was concern across groups about the reliability of electricity, and the potential for interruptions to electricity service to disrupt home heating if electric equipment like heat pumps is used. Many staff and some customers indicated that they prefer to rely on a range of sources of energy, which for them meant not relying exclusively on electricity as a sole source of heating in homes. Others highlighted benefits of newer clean energy technologies, such as smart systems and battery storage, for improving reliability. Concerns were also raised about customers whose energy needs are currently not being met for reasons such as crowded housing conditions, and how further changes would affect them. Guiding principles: Phase 1 discussion paper p. 17 Page 46 of 55 Clean Energy Transition Strategy 2.2.3: Change People most commonly associated change with additional cost. While there was often a desire to do better for the environment, and concern about recent wildfires and other effects of climate change, many saw the benefits of the transition as coming long into the future for future generations, rather than for current customers. This was often seen as a barrier to action. People we spoke with were at various stages of their change journey on this topic. Some found it very difficult to imagine a future as different as the futures we are anticipating. At the same time, many were encouraged that we are undertaking this planning to prepare for those different futures. There was also considerable discussion of the pace of change. Some highlighted the importance of urgent action, either because of the climate emergency or because of the need to protect Kitchener Utilities' future business interests. Others were hesitant to make changes until features of the future energy system become more clear. Stakeholders were the group that most significantly highlighted the importance of mindset and how opportunities and risks are framed for the success of energy transition work. 2.2.4: Kitchener Utilities as a business There was concern, particularly from community members/customers and stakeholders, that changes in our energy context could mean our business would decline, and that this would have negative effects on the City's finances and create community liability for costs. It was suggested that we should be agile and focus on opportunities and not just risks, in assessing future potential business lines. Connections between our assets, our rates, and our infrastructure maintenance and capital planning were a theme highlighted by some staff, since these are critical elements of utility business planning that could be affected by the clean energy transition. All groups were eager to support partnerships, and favoured working collaboratively with other organizations such as utilities, governments, industry, and community organizations. This was, in part, a recognition of the fact that the energy services we provide are part of a broader energy system, with a range of important capacity holders, such as electricity system planners, that influence how the system will work in the future. 2.2.5: Information, education, and awareness Concern about a lack of information, and particularly trusted information, was a consistent theme across groups. There was concern about health impacts of natural gas, and also concern that there are not practical alternatives to fossil fuels for space heating and water heating. While some expressed an openness to change, many indicated that they lacked the right information at the right decision points. There was widespread skepticism across groups around the costs of alternatives, and deep concern about being wrong. Broadly, we heard that many in the public are looking for information and guidance about the changes they can make. Staff were consistently concerned about the accuracy of information provided to Guiding principles: Phase 1 discussion paper p. 18 Page 47 of 55 Clean Energy Transition Strategy customers and were often focused on technical concerns, such as the details of air source heat pumps or hydrogen blending. Across groups, the importance of effective storytelling was highlighted. People are eager to see case studies and hear from people with direct experience of newer energy technologies. This kind of storytelling was seen as a key tool for bringing people along with changes in our energy systems. 2.2.6: Trust and responsibility Many customers and community members told us that they see Kitchener Utilities as a reliable provider of energy services, and that they value this role that KU plays. Staff, as a result, consistently prioritize the value of trust customers place in them and Kitchener Utilities, and are committed to honouring that through words and actions. The best interest of customers and giving them meaningful choices was paramount. At the same time, some were unsure about the motivation behind transition work, particularly at this early stage where we have questions rather than answers. This also relates to the implications of community ownership of the business, as the community is literally invested, and this means that these public conversations about the future of the utility are necessary long before decisions have been made. A number of customers indicated that they see Kitchener Utilities as a trusted provider of information, and would look to us for guidance about their energy decisions, especially since trusted information is hard to find. Guiding principles: Phase 1 discussion paper p. 19 Page 48 of 55 Chan Energy Transition Strategy Part 3: Guiding principles for future phases Principles can be described, as they were in the TransformWR strategy, as "a set of considerations for making decisions and setting priorities over time. They're a guiding light for aligning our intentions and actions, and articulate a framework that decisions should be evaluated against." This section outlines four guiding principles, each of which are accompanied by a stated intention and three more specific objectives. We want the principles we have identified in this section to help us connect what we care about to our actions. They will form the foundation of the decisions made in the second phase of work for this project and will serve as a framework to develop evaluation criteria in Phase 2 to apply to different business options. Guiding Principle 1: Make responsible, accountable, and financially rewarding business decisions Our intention: "We will work to responsibly position our community -owned business for success as things change around us." We know that the energy services we provide for the community and the financial role we play at the City are both key contributions to our community's success. We need to make responsible, accountable, and financially rewarding business decisions throughout the energy transition. Objective 1.1: Follow sound business practices We know that the success of Kitchener Utilities and the City as an energy service provider will depend on following sound business practices. For potential new business lines, following sound business practices means thoroughly evaluating and examining any new business options with a critical lens, and with the support of the right business expertise. For our existing business, following sound business practices means modelling out how changes to our customer base could affect our business model. This is also a critical part of planning responsibly for our current infrastructure and assets, and the work needed to maintain and replace them over the long term, since utility rates are often closely connected to the cost of infrastructure to provide that utility. It also means prioritizing safety. Of course, Kitchener Utilities has always worked to keep the community safe while meeting its energy needs. We commit to continuing to prioritize and strengthen safety throughout changes to our business, and make sure that we continue to align with safety best practices. Similarly, as an energy business, it is critical that our work meets our regulatory compliance obligations. Since regulatory environments can change over time, we will also consider regulatory risks that could arise as things change in the future. Objective 1.2: Take action quickly to manage business risk and maximize opportunity Guiding principles: Phase 1 discussion paper p. 20 Page 49 of 55 Clean Energy Transition Strategy We know that our energy business in its current form faces risks from the clean energy transition. This, in turn, creates risks for City finances more broadly, and for the community that supports the City financially. We know that we can't afford to wait to do this work. While the importance of averting the worst impacts of climate change on our community is one reason, it is especially critical to protect and nurture our business. While the industry changes affecting our customer base will have long-term effects, the things we might need to do in preparation can also have long time horizons. Proceeding quickly helps us to preserve our business options, and to make sure we don't fall behind changes in the energy industry. We will take action quickly, by advancing the strategy development project carefully but with urgency, while continuing to advance related work such as that outlined above. We have an obligation to manage business risk through this work. As part of that, we need to consider both likely and unlikely changes and events that could affect our work and our energy systems. Objective 1.3: Assess value holistically to find our best contribution We know that a key part of securing our utility's future is focusing on our strengths, and filling in the gaps that we are best suited to fill. As part of this, we will consider what contributions the City and Kitchener Utilities are in the best position to make for the community's energy transition, and which can be more effectively played by other capacity holders in the community, as part of our commitment to partnerships. We also need to focus on solutions that can practically be implemented by the City. While risks and costs will be critical considerations as we decide on our path forward, we have a unique opportunity to also focus on the broader benefits of various solutions, and the full value proposition that those solutions could bring to the community and our customers, now and well into the future. We will evaluate the scale of the risks and costs of potential approaches in light of the scale of the potential value that they could bring. Guiding Principle 2: Serve customers as an affordable and reliable partner in the energy transition Our intention: "We will work to empower customers and community members as their trusted partner in the energy transition." We heard throughout our community engagement that many customers have a lot of trust in Kitchener Utilities. We are proud of the strong relationship we have built with the community, and we want to put this trust at the centre of our decision-making as we look to the future. Objective 2.1: Pursue affordable, reliable, and predictable energy services for our customers We know that the affordability of energy is critical to people and businesses across Kitchener. We want to find solutions that can help to ensure people across our community can afford the energy they need to support a high quality of life. As an important part of this, we will consider the different energy affordability needs of people with very different circumstances across our community, including renters, newcomers, those living with low incomes, and those who speak a variety of languages. Guiding principles: Phase 1 discussion paper p. 21 Page 50 of 55 Clean Energy Transition Strategy We know that reliable access to energy and the day-to-day life that it supports is critical in our homes, businesses, and industrial facilities. We want to find energy solutions that make our energy services and broader energy systems even more reliable. This is particularly important in light of the potential for global changes in fuel markets, and the more frequent exposure to extreme weather events like extreme heat as a result of climate change. As things change over the next few decades, we know that customers and community members want to know what to expect. Predictability has value. As we pursue solutions and make related long-term changes to our business and services, we will work to make sure that people can see what is coming, so that they can plan ahead with confidence. Objective 2.2: Empower customers with choice, and with trustworthy, accessible information We know how important customer choice is. We will work to empower customers throughout the energy transition, so that they have what they need to make meaningful choices on the things that affect them most. This means making sure that people always have options for how best to meet their own energy needs, so that they can customize for their own circumstances. At the same time, we know that our community members will be key actors and decision -makers in achieving local climate goals, and that many of our customers are looking for information, support, and guidance as they consider changes to their own energy use. We will work to support customers as key implementers of their own clean energy transitions, as part of meeting customer needs as well as aligning with the City's climate change commitments. We know that, now more than ever, it can be hard to know what information to trust about the big changes that are happening in our society, including in our energy systems. We will position Kitchener Utilities to continue to provide trustworthy information and advice to customers and community members. This includes sharing stories and reliable data in a way that is accessible to people with diverse needs across the community, including through relatable case studies and through materials written in multiple languages. Objective 2.3: Bring people along as things change We know that people are at different stages of their own energy transition journeys. Some people are eager for these changes. Others have concerns. And others are just starting to hear about this, or are not yet sure what to think. This is true for both our customers and our staff. We will work to bring people along with the changes that are planned. This means working to meet customers' needs while growing their awareness, understanding, and comfort with whatever changes may be happening. It also means making sure that our staff have what they need to fully contribute to future business directions, such as relevant training and certifications. Guiding Principle 3: Contribute to a thriving community Our intention: "We will work to make our community even better." We know the critical role that energy, and the energy provided by Kitchener Utilities, plays in the lives of community members and customers across Kitchener. We want to help make sure that changes in our Guiding principles: Phase 1 discussion paper p. 22 Page 51 of 55 Clean Energy Transition Strategy community's energy systems, which are happening as part of the clean energy transition, leave us with an even better energy system and an even stronger community than we have today. Kitchener Utilities' unique positioning as a community -owned energy business means that we need to satisfy two related goals. First, as an energy business and as outlined in Guiding Principle 1, we need to prepare for the energy changes that are happening in the energy industry, to make sure our business can continue to thrive in the future. Second, as a municipal government service, we need to consider and advance community goals and wellbeing as part of the energy transition. Objective 3.1: Collaborate with partners We know that energy is part of a larger system, and that the changes happening as part of the energy transition involve capacity holders and stakeholders from across the community and beyond. To help the community to thrive in a net -zero carbon future, collaboration with governments, utilities, industry, and other organizations will be critical. We will coordinate with and account for a range of partners, to help make sure that our energy system and the services we provide that support it meet the community's needs as things change, and that we are contributing in the most helpful way possible. Objective 3.2: Do our part to address climate change We know that one-third of GHG emissions released within Kitchener are the result of natural gas use, and that much of this gas is supplied by Kitchener Utilities. Based on climate science and the guidance of organizations like the Intergovernmental Panel on Climate Change (IPCC), we acknowledge the imperative to achieve net -zero emissions globally by mid-century to avoid the worst impacts of climate change, and that this means that the role of natural gas will change, in Kitchener and across the world. As an energy provider, we are committed to doing our part to help the community in the transition to clean energy, and to making plans that align with the broad range of ways we could get there. Objective 3.3: Use clear metrics and align them with community -scale goals We know that, to be successful, it's important to be clear about what we're trying to achieve, and how we will know if we are achieving our goals. This is even more important for Kitchener Utilities as a community -owned business, where our community is both our customers and our decisionmakers, through the Council that represents them. We will develop and report on clear and transparent metrics throughout this work. These metrics will consider a range of financial, energy, and environmental outcomes, such as tonnes of GHGs reduced per dollar spent, or amount of energy used per unit of work. While energy and business outcomes will be critical for this strategy, we know that we also need to consider a broad range of outcomes for the community in our work. Our unique positioning as a community -owned business means that the wellbeing of our community is at the centre of our work, and this extends far beyond our energy-related services. We know that the energy transition is a critical opportunity for multi -solving, where work to address one problem can be designed to address other problems. As we heard from our engagement, we know that many in our community are struggling, and that we share many challenges with communities across Canada and the world around affordability, equity and fairness, prosperity and economic development, resilience in the face of shocks (such as supply chain problems or extreme weather events), and Guiding principles: Phase 1 discussion paper p. 23 Page 52 of 55 Clean Energy Transition Strategy environmental impacts. These issues are integrally connected with each other and the ways our society uses energy, and so all of these must be addressed together. Communities that thrive in a low -carbon future will be those that use the energy transition as an opportunity to build a stronger community and ensure that no one is left behind. We are committed to advancing approaches that help our community to address a broad range of issues, including affordability, equity and fairness, prosperity and economic development, resilience, and the environment. We are also committed to making sure our metrics assess this broad range of goals. Guiding Principle 4: Plan for multiple energy futures with flexibility and focus Our intention: "We will work to prioritize solutions that can adapt to and provide value in all energy futures." For success in the energy transition, we know we will need to be flexible while also being focused. Flexibility is needed because we don't know exactly what type of energy technologies will be available and used in different sectors of the economy, or exactly when they will be used. At the same time, focus is needed, because we know that there are common elements across all the different scenarios where we reach net -zero emissions. We need to focus on elements that will play a role in different potential futures. Objective 4.1: Rely on safe bet technologies and prepare for long shot technologies The Canadian Climate Institute has modelled a broad range of scenarios, which show diverse ways we could achieve net -zero emissions at different scales. In their 2021 report, they categorize climate technologies as either "safe bets" or "long shots." We need to account for both of these in our planning. "Safe bets" are emission -reducing technologies and solutions that are already commercially available and face no major constraints to widespread implementation. These technologies are expected to do a lot of the work to achieve net -zero emissions, and play an especially important role in near-term emissions reductions. We will rely on safe bet technologies in developing our approach, as a critical part of ensuring that our approach is practical and achievable, will have value to the community, and will limit risk to the City. "Long shots" are high-risk technologies and solutions with potentially high rewards that are still in early stages of development, and there are many of them in Canada and around the world. Some of these technologies will need to work in the long-term to enable net -zero emissions, but it is not yet clear which of these technologies will prove to be effective, affordable, and scalable down the road. Some of these technologies, for example those that could allow for high levels of hydrogen to be provided for home heating through the gas distribution system, could have significant impacts on our operations. This means that we must consider a broad range of potential long shot technologies, and take sensible steps to prepare to seize new opportunities and respond to technology changes and related changes in the industry that could affect our work as an energy utility in the coming decades. Guiding principles: Phase 1 discussion paper p. 24 Page 53 of 55 Glean Energy Transition Strategy Objective 4.2: Prepare for a broad range of net -zero carbon futures We know that there are different ways that our community, Ontario, Canada, and the world can reach net -zero emissions, and we don't know exactly how things will develop. Given this uncertainty, we need to prepare for a broad range of possible net -zero futures, as part of efforts to future -proof the utility. We will consider the effects of a broad range of potential net -zero pathways. While there are significant energy changes underway in our society, transformational changes happen as a series of incremental steps. This means keeping our eye on the ball for where we want to be well into the future, while building near-term steps to get there that are flexible and can be adjusted as circumstances evolve. Part of this dual positioning means considering both the near-term and the long- term impacts of our work. For example, part of the preparing for the long-term and the short-term includes considering issues of intergenerational fairness. We want our services to be affordable and to meet our community's needs both now and decades from now. This means we need to make sure that we are not putting heavy costs on future customers to benefit current customers, or vice versa. Objective 4.3: Iterate, experiment, and learn We know that, to prepare our business to thrive in multiple possible futures, we need to be prepared to try new things, and to do some things differently than we did before. This comes with uncertainty, and with the expectation that some things we try will work well the first time, and some things won't. We will build opportunities to prudently experiment into the work planned through this strategy. As we have throughout the first phase of the project, we will see doing, learning, and adjusting what we do in response as a key iterative process for enabling success. This flexibility will help us to adapt to changing policy and regulatory environments as they continue to evolve. Guiding principles: Phase 1 discussion paper p. 25 Page 54 of 55 Clean Energy Transition Strategy Part 4: Next steps In Phase 1 of the Kitchener Utilities Clean Energy Transition Strategy, we have sought to invite customers, community members, stakeholders, Kitchener committees, staff, and Council into a problem -solving conversation on the changes that we are facing and the opportunities they might bring. The discussions we have had in this first phase have formed the basis of the guiding principles to inform future phases of the work. 4.1: Expected components of Phase 2 Phase 2 of the project, scheduled to commence at the start of 2024, is focused on determining the way forward together through detailed, collaborative option assessment and recommendation of an integrated approach. We need to do two related aspects of work to recommend an approach. The first is to look at new potential business offerings or program expansions, in light of the opportunities for energy utilities that arise from these changes in our energy systems. The second is to assess our existing business, such as our assets, rates, and revenues, under a broad range of potential future conditions and scenarios. This work involves stress testing our business model against various situations that could arise, and considering opportunities to adjust what we do to prepare for those different possibilities. To be able to assess options for both potential businesses and our current business, we will need to develop detailed evaluation criteria that address all the guiding principles and objectives outlined in this paper. Expected outputs of Phase 2 include: a public report assessing the full range of options and identifying a recommended approach concurrently; a summary of Phase 2 engagement results, and; a report to Council recommending an integrated approach and next steps. 4.2: What you'll see next This discussion paper is being shared back with customers, community members, stakeholders, Kitchener committees, staff, and Council as part of continuing to build relationships and work collaboratively across groups to shape the future of our community utility. While detailed timelines are under development for Phase 2 of the project, informal conversations are continuing with all groups, and a stakeholder brainstorming workshop is planned for early 2024. We expect to bring the results of Phase 2 work and further engagement back to Council, staff, and the public in late 2024/early 2025. Guiding principles: Phase 1 discussion paper p. 26 Page 55 of 55