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Gas rates set to drop in Palo Alto

Original post made on May 3, 2012

After seeing their utility bills grow in recent years, Palo Alto's gas customers could finally get a break this year -- a rate adjustment that would bring the average residential bill down by more than 20 percent.

Read the full story here Web Link posted Wednesday, May 2, 2012, 5:09 PM

Comments (6)

Posted by Common-Sense-Utility-Pricing, a resident of Another Palo Alto neighborhood
on May 3, 2012 at 8:28 am

The fact that natural gas was more expensive in Palo Alto than in PG&E territory is old news. Unfortunately, few people knew anything about it, and too many people kept claiming that the quasi-socialistic model of Palo Alto government ownership of the utility redistribution/sale saved people money—even when the gas prices were somewhat higher.

What's missing from this article, and from the public's attention, is the past, and soon-to-be-current pricing models that the PAU have been using for utilities pricing. There realignment has been driven by Prop.208 lawsuits against (primarily) the LA DWP (Department of Water and Power). It's a shame that Palo Alto was not sued also, so that the history of the Utility's monopoly pricing models could have been obtained, and made public.

> The average monthly gas bill for the largest commercial
> customers would rise from $31,606 to $46,646 under the
> rate adjustment.

A price increase like this comes to about 30%. This means that under the new pricing model (which is presumably now legal under Prop.208 mandates), the commercial accounts were being subsidized by the residential accounts for decades. No doubt this was someone's idea of making Palo Alto "business friendly", but it certainly was not something that was generally known to everyone who was a customer—meaning the home owners. While the commercial customers generally consume around 85% of the electricity sold by the PAU, they only consume about 15% of the natural gas. With the dollar amounts specified in this article, residents have probably been overpaying upwards of $1,500 every ten years. This overpayment was likely used to effectively subsidize the pricing of gas for the commercial accounts.

> Larry Klein said: "The city needs to send the message that "we're
> going to follow the market, and that means we're going to
> follow the market up as well as down."

And how is this pricing model any different than anything else in life? The older model, which tried to avoid market pricing, led to the City's negotiating fairly short contracts which locked in whatever prices they could negotiate. Because the PAU is a fairly small customer, there were few gas resellers that were interested in dealing with the City. So, the contracts that were negotiated were more expensive than the spot-price of gas, which is what PG&E pays, and how it can sell more cheaply than the PAU.

It's not that hard to look at your monthly utility costs on a year-by-year basis instead of a month-by-month basis. If the Council had the slightest bit of common sense, they would insist that the bills, and the PAU's web site would provide month-by-month, and year-by-year average cost for all of the commodities that it sells. This would provide people both views of what their utility commodity purchases are costing them. It wouldn't hurt to post the PG&E equivalent pricing too.

This change is long overdue. It's a shame that we don't have a well documented history of how utility commodity price changes have been determined, over the years.


Posted by Anonymous, a resident of Another Palo Alto neighborhood
on May 3, 2012 at 8:36 am

Gas prices have been far below the Enron contract price for some time and will be in the near term. Since natural gas is used for many electric power generators, the electrical rates should also drop.

Web Link


Posted by Up or Down?, a resident of Old Palo Alto
on May 3, 2012 at 4:12 pm

Amazing!
Right as we have received notice of proposed rate hikes from PAU!!


Posted by Resident, a resident of Another Palo Alto neighborhood
on May 3, 2012 at 6:25 pm

This is a joke? Right?


Posted by Carlito Waysman, a resident of Old Palo Alto
on May 4, 2012 at 12:44 pm

We need to take away the power to raise our utilities rates at will from the City of Palo Alto. The way things are now, gas, water, electricity, garbage are just a sure way to provide funds to the City's general fund. It doesn't matter how good you are at using less water, gas, electricity, producing less garbage, it doesn't matter anyways, you will see your rates going up. When you call the City to explain the reasons of the rate increases, they come up with the most moronic explanations.


Posted by Karen, a resident of Midtown
on May 4, 2012 at 12:54 pm

"The way things are now, gas, water, electricity, garbage are just a sure way to provide funds to the City's general fund."

That is the nut of the issue.

Good post, Carlito.


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