News

Rate hikes push Palo Alto's utility bills over the $300 mark

Higher gas and water costs drive $15 increase to the average residential bill in July

Palo Alto's elected leaders often tout the many achievements of the city's municipal utilities, from its "carbon neutral" electricity and profitable fiber network to its practice of buying "offsets" to mitigate the environmental impact of natural gas.

Last month, however, Palo Alto Utilities hit a milestone few are anxious to brag about: residential bills that, for the first time, top $300 per month on average. And according to city utilities staff, the number will continue to go up in the years ahead.

The City Council approved in June an array of rate increases that collectively add 5% — or $15.65 — to the residential monthly bill, bringing the average to $312.15 per month, according to staff. The new rates kicked in on July 1, the first day of fiscal year 2020.

The biggest factor is gas rates, which went up by 8.4% in July, adding $4.91 to the average monthly residential bill. Wastewater rates went up by 7%, adding another $3.83, while electric rates jumped by 5.5%, or about $2.98. Water rates increased by 4.4%, tacking on another $2.71 bill.

Smaller increases to the storm-drain fee and the rising utility user tax, combined, bump up the average monthly bill by another $1.22, according to Utilities Department staff.

The latest round of hikes marks the fifth year in a row in which the city has raised utility rates. Since 2014, the last year in which there were no rate increases, the average residential utility bill has gone up by more than $70. The biggest increase occurred in 2016, when the council approved various rate hikes that raised the average bill by more than 8%, or about $22. Utility bills then went up by another 2.5% in 2017 and by 3.9% in 2018, reaching $293.50, according to Utilities Department reports.

Utilities officials note that even with the recent rate increases, Palo Alto Utilities still compares favorably with neighboring jurisdictions, most of which are served by PG&E. Local residents still pay about 30% less for electricity than PG&E customers, said Catherine Elvert, communications manager for Palo Alto Utilities. And when it comes to gas costs, the city's rate is about 10% lower than PG&E's, Eric Keniston, rates manager for Palo Alto Utilities, told the City Council in June.

A comparison of rates from fiscal year 2019 shows Palo Alto's total utility bills below those in Mountain View, Redwood City, Los Altos and Menlo Park (which has the highest combined bill for water, wastewater, gas and electric). It is, however, higher than the city of Santa Clara, which also runs a municipal utility.

Elvert attributed the bulk of the increases to factors that aren't entirely in the city's control, including the higher costs of both acquiring and delivering commodities to customers. In some cases, she said, the near-term increases are necessary to avert higher hikes further down the road.

She pointed to the San Francisco Public Utilities Commission's recent effort to upgrade the Hetch Hetchy water system, a $5 billion project that required contributions from all SFPUC customers, including Palo Alto. The project, she said, is an example of a "very proactive investment" in the aged system that is used by San Francisco and more than two dozen other municipalities.

Many other water systems throughout California will have to make similar investments, Elvert said. And given the sizzling construction market, costs for such projects are only expected to increase.

"The benefit of completing the project when SFPUC did is that we continue to see labor costs increase, and you likely can't expect that to go down," Elvert said. "Hopefully, we were able to achieve cost savings."

On gas rates, higher transmission costs are a major driver in rate increases, she said. Even though the city owns its own electric utility, it relies on PG&E's transmission lines to bring natural gas to customers. With PG&E rebuilding and upgrading its gas lines and increasing inspections, particularly in the aftermath of the San Bruno pipeline explosion in 2010, the city has to deal with the rising costs of transmission.

PG&E's projects to update both its gas and electric systems are also impacting the area's construction market, further driving up the costs of capital repairs. The costs of replacing gas pipelines have increased dramatically in recent years, she said.

"Since PG&E is doing so much work on their system, it's hard for us to find contractors to complete the work on our system," Elvert said.

Elvert said the utility has taken some actions to curb future increases. This includes scheduling its upgrades so that major projects can be undertaken in alternate years, increasing the economy of scale and potentially lowering construction costs. It has been negotiating with PG&E to keep the rate increases more modest than the company had initially proposed. And it recently negotiated a pre-pay arrangement for the city's gas supply that she expects will save about $1 million annually.

The utility is also now reforming its billing system to make it more efficient, an upgrade that Elvert said will save money once it's in place.

The utility is also continuing to review its staffing levels and adjusting positions to make operations more efficient, she said.

Even with these changes, however, bills are expected to continue to rise in the coming years. The city's preliminary projections show electric rates rising by about 4% annually over the next three years and by 3% the year after that. Gas rates are expected to go up by 9% and 7% over the next two years, respectively, followed by more modest increases (between 2% and 3%) in each of the two following years. When coupled with increases in water, wastewater, refuse and storm drain rates, the average residential bill is expected to go up by a total of 5% in fiscal years 2021 and 2022 and by 4% in fiscal years 2023 and 2024.

The projections indicate that residential customers should expect to see their monthly bills go up by between $13 and $15 every year between now and 2024.

During the June 17 discussion of the most recent rate hikes, Councilman Greg Tanaka objected to rising rates. He and Councilwoman Lydia Kou both voted against most of the rate increases, with the exception of wastewater rates. Tanaka suggested that because the city owns its utilities, it should be realizing more savings.

"I know one resident who just moved out of Palo Alto after 40 years because it just got too expensive here, with utilities going up and taxes and what not," Tanaka said.

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Comments

24 people like this
Posted by TTurner
a resident of Palo Alto Hills
on Aug 1, 2019 at 11:21 am

TTurner is a registered user.

BOHICA Here it comes again, bend over


37 people like this
Posted by SuperD
a resident of Community Center
on Aug 1, 2019 at 11:31 am

Gotta love consistency. I've lived in Palo Alto 12 years now and it seems like the utility prices have been rising the entire time. Here's to big government!


11 people like this
Posted by JR Winslow
a resident of Leland Manor/Garland Drive
on Aug 1, 2019 at 11:56 am

JR Winslow is a registered user.

At one time a monthly $300 utility bill would have been considered humongous.

Not any more. But if you can afford to live in a $3M+ PA home, you shouldn't be complaining (unless you are an elder on a fixed income).

For all others...boo hoo (with sorrowful violins playing in the background).

The billing comes with the territory.

No one ordered you to reside in Palo Alto.


3 people like this
Posted by Joel
a resident of Barron Park
on Aug 1, 2019 at 12:31 pm

Joel is a registered user.

Is the utility rate for low income people on a fixed income changing as well? I believe that Palo Alto's maximum rate for low income is at $46,000; whereas Santa Clara County low income rate is around 58,000.


32 people like this
Posted by Citizen
a resident of College Terrace
on Aug 1, 2019 at 12:50 pm

Are funds collected for utilities being used for general fund items? Is this another hidden tax w out having to get the tax put out to the voters?


42 people like this
Posted by Paly Grad
a resident of Leland Manor/Garland Drive
on Aug 1, 2019 at 1:42 pm

Last year more than $20,000,000 was transferred from Utility Funds to the General Fund.

Web Link


10 people like this
Posted by Anon
a resident of Another Palo Alto neighborhood
on Aug 1, 2019 at 1:49 pm

Posted by JR Winslow

>> The billing comes with the territory.
>> No one ordered you to reside in Palo Alto.

True, but, for those who wish to pay less, consider drought-tolerant native plants. SCVWD used to have a program to subsidize re-landscaping, in fact. Curiously, I notice that real estate agents often get people to re-landscape with traditional high-water-usage landscaping for showing a property; after a while, the new residents get tired of paying the huge water bills and re-landscape again. I have to assume that people pay quite a bit more for properties with a bluegrass lawn? Go figure.


47 people like this
Posted by Pied Piper
a resident of Gunn High School
on Aug 1, 2019 at 1:56 pm

Pied Piper is a registered user.

The utilities department is a clever little end run around Prop 13, a way for the city to increase taxes without calling the levy a tax.

Let your Council members know that the transfers to the general fund need to end.


11 people like this
Posted by Joe
a resident of Another Palo Alto neighborhood
on Aug 1, 2019 at 1:58 pm

The Utility suggests that the average bill could go up by $15 a year for the next five years or so. Ok, that’s a likely possibility. That means at/around 2024, the average bill will now be $375. But what comes next? Is the Utility in the dark about the possible increases beyond 2024, or just not willing to reveal what they know to the public?

Let’s do a little thought experiment. If the Utility were able to keep the yearly increase to just $15/month – that would mean an increase of $180 every year. So, come 2030—the average bill would be $660/month. Ten years after that – the bill would likely be $465/month. And every ten years after that, another $180 is added on. Under this model, the average bill would be around $660/month by 2040.
Ok .. maybe no one reading this is going to living here in 30 or more years – but people moving in this year could well be here thirty years from now. The Council should be looking at more than just rubber stamping the Utility’s ever-increase demand for money.

On the downside, it’s very unlikely that the Utility will not be able to keep the yearly increases to just $15/month. Clearly energy use will be on the nation’s mind for a long time to come. Conversion to all electric, as the Utility has suggested in the past would increase the electricity costs by likely more than the cost of the gas producing the same amount of energy. Then there are some of the mandates of the CA Legislature that most assuredly will result in driving up prices and also might cause rolling blackouts because renewables are not as effective over a 7/24/365 time frame.

How many times have council candidates talked knowledgeably about the Utility, its costs to the residents—either from the dais or while campaigning for a seat on dais? Given that it’s clear future costs will be increasing considerably, isn’t it time for those running for council to be pressed to demonstrate their knowledge about the Utility?


11 people like this
Posted by Much Ado About Nothing
a resident of Midtown
on Aug 1, 2019 at 2:59 pm

...for those who wish to pay less, consider drought-tolerant native plants.

^^^Excellent point. In Palm Springs, those who prefer to keep their H20 bills down plant succulents or have rock gardens.

>> I have to assume that people pay quite a bit more for properties with a bluegrass lawn?

^^^ If they want lawns, they better be prepared to pay for the irrigation costs.
No sympathy here. As the other poster noted, if you can afford to pay $3.5M+ for a house in PA, water costs should be the least of your concerns.

Golf courses & cemeteries (with grass) also use a lot of water. Artificial turf could reduce much of this requirement + reduce the need for lawn cutters.

Or just relegate the deceased to mausoleums OR have their ashes scattered & bodies donated to med schools for cadavers.

Golfers should be able to adjust to artificial turf...football & baseball players did.

We use underground well water for our plant needs in Midtown. The water isn't suitable for drinking/bathing but OK for landscape irrigation purposes.


6 people like this
Posted by RS Love
a resident of Leland Manor/Garland Drive
on Aug 1, 2019 at 5:07 pm

First the obvious observation that Palo Alto is not unique among California communities facing these issues other than its beautiful location next to Stanford University and its ever-changing role in Silicon Valley's story (including the good and the bad stuff).

I would like to think that Palo Alto as a community is always looking ahead to a better, more sustainable future especially with respect to how we produce and consume energy. Upgrading gas pipelines may be good for the short-term business that PG&E is involved in but longer term, Palo Alto and our Utilities business should be planning for the end of gas sooner not later (yet another fossil fuel we must stop depending upon).

Electrification of everything; from transportation to heating/cooling homes & buildings should be at the forefront of city planning; not just delivering seminars or buying research reports but actionable, deployable infrastructure, pricing programs and policies that can be measured. And yes, it would mean a lot more direct investment in owning local clean generation, back-up battery storage and grid upgrades to withstand outages and growing spikes in demand. It would mean a new, more resilient power grid for all of Palo Alto.

We're basically out of time now for evaluating the merits of the carbon footprint challenge. It's truly radical thinking but the city of Berkeley is first among California cities to end the use of gas. Good for them!

Web Link

Where can Palo Alto start to make bold but practical decisions concerning our shared energy future?

Three possible areas to act on now: 1 - invest and directly own a lot more clean, "local" energy production (MW scale) such as rooftop solar and lots of it with supporting community microgrids which requires more investment in local battery storage (home and commercial), upgraded sub-stations and/or transformers, 2 - accelerated spending to replace existing city fleets with electric and hydrogen vehicles plus the supporting infrastructure of smart EVSE stations; and 3 - better or more tax/financial incentives to approve and build only 100% certified zero net energy (ZNE) homes and buildings (all electric).

As utility prices continue to rise even faster, ask yourself if Palo Alto will be more resilient or less resilient as a result of rising prices which today must include long distance, high voltage, transmission lines from suppliers such as PG&E. What's our back-up plan whenever the feeders go down? A diesel generator at city hall? A 1-hour stand-by battery? Or is it every neighborhood and business district is able to run uninterrupted in an off-grid or island mode?

The rising cost to maintain our Utilities business should force us to ask if we are making the best investment choices for the moment or for years to come? We have the technology and engineering, do we have the community vision to electrify everything sooner not later?

Let's hear everyone's thoughts. How would you make your city block or neighborhood more resilient?


26 people like this
Posted by Resident
a resident of Another Palo Alto neighborhood
on Aug 1, 2019 at 5:38 pm

Yet another way we are all paying for the tech dodo birds to crowd the rest of us out of the nest.


11 people like this
Posted by He Must Go
a resident of Old Palo Alto
on Aug 1, 2019 at 6:19 pm

Typical millionaires & billionaires complaining about a couple of bucks extra for utilities, all while the median average price for home in Palo Alto is now more than 2.9 million according to Zillow. I can’t believe all the complaining and BS about how you and others can’t afford to live here anymore.

Instead you should be more concerned about who and how this city is being fleeced buy these bureaucrats like Mr. Shikada now hiring a Spin Doctor his very own Sarah Huckabee Sanders @ 180 k + doesn't our city council have anything to say about these ridiculous personnel additions.

He Must Go


5 people like this
Posted by Odonata
a resident of Ventura
on Aug 1, 2019 at 8:10 pm

Odonata is a registered user.

This article focuses on rate increases but not ways to lower costs.

You can have lower bills by going solar, using efficient appliances and planting drought tolerant plants.

Our July CPAU bill was only $160: $78 for 7 CCF of water, $40 for sewer, $28 for a mini-can of refuse, $11 for storm drain, and $4 utility users tax. Zero for electric (we have solar PV) and zero for natural gas (our home is now all electric).

CPAU has many programs offering assistance for lowering utility bills. Start with a Home Efficiency House call: Web Link


8 people like this
Posted by That's Cheap!
a resident of Crescent Park
on Aug 1, 2019 at 8:50 pm

Over $300? BIG DEAL! My utility bill hasn't dipped below $900 in years, and sometimes it's even over $1,000!


29 people like this
Posted by Another Giveaway
a resident of Another Palo Alto neighborhood
on Aug 2, 2019 at 12:26 pm

Not everyone in Palo Alto is a billionaire or even a millionaire.

These utility rate increases are a hidden REGRESSIVE tax that is used to inflate the general fund, which in turn is used to fund giveaways to connected real-estate developers and social-engineering schemes favored by hypocritical elitist environmental scolds.

Palo Alto's utilities should not be a government run "for profit" monopoly. The utilities should be a not-for-profit service provided to residents, funded by property taxes and monthly utility use payments.


15 people like this
Posted by nickle and dimed
a resident of College Terrace
on Aug 2, 2019 at 12:33 pm

Thanks a lot! as if it's already expensive enough here! I am sure the rich city council members could care less


19 people like this
Posted by A Moral Compass
a resident of Leland Manor/Garland Drive
on Aug 2, 2019 at 12:39 pm

A Moral Compass is a registered user.

Back around 2003 or so, a $300.00 utility bill got Gray Davis tossed out of office as CA governor.


7 people like this
Posted by Paul C.
a resident of Midtown
on Aug 2, 2019 at 12:52 pm

Palo Alto should be smarter than that! Get some engineers, researchers instead of hiring PR bureaucrats to give us the craps. We need to think out of the box by leveraging new technologies to work smarter and inspire residents! Have a thorough evaluation of energy technologies and be open minded to new options such as:

Web Link


26 people like this
Posted by Online Name
a resident of Embarcadero Oaks/Leland
on Aug 2, 2019 at 3:17 pm

I read your report in the print edition on the utility rate hikes and comparisons and found the hikes are even worse than reported because the report left out all the various "use" fees -- fees to use utilities, fees to use your cell phones, fees for access to cable tv, etc.. etc etc.

There was an article some time ago that Utilities "had to" raise some other fee to compensate for all the cable tv cord cutters?

Re all the helpful conservation tips, the city has repeatedly defended rate hikes because we conserved TOO much.

Please update your reports to include all the fees and charges and surcharges because I don't have my bill handy.


17 people like this
Posted by Senior
a resident of Community Center
on Aug 2, 2019 at 6:13 pm

WOW! Ditto!Posted by:"That's Cheap" My Utility Bill has never been as low as $300. Has been as high as $1000.00+ We are two Seniors living in a one story home. NOT every Palo Alto resident is a Silicon Valley Millionaire.


16 people like this
Posted by Online Name
a resident of Embarcadero Oaks/Leland
on Aug 3, 2019 at 8:37 pm

I got my utilities bill today and added up the various taxes, fees etc. which came to 12% a month or $759.12 annually. The 3 biggies were the Utility User Tax at $265, the Water Meter Service Charge at $240 and the "Gas Monthly Service Charge" at $156 p/a.

Assume there are 23.000 utilities household and assume my charges are typical, the fees/taxes alone generated #17,480,000.

This is before the new rates go into effect.


51 people like this
Posted by Old Joe
a resident of Barron Park
on Aug 4, 2019 at 11:20 am

Home prices are cratering.
Palo Alto continues to make this town more and more unappealing


11 people like this
Posted by C
a resident of Midtown
on Aug 4, 2019 at 9:37 pm

Maybe utilities could save a few bucks by cutting out those full-color inserts with the bills. And we could save a few *million* dollars from the general fund (or whatever fund) by not spending it on that ridiculous European speed-slower on Ross that has only shunted traffic to other neighborhoods.


3 people like this
Posted by CrescentParkAnon.
a resident of Crescent Park
on Aug 5, 2019 at 3:34 pm

Uh, does anyone have bills under $300 now .... the whole year round?


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