After holding steady this year, Palo Alto's utility bills are about to embark on an upward climb.
The city is planning to increase its gas, water and wastewater rates to help pay for a series of regional infrastructure projects relating to these utilities, according to a presentation that the Utilities Advisory Commission heard on Wednesday night. In addition, the city's refuse rate is projected to go up by 9 percent.
On the bright side for local customers, electricity rates are expected to stay flat in the coming year, continuing a trend of stability that began in 2009.
When combined, the projected hikes in gas, water, wastewater and refuse rates would increase the median monthly bill by about 6 percent, or about $12.60, in fiscal year 2016, which begins on July 1. Currently, the median bill is $218.45, according to the Utilities Department.
At a Wednesday presentation in front of the Utilities Advisory Commission, staff attributed the increases largely to infrastructure projects, many of which extend far beyond Palo Alto. Higher water bills, for instance, are driven primarily by the gradually rising cost of buying water wholesale from the San Francisco Public Utilities Commission (SFPUC).
The SFPUC, which draws its water from the Hetch Hetchy system, is in the midst of a multi-year program to refurbish and upgrade the reservoirs and pipelines that make up the system. Much like the other two dozen or so cities that get their water from the SFPUC, Palo Alto is contributing to the cost of the infrastructure renovation. As a result, staff is projecting 7 percent increases in water rates in each of the next four fiscal years, followed by a 3 percent increase in 2020.
The gas utility is also projected to go through years of increases, though in terms of percentages the hikes are more modest than for the water utility. Staff is projecting a 3 percent increase in fiscal year 2016, followed by four consecutive years of 4 percent increases. Staff attributed this to both PG&E's ongoing effort to upgrade its gas pipelines and to the city's own program in replacing gas mains. Because the city uses PG&E's pipelines to transport its gas, it is being charged higher transportation costs. Utilities staff expects these costs to nearly double in fiscal year 2016, according to Eric Keniston, a department resource planner.
In addition, the city's own capital-improvement costs are projected to be $450,000 more than previously expected because of a hotter construction climate, which results in higher bids. Keniston said the cost of main installation has gone up by 25 to 50 percent.
The wastewater rates, which make up a relatively small portion of the overall bill, will undergo a similar rise. Staff is projecting a 9 percent rate increase in each of the next four years, followed by a 7 percent hike in 2020. In 2016, this will add $2.64 to a residential bill. Jon Abendschein, a senior resource planner, said the rising rates are associated with improvements that Palo Alto and its partners in the region are making to the Regional Water Quality Treatment Plant. The city has recently embarked on the design of a new facility that would allow it to retire the existing sludge-burning incinerators.
"We've done an exemplary job in continuing to invest in our infrastructure and we're making sure we maintain a safe system and don't leave infrastructure investments undone for future ratepayers," Abendschein told the Utilities Advisory Commission. "This forecast assumes we'll continue to do that."
The rate hikes are by no means limited to this year. According to staff's projections, the 5 percent increase in this year's bill would then be followed by three straight years of 6 percent increases and then a 4 percent increase. When combined, these projected increases in the various utilities would add a total of $52.56 to the median bill by 2020.
Commissioners accepted staff's explanations, though some wondered if it would be possible to find a way to have at least one year in which the bills don't go up at all (much like this year). Commissioner Audrey Chang called the projected rate changes a "pretty significant increase" and stressed the need to clearly communicate to customers the reasons.
"I think there is a need to explain it in terms that people understand quickly," Chang said.
Commissioners also lauded staff's work on keeping the local infrastructure up to date. Commissioner Steve Eglash praised the city's "continued commitment and dedication to capital improvement" and said it should be a "source of pride to all utilities staff and everyone who lives in the city."
"Unlike most of our nation's infrastructure, our utilities infrastructure in Palo Alto is being conscientiously managed," Eglash said.
Commissioner James Cook was particularly pleased about the electric rates, which staff noted remain among the lowest in the state and well below those charged by PG&E. This is particularly notable, he observed, because of the city's gradual switch to clean-energy sources, an effort that hit a milestone last year when the city adopted a "carbon-neutral" electric portfolio.
"We've adopted a carbon-neutral portfolio, we've gone beyond state requirements for renewable energy, and yet over the same time, in the last few years, we had zero percent rate increases, including this year," Cook said.