Rate increases projected for Palo Alto utilities

Water, gas and wastewater rates all set to go up in July

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.

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43 people like this
Posted by Resident
a resident of Another Palo Alto neighborhood
on Feb 5, 2015 at 10:24 am

Probably because of all their mailings about how to use less and be more energy efficient (than our neighbors) we are using less so they need to make up the difference by charging us more.

45 people like this
Posted by jm
a resident of Barron Park
on Feb 5, 2015 at 10:40 am

The city have been transferring millions from our utility bills into the general fund for years. A hidden tax that should be more transparent. How about a line item on each bill showing how much is going into the general fund each month. Since the economy is booming and the city seems flush with cash for things like bike bridges perhaps it's time to earmark this hidden tax for the utility infrastructure upgrades.

40 people like this
Posted by Kate
a resident of Duveneck/St. Francis
on Feb 5, 2015 at 10:51 am

No doubt the city has to pay the extravagant salaries for the ridiculous number of managers who manage each other
and each has a secretary who has a secretary who has a phone line, a pension, expensea, and on and on and on. In the meantime, residents, especially those on 'fixed incomes', are turning off the lights, wearing sweaters to keep warm, and letting the plants die. The City Hall gets a $4M overhall, the Boardwalk falls into the water, and other not-needed projects like a bridge to the Baylands to be used by only a few has a budget that also skyrockets. How do we stop this????

29 people like this
Posted by concerned citizen
a resident of Crescent Park
on Feb 5, 2015 at 11:00 am

Ridiculous. Rates are too high as it is. this has got to stop. incessant taxation on everyone--for any reason. the answer by the government for all of their mismanagement--RAISE TAXES!! All of these services charge too much. Water is too high. Garbage is too high. Sewer is too high. Gas is too high. Electricity is too high. The other answer by the city --keep building more buildings--who cares about the intense traffic issues-- keep building and keep taxing. -- and thanks for voting for us to represent you--now give me more money

17 people like this
Posted by resident
a resident of Duveneck/St. Francis
on Feb 5, 2015 at 11:01 am

Perhaps the infrastructure projects and rate increases can include plans to underground the city's utility poles and overhead cables. This relic infrastructure is unattractive, outdated and expensive to maintain. Growing numbers of cities across the country have already made investments to bury their utilities in order to increase service reliability and reduce maintenance costs in addition to eliminating these public eyesores.

31 people like this
Posted by Mr.Recycle
a resident of Duveneck/St. Francis
on Feb 5, 2015 at 11:24 am

It is hard to reconcile, even with infrastructure costs, that natural gas prices are going up, as the market price continues to drop, and is close to the 10 year low. It is at about half the 10 year average right now.

8 people like this
Posted by Crescent Park Dad
a resident of Crescent Park
on Feb 5, 2015 at 12:13 pm

@ Concerned: have you looked at the PG&E rates lately? CPAU is far better than those guys.

35 people like this
Posted by Online Name
a resident of Embarcadero Oaks/Leland
on Feb 5, 2015 at 12:16 pm

1) I'm tired of the ridiculous number of erroneous mailings on energy use.

2) I'm STILL searching for my non-existent storm drain for which I'm paying even though there's always a flood in front of our house and driveway on the rare occasions it sprinkles.

3) I'm still waiting for them to institute trash vacation coverage rebates.

4) I'm tired of seeing PA having the biggest surchages/usage fees on my landline, cellphone and cable bills.

5) I want a raise for hauling all those refuse cans, something our bills paid the city to do. If I'm going to do it, I want a 9% raise.

Maybe our new Chief Sustainability Officer can help us sustain our money. I compare my bills with friends in Los Altos, Mountain View and Menlo Park and they pay way less.

1 person likes this
Posted by Crescent Park Dad
a resident of Crescent Park
on Feb 5, 2015 at 12:25 pm

Let's see:

The driveway/curb drainage is an issue with Public Works (streets), not CPAU. You very well know there are storm drains on your street, the problem is the pitch at your address is not working.

It probably costs them more to figure out how to do vacation stops (and manage them) than it costs to keep the service going. Even local newspapers no longer give vacation rebates any more.

Agreed on surcharges.

You can pay a (even) higher fee for side yard service... ;-)

21 people like this
Posted by anonymous
a resident of Duveneck/St. Francis
on Feb 5, 2015 at 12:30 pm

Ok, ok, so there are a bunch of reasons why they want to raise the various utility rates here. I pay more than the average though I take steps to conserve resources. I would prefer the City Council monitor the utilities and other fundamentals like paving the roadways, ensuring storm drains function, then move on to under grounding the lines and etc. before focusing on "exciting" topics like the proposed bike bridge. Bike bridges are nice, but utilities that are affordable and overseen by our local government are more important. The high cost of living here is exacerbated by the City of Palo Alto and with their size and scope I would prefer more of a focus on crucial services than fluff like communication officers and sustainability officers.

20 people like this
Posted by Resident
a resident of Another Palo Alto neighborhood
on Feb 5, 2015 at 12:31 pm

Residential rebate is easy with a microchip. Many other trash removal systems use it. We all get a chip on our can(s) (with the savings we potentially make we can easily be asked to pay the initial modest cost) and the truck has a reader. They only pick up what is left at the curb, we only put out when full or not on vacation. They read who puts out cans each week. There are less cans on the route, the routes take a shorter amount of time, they use less time and/or less costs for pickup, we pay less because we can decide when to leave out the trash or not. Simple computerized system, everybody wins.

19 people like this
Posted by Paula
a resident of Midtown
on Feb 5, 2015 at 12:49 pm

And why isn't electricity going up as well? Hmmm? So electric car users are not put off by higher costs? Because Tesla is in Palo Alto?
Everyone I know is turning down the heat, saving water, recycling every scrap possible, and the city continues to raise rates. How many times has the water rate been raised in the last 5 years and what percent? And furthermore the money we pay for utilities should NOT be transferred to the general fund. I am tired of the duplicitous shell game the city is playing with us.

27 people like this
Posted by Online Name
a resident of Embarcadero Oaks/Leland
on Feb 5, 2015 at 12:56 pm

All of this is a good reason why Palo Alto Utilities should NOT be running our web services.

We conserve and conserve and then get told we're paying more because we're not using enough to satisfy the Utilities' contractual requirements.

I guess rates have to keep rising to replace the lost sales tax revenues as we keep replacing retailers with offices and make it more difficult to get out an shop locally. How much sales tax revenue have we lost as the Cal Ave contructions drags on? How much when Fry's is gone?

26 people like this
Posted by Joseph E. Davis
a resident of Woodside
on Feb 5, 2015 at 12:59 pm

Somebody has to pay for all those padded government and union salaries, pensions, and benefits, after all. Looks like that someone is you!

15 people like this
Posted by ChrisC
a resident of College Terrace
on Feb 5, 2015 at 1:24 pm

Are Palo Altans aware that the wastewater fee is a flat rate whether you alone live in a tiny studio apartment or in a 10,000 sq foot house with 7 people living there? This is so grossly unfair. I think if small dwelling owners/residents were aware of this all hell might break lose at City Hall. Gennady . why don't you cover this inequity some time?

31 people like this
Posted by notoratehike
a resident of Barron Park
on Feb 5, 2015 at 1:53 pm

I am baffled that the city is allowed to take money from the Utilities and then our Utilities says it needs to charge us more. Huh?

Also, the silly flyers -- supposedly they are comparing like houses. You can't really do that without having lots of data: how many people are in the house, who works, who travels, who showers at the gym, versus higher energy users, such as elderly (may need a warmer home), or the sick, or those who have visitors. We are urged to update our profile. Sounds like nanny gov.t to me. And, most us us try very hard to conserve, but we are treated like we need more management.

23 people like this
Posted by History Buff
a resident of another community
on Feb 5, 2015 at 3:43 pm

In 2009, city councilwoman Yoriko Kishimoto wrote in an email: “Palo Alto benefits greatly from having our own utilities. The profits which would go to PG&E shareholders instead come to the city general budget.” Web Link

This perspective – that the profits belong to the city and not to the rate payers – has serious consequences:

1. The city can -- and does -- raise utility rates at will. There is no PUC, no oversight

2. The city can transfer as much as they want into the city’s general fund, to be used for any purpose determined by the city government.

3. The city admits that it is using our utility payments to plug holes in the city budget.

In 2009, about 360,000 utility bills were generated, invoicing an estimated $198,500,000. Between 1909 and 2005, total transfers from Utilities to the City amounted to $351 million. Web Link

7 people like this
Posted by History Buff
a resident of another community
on Feb 5, 2015 at 3:44 pm

5-26-2009: City Manager Report 260:09 details the methodology used to calculate the Equity Transfer from the Electric and Gas Funds. The City does not make an equity transfer from the Water Fund to the General Fund Web Link

The reason the city stopped transferring money from the water fund is that Prop 18 made it illegal back in 1997. But the city continued the transfer until 2011.

6-21-2011 :Palo Alto halts water-rate increase -- for now
“Councilman Greg Scharff said the proposed rates would violate Proposition 218, which requires water rates to be consistent with the cost of providing service.

“The council decision to revise the water rates appeared to surprise city staff. City Manager James Keene told the council that its new direction on water rates is a ‘rather significant change from what you've been considering.’ Utilities Director Valerie Fong said staff is a ‘little bit confused’ by the council's proposal …” Web Link

2-11-2009: City contemplating $19.6 million transfer of utilities funds into general fund -- largest transfer in city history Web Link

“Commissioner Dick Rosenbaum said he wished staff was more candid about how they arrived at their transfer numbers. The commission had no involvement in any discussions on changing the transfer amount, he noted.

"’Under those circumstances, for Utility to propose a $7 million increase in transfer to the general fund is, in my opinion, just beyond belief,’ Rosenbaum said, referring to staff proposals to increase transfer from the electric fund by $4.2 million and to increase transfer from the gas fund by $3.1 million. ‘To do so without discussion and to tell us next month that you'll provide the numbers, it's just totally unacceptable.’"

17 people like this
Posted by Marie
a resident of Midtown
on Feb 5, 2015 at 7:11 pm

Marie is a registered user.

Since the utility tax no longer serves the initial purpose (i.e. reason cited in original election materials) of leasing sites from the school district, the tax should be used to defer the long term utility infrastructure costs. I see no reason utility costs should go up so much when inflation is so low, when there are other funds that could be used to offset basic long term infrastructure costs, as opposed to actual costs of electricity, water and garbage.

11 people like this
Posted by jerry99
a resident of Barron Park
on Feb 5, 2015 at 9:27 pm

Outrageous. The City Council vote to piss away Palo Alto resident's money on nonsense every week and now wants to steal more money by increasing every utility rate. No more money. With the decrease in gas rates that money can pay for all the "increased utility costs".
We are not all millionaires that can pay for all the lunatic programs like green energy, low income housing, etc. by having the city continually stealing money from us through utility bills.

13 people like this
Posted by Being Taken
a resident of Crescent Park
on Feb 5, 2015 at 11:21 pm

At some point, the public is going to have to figure out that the CPAU is the golden goose. Profits from the utilities go into the general fund? Voila! We have solved ze problem of ze Prop 13. Now the city council can screw us to the wall merely by raising utility rates. Whoopee.

The City of Palo Alto is now a wholly owned subsidiary of the Utilities Department. Until we dump city-owned utilities, don't expect this picture to change.

The only solution is to put it to vote. We'll know then, by how loud the screams are, how bad it has been all these years.

12 people like this
Posted by Ross
a resident of Palo Alto Hills
on Feb 6, 2015 at 8:47 am

Have to fund those big pensions for all the $100k+ per year employees. That is why all the money is dumped into the general fund.

3 people like this
Posted by Crescent Park Dad
a resident of Crescent Park
on Feb 6, 2015 at 9:12 am

"Until we dump city-owned utilities, don't expect this picture to change."

Really? You'd rather have PG&E and their exorbitant rates?

Fix the problem but don't throw the baby out with the bath water.

10 people like this
Posted by SteveU
a resident of Barron Park
on Feb 6, 2015 at 9:33 am

SteveU is a registered user.

For those of you who live in Single Family New Construction that have the required fire sprinklers, you are paying about $80 more A MONTH than those who live in older houses.

The Reason. 'Meter size charge'
Those houses need a 1-1/2" to 2" meter where a typical residence uses a 5/8" or 3/4" meter.

Meter size charge makes sense for many commercial sites where the water demand (flow rate) is common. In a 1FR, the only time a high flow is expected is during a FIRE.
This 'Windfall' gets neatly around Prop 218

8 people like this
Posted by pares
a resident of Barron Park
on Feb 7, 2015 at 12:48 pm

With the huge increases in real estate over the last decade, you would think our city is awash in revenue. Why do they need to raid our utilities?

This is an additional tax if the city takes from utilities and then the utilities doesn't have enough money.

9 people like this
Posted by senior resident
a resident of Midtown
on Jul 7, 2015 at 8:50 am

Looking at my current bill, I find I am using less than half of the water I used last year. Now I find that all my efforts in cinserving water will result in my being penalized with a surcharge. In effect I am now going to be charged for water I did not use. That is hardly conducive to encouraging water conservation. I wonder how much more I should use in order to avoid the surcharge.

7 people like this
Posted by Bunches of Baloney
a resident of Community Center
on Jul 7, 2015 at 9:03 am

Blue Shield was caught stuffing profits into a general fund recently. They were sued and heavily fined recently by the Feds.

Apparently, by law, after years of excess profits such as the ones the utility department has had, they are supposed to lower their rates or add extra services.

They simply cannot simply hoard money.

In the Blue Shield case, they had hoarded tens of billions and now must send refunds to subscribers.

Can the CPAUD be sued?

7 people like this
Posted by Bunches of Baloney
a resident of Community Center
on Jul 7, 2015 at 9:07 am

Hey,mwhatever about the underground electricity we paid for 20 years ago but never got?????

We need a refund for THAT!!!!!!

5 people like this
Posted by Online Name
a resident of Embarcadero Oaks/Leland
on Jul 7, 2015 at 9:24 am

Hey, we've got to pay the $30,000 housing allowances for those impoverished bureaucrats making $232,000 a year, a new chief sustainability officer, a second asst city manager and all the rest of the high-spending for a city that can't fix a major traffic light in 7 years!

Also we were out walking the dog at around 10:30 PM the other night at Rinconada Park and the sprinklers were going full blast!

Why do we have to spend thousands to redo our landscaping while the city continues to keep its nice green grass? Silly me. We have to pay for a new "wayfinding" system for the 1st floor of City Hall, etc ad nauseum.

6 people like this
Posted by sunshine
a resident of Barron Park
on Jul 7, 2015 at 10:13 am

If the City has excess money from our utilities that it shifts to the general fund, it should pay a dividend to all utility users instead of transferring money to the general fund. This excess money can also be used to underground wires in neighborhoods beyond the northern end of Palo Alto. We are all citizens and residents of the area and deserve all the beautification heaped on the rest of Palo Alto to the north. Please make certain that the beautification does not come in the form of cement walls without windows right out the the edge of the sidewalk; make them worthy beautifications.
Bike bridges only help a small segment of the population get to the Baylands. There are many of us who are either not yet old enough or are no longer capable of riding a bike or walking that far who like to visit the area. It's one of the few areas left where you can park near where you want to walk.
Vacation rebates: If the New York Times can still offer vacation rebates the City should be able to do it for trash. In addition, Not everyone fills every bin every week. We should get a rebate for the weeks we do not use the service. Perhaps if the City is pinched by some of its contracts for a change instead of passing everything on to the residents they will learn to not make such expensive contracts.
Finally, any money in the general fund should be used to fix all potholes properly, don't just put icing in the form of a slurry over the mess. If water collects in some areas it is due to poor construction of the road or storm sewer.

2 people like this
Posted by Midtowner
a resident of Midtown
on Feb 5, 2016 at 4:46 pm

As you can see, we're mad as hell. All of the above are true. Enough is enough. We're not stupid.

3 people like this
Posted by Sunshine
a resident of Barron Park
on Feb 5, 2016 at 6:14 pm

I notice that many City employees, especially managers are pushing for a big raise. Do they not know that those. Of us in SocialSecurity received no increase for the coming year.
Yes, local seniors will have to make do without an increase in benefits while City managers want a big increase. There should be no increase in City pay for any employees this year.

Sorry, but further commenting on this topic has been closed.

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