Palo Alto utilities customers could soon see $17 a month increase | March 3, 2023 | Palo Alto Weekly | Palo Alto Online |

Palo Alto Weekly

News - March 3, 2023

Palo Alto utilities customers could soon see $17 a month increase

New financial plans indicate water, wastewater and gas rates will increase in July

by Gennady Sheyner

With gas prices falling and reservoirs replenishing after recent storms, Palo Alto's leaders hope the type of skyrocketing rates that residents have experienced over the past two months will be an aberration, not a norm.

At the same time, utility customers in Palo Alto should expect to see gradual increases in most rates come July, thanks to high commodity costs and the Utility Department's ongoing efforts to refill its depleted financial reserves and upgrade aged infrastructure.

According to the city's new financial plans, the gas, water and wastewater utilities are all expected to see rate increases in July, when fiscal year 2024 begins. Collectively, all the rate changes are expected to add about $17 to the average monthly bill, which in 2023 amounted to $369, according to a presentation that the city's Utilities Advisory Commission saw on Wednesday night.

While high gas bills have been common lately thanks to colossal increases in commodity costs in January and February, the new financial plans suggest that changes to water rates will have the highest impact on utility bills in fiscal year 2024. Palo Alto's long-term plan shows a 7% increase in water rates in 2024, followed by three consecutive 3% increases in the following three years. This means the median monthly residential water bill is expected to increase by $6.90 in July.

The water rate hike is driven in part by infrastructural improvements undertaken by the city's supplier, the San Francisco Public Utilities Commission (SFPUC), and in part by local efforts to upgrade and maintain the distribution system. The SFPUC is now in the final stages of completing its massive, $4.8-billion project known as Water System Improvement Program (WISP), which entails 52 infrastructure projects around the region focused on boosting seismic safety for the Hetch Hetchy Regional Water System.

Palo Alto is one of more than two dozen cities that get its water through Hetch Hetchy and, as such, is responsible for its share of payments for the infrastructure improvements and the debt service costs.

"This has resulted and will continue to result in large increases in the annual debt service costs assigned to wholesale customers like Palo Alto," a report from Lisa Bilir, senior resource planner at the Utilities Department states.

Another major component of the water rate increase is the escalation in distribution costs, which includes the costs of paying for main replacements and performing seismic upgrades at two local reservoirs. While the city plans to tap into the water utility's reserves to avoid a higher rate escalation, the combination of growing costs and decreasing water sales (thanks to local conservation efforts) are prompting the city to seek higher rates.

Wastewater bills will also continue to rise, thanks to the colossal effort by Palo Alto and its partner cities to upgrade the Regional Water Quality Control Plant. On wastewater bills, customers can expect a series of cumulative 9% increase between 2024 and 2028, which will push the average residential bill from the current level of $44.62 to $48.64 in 2024 and, ultimately, to $65.53 by 2028.

The Utility Department's new plans also show an 8% increase in gas rates, which would add $5.20 to the median residential bill. That change, however, assumes that supply costs will remain steady between 2023 and 2024. Because utilities staff are forecasting that the city's cost of buying gas could in fact drop by about 36% from the sky-high levels of this past winter, local bills could decrease by 13% in the next year, according to staff projections.

Jonathan Abendschein, assistant director in the Utilities Department, said Wednesday that the recent quotes that the city has been getting from the gas markets show no indication that the market prices will reach a level similar to this past winter. He warned, however, that the projections can change.

"There are scenarios where people can see gas bills rise again next winter," Abendschein told the utilities commission.

Electricity bills, which also spiked during the last year, should remain relatively unchanged, according to Utilities Department staff. The city plans to slash in half the "electro rate hydro adjuster," a charge that it tacked on to bills last year to account for the drought's impact on the city's hydroelectric sources.

But while such a change would normally lead to lower bills, the department is also looking to raise the "base rate" by 14%, leaving bills more or less at the level where they are now.

The Utilities Advisory Commission endorsed the financial plans for all four utilities at its Wednesday meeting. The commission also supported a proposal to lower the amount of revenues that the city would transfer from its gas utility to its general fund in the coming year. While Measure L, which voters approved in November, authorizes the City Council to move 18% of gross revenues from the gas utility to the general fund, which pays for most basic services, the new proposal would limit the transfer to 15.5%.

That reduction, according to staff, obviates the need for a higher gas rate increase. If the city transfers 18% of the gas revenues, it would need to raise rates by 9% and 10% in fiscal years 2024 and 2025, respectively. With 15.5%, the increases in the two years would be 8% and 7%.

Abendschein also said that the city hopes to limit sharp fluctuations in gas prices by exploring hedging strategies, which may include entering into more long-term deals to avoid rapid changes in the "spot" market.

Commissioner Phil Metz was the only member of the commission who voted against the gas financial plan because it proposed transferring money from the distribution fund (which supports the system's operation) to pay for high commodity costs. The financial plans for the water, wastewater and electricity plans all received the commission's unanimous endorsement and will now go to the City Council's Finance Committee for review before moving on to the full council.

Like others, Metz urged utilities staff to more fully explore the reasons behind the recent spike in gas prices and come up with ways to reduce the volatility in the future.

"This one is such a big problem and such a public one that the City Council and all the residents and ratepayers are concerned about that, (and it) requires visible and transparent analysis to address what happened and what are we doing to improve it," Metz said.

Email Staff Writer Gennady Sheyner at [email protected]


Posted by Nayeli
a resident of Midtown
on Mar 3, 2023 at 8:57 am

Nayeli is a registered user.


Utility prices have ALREADY risen drastically over the last year! Why in the world would Palo Alto consider raising prices even higher?!?

I've read comments here and on websites like NextDoor. Despite the overwhelming majority of people upset at rate increases, there are still a tiny fraction who defend price increases (or those who try to pretend like it's "not a big deal").

There should be a law that restricts rate (and FEE) increases to less than 5% year-over-year. In fact, each and every presentation of such proposals (both in Palo Alto and throughout the state) should include an expected per-household cost.

If a politician proposes a new gas tax or rate increase, they should be required to explain just how much more each and every person will be paying.

Posted by Nayeli
a resident of Midtown
on Mar 3, 2023 at 9:08 am

Nayeli is a registered user.

Inflation over the last 18 months has hurt many families -- even in Palo Alto. We are forced to absorb increases in gas prices, grocery prices, energy prices, interest rates, tuition/fees, licenses, etc. Yet, the total increases are far exceeding any increases in our paychecks.

Yes, the rates went up recently (for a few reasons). Yet, how forthcoming are those explanations? How much is attributable to natural macro changes versus specific state or local policy changes? It is a bad time to justify any changes when people are experiencing this current inflationary pinch (or grab).

Posted by Online Name
a resident of Embarcadero Oaks/Leland
on Mar 3, 2023 at 10:49 am

Online Name is a registered user.

$17 a month?? Surely you're joking when many of us have already seen bills over $1,000 -- and that's before the latest round of increases.

But then again you once reported that some had utility bills of $88 dollars a month which is totally impossible when there's a $50 a month utility user tax, a $30 water "connection" fee!

Fully one third of our bills are surcharges, taxes, connection fees etc and an investigation of CPAU charges is long overdue and shouldn't be dismissed with articles claiming our bills will rise by piddly amounts when in fact they're skyrocketing after years of being overcharged by $20,000,000 a year.

By the way, when are we going to get our rebates from the Miriam Green lawsuit? How about covering that.

Posted by Miriam Palm
a resident of Old Palo Alto
on Mar 3, 2023 at 11:30 am

Miriam Palm is a registered user.

Outrageous!! Let's put that transfer tax back on the ballot, now that more of us understand it. Not everyone who lives in Palo Alto is made of money.

Posted by MyFeelz
a resident of another community
on Mar 3, 2023 at 1:32 pm

MyFeelz is a registered user.

I'll just keep posting these 2021 figures until I'm blue in the face, or when the new figures come out. This is why the City needs to charge us more to pay for utilities. We are paying nearly 3 million dollars a year for dead weight.

Edward Shikada City Manager $573,307.57

Molly Stump City Attorney $487,795.83

Dean Batchelor Director Utilities $457,631.76

Tomm Marshall Assistant Director Utilit $435,273.72

Debra Lloyd-Zannetti Utilities Compliance Mana $424,822.57

Posted by mjh
a resident of College Terrace
on Mar 3, 2023 at 1:39 pm

mjh is a registered user.

Palo Alto transfers about $20 million a year from the profit it makes from our entire utility bill to the general fund, not from just gas overcharges. A few decades the city used to charge Utilities a small annual amount to recover expenses. Then during a budget turndown the council looked at the Utility’s reserve fund and decided our utility bills could be a cash cow for city hall. Since then our bills have been increasingly padded, most recently amounting to approximately $20 million a year siphoned off to the city’s general fund. The gas overcharges represented only a part of this profit. When the city claimed they had historically always transferred money from our gas bills to the general fund to justify bringing the measure to the voters last election, this was true. Except what they didn’t tell you that this used to be small annual amount to recover city expenses. For those paying Palo Alto utility bills, it would be more honest if this hidden tax was a line item on our bills.

Posted by Online Name
a resident of Embarcadero Oaks/Leland
on Mar 3, 2023 at 4:19 pm

Online Name is a registered user.

@mjh, excellent point about breaking out the fees, taxes, surcharges etc. as separate line items esp given the city's propensity for secrecy and for laughably whitewashing the increase as "$17 a month"! Accuracy and honest from government matters as much as "quality journalism."

Years ago when the Miriam Green lawsuit and overcharges was being discussed on NextDoor and the CPAU spokeswoman Elvert? was giving evasive happy talk responses to specific questions about the reported $20,000,000 in overcharges she PRIVATELY to individuals raising questions instead of to the entire group.

So we did her job as "spokesperson" and revealed the amount -- which she'd confirmed privately -- to the entire group.

You can wire our #300,000 "communications" fees to our Swiss bank accounts with no unfunded pension liabilities!

Posted by Bystander
a resident of Another Palo Alto neighborhood
on Mar 3, 2023 at 4:47 pm

Bystander is a registered user.

So much of our utilities bill is basically tax as others have said. There is very little we can do to reduce our bill as even when away on vacation we still have to pay for every line item, including trash pick up which we are not using.

How about giving us the option to have less pickups? How about we can opt for twice a month pickup? How about being able to have vacation holds on pick ups? No, the utilities is just a money grabbing government agency, not a service provider with the needs of its customers as a priority.

Unfortunately we do need our utilities and they know that. They can charge what they like and we are forced to pay even if it means doing with less discretionary spending money left in our pockets. We are seen as bottomless sources of income to every whim of their choosing and very soon there is going to be rebellion.

Posted by Morgan
a resident of Meadow Park
on Mar 3, 2023 at 5:07 pm

Morgan is a registered user.

If the Utility department is not making enough money to support itself then why is it transferring ANY money to the general fund?

And, "because they can" or "because the city needs money" is not a good reason.

The city can't use an inelastic food such as utilities to fund their careless spending. What is the city doing to cut costs from the general fund?

Posted by Online Name
a resident of Embarcadero Oaks/Leland
on Mar 3, 2023 at 6:46 pm

Online Name is a registered user.

I just got my utility bill and was admiring all the creative fees etc and wondering why for gas there's a Winter Distribution Charge ($153.35), a separate transportation charge ($19.82) a monthly service charge of $11.54 just for gas and separate from the overall Utilities User Tax of almost $40, and both a carbon offset charge (9.96) AND a Gas Cap and Trade Compliance fee ($10.93).

Apart from my commodity charge, those equal $205.77 so it wouldn't matter how cold I let the house get and how much I tried to conserve! Check your bills and you'll see the commodity charges are quite reasonable vs all the add-ons!

Serious questions:1) Who benefits from the Public Benefit fee for electricity? 2) What's a Hydro Rate Adjuster fee 3) Why are we paying a month;y service charge for gas? 4) What's the difference between a Gas Distribution Charge and a Gas Transportation Charge? 5) What's a Winter Distribution Fee and how does it differe from Gas Distribution and Gas Transportation?

Posted by Moctod
a resident of University South
on Mar 3, 2023 at 8:39 pm

Moctod is a registered user.

This article reads like a copy from ther Palo Alto Utilities staff press release.

Does anyone really believe that the increases to waste water, natural gas, water and electricity will amount to $17. per month? Sure.

Please do some research and read the 360-400 pages from the Palo Alto city staff rubber-stamped by the Utliities Advisory Commission on March 1st.

This was posted a week ago, how do these raises amount to $17, per month?


Sewage- 9% per year for each of the next five years.

Water rates- 3% increase

Natural Gas-
Transfer 18% of yearly gas revenues to the general fund for the fiscal years 2021 to 2024.

Increase the gas cost rates for tier one and two by 21.4%

Increase gas distribution rates by 8%, 7%, 5%, 5%, 5% for the fiscal years 2024-2028.

Electric- (Here is the one bone, or, I should say, one half of a bone) The recent Hydroelectric rate surcharge decreased by 50% on July 1, 2023.

However, all residential electric rates increased by 14% effective July 1, 2023.


It is interesting to note that both the Palo Alto Online and the Palo Alto Alto Daily Post article on these raises read like the same hand-out from the city bureaucracy....Only a raise of $17, to be exact.

Posted by Bystander
a resident of Another Palo Alto neighborhood
on Mar 3, 2023 at 9:27 pm

Bystander is a registered user.

So the news about the drought is that officially we are not in a drought although that doesn't mean the drought is over.

All these higher water rates, surcharges for using less, and fixed amount drought levy, should be reduced. I'm not holding my breath.

Posted by Online Name
a resident of Embarcadero Oaks/Leland
on Mar 4, 2023 at 12:03 pm

Online Name is a registered user.

Speaking of the drought, when I was reviewing my recent utility bill and noticed the drought surcharge field I was reminded that CPAU kept charging us that surcharge for months after the governor had declared the drought was officially over. It took concerted public pressure for them to finally remove it and even then we never got a refund or an apology or even an "oopsie" excuse.

Serious question, what DOES the Utility Advisory Commission do?

Posted by Resident 1-Adobe Meadows
a resident of Adobe-Meadow
on Mar 9, 2023 at 11:10 pm

Resident 1-Adobe Meadows is a registered user.

Here we are sitting in a storm. Watching the evening news they are telling you where the power outages are. In PA we have electricity. We have hot water and heat - thank you gas. Los ALtos has power issues. What anyone can learn from this adventure in weather is that being totally dependent on electricity is a losing proposition. We need to get off that theme - it is failing all over the state. And be happy that in our city we have electricity, and gas for heat. So who in this city is pushing for being totally dependent on electricity? We need names here - we need to know who is being a disrupter of a system that is working.

You can read about someone who is shooting transformers and putting whole areas out of service. The people who are pushing for change are not taking into consideration the number of people who are loose and being a problem.

Posted by Crescent Park Rez
a resident of Crescent Park
on May 10, 2023 at 7:06 am

Crescent Park Rez is a registered user.

Like resident 1 - Adobe meadows said - it could be worse. I’m grateful I’m not a PG&E customer who will start charging a base connection based on your household income thanks to AB205 which our state legislature slipped in the reconciliation bill last June. PG&E, an investor owned utility - not a public one - is essentially taxing people. What else is it if it’s based on income?

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