After experiencing a jarring spike in gas bills earlier this year, Palo Alto customers could see some relief in the months ahead as the city prepares to roll out a rebate program and begin distributing money as part of a settlement stemming from a court case.
While the amount of refunds will vary based on gas usage, the two payments could add up to more than $230 for a typical residential gas customer. This total includes about $80 that the city is considering issuing to each customer. It also includes the roughly $156 that the median residential customer should expect to receive from the Miriam Green case, money that would be meted out in three installments, according to a new report from Utilities Department staff.
While the timing of the court-mandated payments remains uncertain and hinges on court approval of the payment scheme, the rebate could kick in soon. The City Council is set to consider on Monday a proposal to provide each customer with a rebate totaling 20% of the January bill, consistent with its February direction. Given that the median residential bill in January was $403.90, a typical rebate would be about $80.78, according to staff.
By offering the rebate, the council is hoping to ease some of the pain that the city's gas customers have experienced earlier this year. Utilities Department staff attribute this largely to escalating supply costs and note that gas prices in January jumped to their highest level since the 2001 energy crisis. After peaking at about $4 per therm that month, the gas commodity rates have since dropped to $1.26 and $0.77 per therm in February and March, respectively, according to a new report from the Utilities Department.
Palo Alto isn't the only city grappling with the high gas bills. According to Utilities Department staff, the city of Long Beach is developing a program for customers who are low-income, disabled or seniors on fixed income. San Diego Gas & Electric has two programs, one offering one-time payments of $600 for customers who may not qualify for low-income assistance and another targeting the most vulnerable and low-income residents.
Locally, more than 6,000 customers saw gas bills range between $500 and $1,000 in January, while more than 900 had gas bills greater than $1,000 that month, according to the city.
Additional payment could arrive later in the year as part of the city's settlement with Miriam Green, a resident who sued the city over its historic practice of transferring money from its gas utility to its general fund. As part of the settlement, the city was ordered to refund $17 million in funds that it had transferred between 2015 and 2022. While payments would vary based on gas usage, an average residential customer would get about $156, according to the Utilities Department.
"The City hopes to receive approval to issue refunds as soon as possible, which is especially timely in light of recent gas price spikes," the report states. "If the courts do not approve the parties' settlement, both sides anticipate relitigating their appeals."
On Tuesday night, the council's Finance Committee offered another small gesture of support to gas ratepayers when it voted 2-1 to reduce the amount that will be transferring this year from the gas utility to the general fund. Last November, Palo Alto voters approved Measure L, authorizing the city to transfer up to 18% of gas utility revenues to the general fund, which pays for most basic city services. Council members Pat Burt and Julie Lythcott-Haims both supported on Tuesday reducing the percentage to 15.5% in the coming year, an adjustment that will allow more money to stay in the utility and slightly reduce future increases in gas rates. Vice Mayor Greer Stone dissented and suggested sticking with 18%.
For an average customer, the impact of this reduction will be fairly negligible: under the 18% scenario, gas rates would increase by 9% in the coming year, while under the 15.5% scenario they would increase by 8%. This amounts to a difference of about 52 cents on the monthly residential bill in fiscal year 2024, according to John Abendschein, assistant director of utilities.
Burt noted Tuesday that the spike in gas prices was caused by factors well beyond the city's control, including Russia's invasion of Ukraine. Even so, he argued that it's important for the council to demonstrate to residents that the city is listening to their concerns and trying to support them. This, he said, is particularly critical at a time when the city is asking customers to support ambitious electrification efforts as part of its sustainability plan.
"If they believe that we're indifferent toward the impacts on them, we're going to undermine their support for that movement in the coming years," Burt said. "That sways me to a great degree toward wanting to demonstrate both in real dollars, through the general fund rebate, and through doing whatever we can during this fallout from this big disruption that really was beyond our control.
"They're not looking to blame Putin for this. They're looking to blame us for this."
Stone favored keeping the transfer to the general fund at 18%. Reducing the transfer amount, he said, could lead to service reductions and other hard decisions during the budget season, which will kick off in April and conclude in June.
"I don't want get into the budget and make difficult cuts on affordable housing or public safety or anything else because of a difference of a couple of dollars here," Stone said.
But even as gas customers will get some assistance, council members are backing away from an earlier proposal to send similar rebates to electricity customers. Last year, the council added a fee known as a "hydroelectric rate adjuster" to electric bills to account for dismal production from hydroelectric sources during the drought. According to staff, electric rates had gone up by 35% since April.
Lythcott-Haims suggested last month that the city explore rebates for electricity much like it's doing for gas. But on Tuesday, she and her colleagues struggled to find the right method for doling out that assistance. They confronted the fact that limiting the rebates to the 20% of the January bill would lead to flat rates of $27.05, an amount that committee members deemed to be too paltry to be meaningful.
The committee also rejected the idea of basing rebates on usage. Under that alternative, rebates would range from $2.08 for customers with bills under $20 to $774.37 for those with bills greater than $2,000.
Neither option, they noted, considers whether the customers getting the assistance are in fact those who need it the most. Lythcott-Haims suggested that a $27 rebate, which is based on an average residential electric bill of $135.26, is not enough to "send the signal that we're trying to send, which is, 'We know you are hurting.'"
"I worry for those people who are lower income and had a utility bill of $500," Lythcott-Haims said. "Getting $27 is going to feel like a slap in the face."
At the same time, city officials are considering offering additional assistance to low-income residents who are struggling to pay their electricity bills by expanding an existing subsidy program known as ProjectPledge, which is currently funded by voluntary contributions from customers and which offers one-time payments of up to $750 for residential customers who fail to pay their bills on time because of unexpected hardships. The Finance Committee plans to further discuss ProjectPledge and possible electricity rebates on April 4.
Lythcott-Haims said she would like to focus on assisting low-income residents rather than simply issue $27 rebates to everyone.
"We ought to be directing relief funds to those who really need them," Lythcott-Haims said.