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Palo Alto to cut gas rates, cut back fund transfers

Original post made on Mar 5, 2009

Faced with pubic outrage and criticism from its own Utilities Advisory Commission (UAC), Palo Alto has scaled back plans to hike utility rates and revised its method for transferring money from the Utilities Department to the city's general fund.

Read the full story here Web Link posted Thursday, March 5, 2009, 8:27 AM

Comments (36)

Posted by W. Smith
a resident of Palo Alto Orchards
on Mar 5, 2009 at 10:37 am

The administrative services director, Lalo Perez, wants the city to "get a consistent, transparent, and easily calculated rate of return on its (utility) investment..."

Wouldn't we ALL like that! Unfortunately, it is in the nature of most investments NOT to provide a consistent rate of return - especially in uncertain economic times. As Mr/Ms Perez taken a look at the stock market in the past six months? Exactly WHO has been getting a consistent rate of return on his/her investments???

"Insuring a consistent rate of return" means milking the ratepayers to fund the city's inflated budget which Keene seems to feel is so sacred. ("It's us.") Is that why our gas rates are 38% higher than neighboring communities with PG&E? This is outgrageous! And kudos to Dick Rosenbajum for calling a spade a spade.

Posted by Anna
a resident of Downtown North
on Mar 5, 2009 at 10:58 am

The entire concept of a "Rate of Return" when applied to the Palo Alto Utilities operation is nonsense.

We - the residents of PA - are the ultimate owners of PAU. We - the same residents - are also the ratepayers for PAU services. The only way we as residents see a "return" on our Utility investment is if we are charged more than it costs to supply utility services to us as ratepayers.

The whole "rate of return" is a scheme to take money out of our pockets as ratepayers and then to transfer it to the general fund to be spent the same way as all other revenues the general fund receives. That is, it's functionally equivalent to a tax.

The city could get the same revenues it gets now by lowering utility rates to cover only the cost of providing them, and by raising taxes on us to make up the difference. This would be a more clear and open way of extracting money from us to pay city salaries and pensions. It would also be more honest - which is exactly why it doesn't happen.

Posted by common sense
a resident of Midtown
on Mar 5, 2009 at 11:26 am

""The bottom line is we're not trying to balance the general fund by using the transfer," Perez said. "If we wanted to balance that, we'd come back with a number to match that."

Lalo is being not being up front on how the city trying to solve the $8 million deficit:

They originally wanted to raise the transfers from utilities by $4 million,

And a proposed business license tax of $4.4 million

Net is $8.4 million in new taxes. And how much is the deficit: $8 million.

And how much is the city reducing it's spending in these tough economic times: $0.

Most residents in these tough times are watching their spending, and cutting back on what they spend on. It appears the city doesn't feel they have to do the same.

Posted by YouShouldKnow
a resident of Old Palo Alto
on Mar 5, 2009 at 11:30 am

"Instead, they decided to leave the question of electricity rates in 2010 to staff and the City Council."

Oh great, THEM again. The nefarious out of touch with reality City Council. This decision is pretty much tantamount to asking a trophy wife clutching her husbands Centurian Card at Neimans to stay under budget.

Posted by Resident
a resident of Adobe-Meadow
on Mar 5, 2009 at 11:32 am

They want to raise electricity rates so we can have lower rates later? When later, no time frame? What kind of illogical reasoning is this? We pay more now so we can lose out on the interest or other types of living arrangements we can make now so that later on we have less money to spend?

Idiots, the lot of them. I'm glad I cancelled my Palo Alto Green.

Posted by jardins
a resident of Midtown
on Mar 5, 2009 at 11:46 am

Time to abolish the Utilities Department--it's not serving its original purpose, which was to keep all rates lower for Palo Alto residents than PG&E.

I'm sick of taxpayers' money being used to cover shortfalls elsewhere in the city--shortfalls often caused by council decisions to spend money on total un-necessities, such as remodeling Lytton Plaza, redoing the landscaping in Hoover Park beyond the needed drainage work, setting up the Destination Palo Alto bureau, appointing a consultant for half a million dollars to tell us which garbage company to use next, etc. etc.

Posted by Sylvia
a resident of Midtown
on Mar 5, 2009 at 2:28 pm

Oh, goody! They're going to lower my gas rates in JULY after I've sat around all winter with half the clothes in my closet wrapped around me to keep the utility bill from causing me an early coronary.

Posted by TwoSides
a resident of South of Midtown
on Mar 5, 2009 at 4:30 pm

They should issue a utility rebate dating back to October 2008 and have it reflect on our next utility bill.

Posted by This is a TAX
a resident of Community Center
on Mar 6, 2009 at 6:23 am

City of Palo Alto has become a robber. No Kidding.
Any lawsuits possible here?

Posted by Questioning
a resident of another community
on Mar 6, 2009 at 7:00 am

All the money "generated" from rate payers by the Utilities Department and then transferred to the City of Palo Alto General Fund contributes to the atmosphere of entitlement, greed, corruption, and incompetence that flourished in the era of CM Frank Benest, Asst. CM Emily Harrison, and Adm. Servs. Director Carl Yeats. The latest Utilities Department scnadal is a contiuation of this sordid saga.

Even though Benest and Yeats have retired and Harrison left to work for Santa Clara County under the patrongage of Liz Kniss after being disciplined for harassing a subordinate, the culture of the City of Palo Alto organization has not changed.

All the money means that mediocre (at best) managers - including such holdovers from the Benest/Harrison/Yeats era as City Attorney Gary Baum, HR Director Russ Carlsen, Utililites Director Valerie Fong, PW Director Glenn Roberts, Asst. PW Director Michael Sartor, and others - can play political games all day long with other people's money. After that they can all retire on fat pensions with fully paid health care for life.

Time for CM Keene and City Council to clean up the stables or for a Grand Jury to shed light on the whole sorry mess then have the courts clean it up for them.

Posted by pat
a resident of Midtown
on Mar 6, 2009 at 10:24 am

Is it legal? I asked a lawyer who knows about these issues:

" appears the City is padding its electricity and natural gas rates to fatten the General Fund. Unfortunately, such rate padding and revenue siphoning was declared legal by the courts prior to Proposition 218 in a case called Hansen v. City of Ventura. Proposition 218 outlawed the practice with respect to most property-related charges, such as water, sewer, and garbage rates, but unfortunately Proposition 218 exempts gas and electric rates. See art. XIII D, § 3(b).

"I checked into the possibility of you switching suppliers to avoid the City's padded rate, but I don't think you have any options. It used to be that, under California's deregulation law, you were allowed to choose your electricity supplier. But the deregulation law is currently suspended. You can still choose a different natural gas supplier and, in fact, a company called Tiger Natural Gas operates everywhere PG&E does, but at a lower rate. However, I called Tiger and asked about Palo Alto customers and was told that service is not available to you. Sorry.

"I'm afraid the only remedy left open to you is to place a people's initiative on the ballot to reduce the City's rates."

Posted by Walter_E_Wallis
a resident of Midtown
on Mar 6, 2009 at 10:47 am

Walter_E_Wallis is a registered user.

Perhaps they listen just a bit.

Posted by resident
a resident of Meadow Park
on Mar 6, 2009 at 10:56 am

Pat, thank you for that information.

It appears the Council has done their homework and has found any and all loopholes through which they can get away with charging more. They have a virtual monopoly on this and can charge anything they want. We're stuck, unless someone wants to run a campaign.

Posted by resident
a resident of Meadow Park
on Mar 6, 2009 at 10:57 am

Walter, don't you get it? They're raising electricity and water rates!!! The title of the Weekly article is sooooo misleading. People think they're getting deal. Just wait till summer.

Posted by YouShouldKnow
a resident of Old Palo Alto
on Mar 6, 2009 at 12:51 pm

Time to clean house people. The Powers That Be got rid of the Police Chief because she got too close to reality with the Childrens Theater debacle. The PC b.s.after was just a convenient excuse to send her packing. Well, she was the first to go, the door has been opened...why not send several more through it thus making space to bring in fresh new perhaps more relevant faces. People who may shy away from cronyism and who understand Palo Alto has changed for the worse. Time to get it back on track!

Posted by Albert K Henning
a resident of Duveneck/St. Francis
on Mar 6, 2009 at 2:02 pm

I completed a letter to CPAU, the city manager, the council, and the PA Weekly editor, several days ago.

Based on the extraordinarily absurd utility rate increases, and the continued and elevated transfers of funds from CPAU to the city general fund, I will be ceasing my participation in PaloAltoGreen. I urge every participant to do so, as well.

I am a life member of the Sierra Club, and longtime professional in the arena of technology related to energy efficiency. I have long believed PA residents to be fortunate in having their own utility, to buffer energy costs, and keep them low. As such, I took CPAU's message about the benefits of PaloAltoGreen at face value, and participated early in the program.

I no longer believe in the program, or in CPAU, or in the Utilities Commission, or in the Council, or in the city manager, or in city staff.

The continued transfers from CPAU to the city general fund constitute a shell game. Essentially, Council believes it cannot achieve voter-approved tax increases to fund city services. So, Council siphons extra money from CPAU, thereby negating the efficiency of CPAU on behalf of the residents, and reducing CPAU's ability to buffer energy costs and keep them low.

I've been willing to accept this shell game: until now. The proposed absurd transfers, and the attendant, exorbitant rate increases, would paint me a fool, were I to continue also to 'tax' myself the extra 10% or more on energy, which is the bottom-line effect of PaloAltoGreen.

CPAU no longers serves the residents. It is merely an unregulated, back-door conduit, with no voter oversight, to supply city staff with benefits and salary -- benefits and salaries which are, in these extraordinary times, denied to the very residents they serve. Beyond voting for alternative candidates, or voting for a ballot proposition to prevent future transfers, I can do very little about city budgetary matters. But, I can cease immediately the self-taxation which is PaloAltoGreen. I urge each of you presently enrolled in the program, to do so as well.

Posted by jardins
a resident of Midtown
on Mar 6, 2009 at 2:13 pm

How about a people's initiative on the ballot, to abolish the Palo Alto Utilities Department? Surely Palo Alto taxpayers originally voted to set up the U.D. Now they could vote to dismantle it.

Posted by Palo Alto Green tax
a resident of Adobe-Meadow
on Mar 6, 2009 at 2:13 pm

Albert, thank you very much for your post. I also cancelled my Palo Alto Green subscription for the same reasons. I also tried to start a post encouraging others to do the same, but the Weekly seems to have deleted it.

Posted by TwoSides
a resident of South of Midtown
on Mar 6, 2009 at 2:36 pm

I want a Tiger in MY tank.

A windmill in my backyard.

Enough, is enough.

Posted by No Taxation without Competent Representation
a resident of Duveneck/St. Francis
on Mar 6, 2009 at 3:00 pm

I am trying to reach the Utilities department to cancel my Palo Alto Green subscription. But no one is home. I wonder if they are suddenly getting a barrage of calls from angry residents with the same goal. I don't how else to explain it. I am not even getting an automated message.

Posted by No Taxation without Competent Representation
a resident of Duveneck/St. Francis
on Mar 6, 2009 at 3:11 pm

Palo Alto Green cancelled. The representative on the phone wanted to know why, and when I told her, she said, "Yeah, I know."

Posted by Anna
a resident of Downtown North
on Mar 6, 2009 at 3:14 pm

Of course you're having trouble reaching somebody at the U department. It's Friday. Most city workers have the day off today, so there's minimal coverage for city services.

The rest of the city workers are home figuring out how soon they can retire - thanks in part to the overcharges on our utility bills that the city uses to pay in part for their pensions and retirement health care - which they can start drawing in their 50's in many cases..

Posted by Richard C. Placone
a resident of Barron Park
on Mar 6, 2009 at 5:30 pm

Richard C. Placone is a registered user.

I have never seen Palo Alto residents so outraged as indicated by the posts on this subject. For the record, I too canceled my Palo alto Green participation two months ago. I've said this before but I think it is worth repeating: Please, all of you, these are excellent messages, but the city council members and the city managers need to see them. They do not read these blogs, by their own admission. Go back to your message here, highlight it, and paste it to a message to the council. Send it to the official council e-mail address and it gets placed in the public record and the next council packet, the libraries etc.: [email protected] CC the various managers using this format: [email protected]

As we can see from recent developments, if enough residents express their outrage, we do get some action. Now lets really go after them and get the word out. I have sent a blistering letter to the council and CM Manager about this, as well as the (don't forget) "Hidden Third Floor" issue.

Richard Placone
Barron Park

Posted by Outside Observer
a resident of another community
on Mar 6, 2009 at 9:05 pm

Richard P.,

Please enlighten us. What is the "Hidden Third Floor" issue.

Posted by Albert K Henning
a resident of Duveneck/St. Francis
on Mar 7, 2009 at 8:08 am

I take back part of what I wrote earlier:

Brian Ward, manager of Palo Alto Green, is a passionate and dedicated member of city staff. I'm sure there are many others, and I apologize for including those dedicated staff members under my blanket, negative comment earlier.

That said: as I wrote Brian, I have only one thing I can control in this controversy. And, it is the 'self-tax' I give voluntarily to PAGreen. Brian is a wonderful and accomplished guy. We are lucky to have him. Under other circumstances, I will once again 'self-tax' for PAGreen. But not now.

On a personal level, I've cut my expenses on every level I can think of, in order to stay in this town. And, I'm working on my own 'revenue' side of the cash balance equation. City management insists that CPAU generate a return on investment. Mr. Keene forgets that, if CPAU generates ROI for anyone, it is for residents and ratepayers. CPAU ROI needs to be used solely to develop new, greener, cheaper energy sources, and to lower rates: not to provide a return for *government*. Government did not invest in CPAU: we invested.

The city is not cutting expenses anywhere near enough. And, they're using the CPAU transfers to enhance the revenue side. But this is wrong: it is not transparent, it avoid doing the hard work on the expense side, and it must end.

The right answer is not to cease CPAU. It is to cease the transfers. I submit that, if CPAU transfers are ended, and the sums used to develop new, cheaper, greener sources, and to lower rates, then voters will be much more willing to vote for *transparent* taxes for city services.

I have expressed all this to Mr. Keene, and to every Council member. Please do so as well.

Posted by pat
a resident of Midtown
on Mar 7, 2009 at 12:51 pm

Albert: Thank you for expressing the fund transfer problem so clearly and concisely.

It’s beyond my comprehension that these transfers can be legal, but apparently they are. Keene is not one bit embarrassed to say that the utilities fees will be used to balance the city budget.

Outside Observer: The “hidden third floor” is the third floor of the police building, which was originally to be used for expansion, but has never been occupied. The Daily Post wrote about it last week. Councilman Pat Burt has suggested that the city look at using this space instead of spending $80 million on a new public safety building. (How refreshing to have a councilmember suggest a way to save a lot of money!)

Staff seems to think it would cost more to upgrade the current police building for seismic safety than it would cost to build the new public safety building ($80 million plus debt fees, which would bring the total cost to about $160 million). This seems hard to imagine.

Please encourage the city council to follow Pat Burt’s idea to get an objective cost analysis.

Posted by Anna
a resident of Downtown North
on Mar 7, 2009 at 1:09 pm

Hidden Third Floor?!

Do you mean that the city is renting expensive retail space Downtown for the Planning and Building Department (which I believe they have been for at least a decade), while they have a full unoccupied floor in City Hall that isn't providing any return to the city?!

This is crazy. Who runs this town?

Posted by Mike
a resident of Crescent Park
on Mar 8, 2009 at 1:00 pm

How is it that our gas prices are 38% higher than PG&E? I thought the whole purpose was to provide somewhat better rates and put profits into the city.

I can see 5% or so higher because of some mistakes or bungling on the part of utilities, but 38%??

Posted by resident
a resident of Adobe-Meadow
on Mar 8, 2009 at 6:52 pm

I just sent the city council this discussion and my reasons for cancelling Palo Alto Green.

Posted by resident
a resident of Adobe-Meadow
on Mar 8, 2009 at 6:54 pm

I also sent the city council a copy of this discussion.

Posted by resident
a resident of Adobe-Meadow
on Mar 8, 2009 at 7:33 pm

Here's a copy of the response I received from Kishimoto:

Thank you for your emails and sharing the other posts. I'm sorry to hear that you cancelled the Palo Alto Green altho I understand that people have to shave every dollar they can from their household budgets.

Just quickly to address the higher gas rates, it's because we "smooth" the rates so we are now suffering from the averaging of last year's high gas prices. PG&E customers get the spikey high rates when they come and they get the low rates when they come. We could choose to do the same easily. In the years that PG&E was higher than us, few people noticed it or appreciated it. Perhaps it's just easier to do what PG&E does.

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.

I think the entire council has been hearing loud and clear that we have to watch the expenses and dollars at the utilities. My family saw a surprising "spike" in gas bills this last January too.

I appreciate that you wrote us -- feel free to contact me again with any more questions. The worst is to not be able to ask questions of what's happening and why. We owe you responses -- and of course the best policy response possible.


Yoriko Kishimoto
Palo Alto City Council
Valley Transportation Authority Board of Directors
Bay Area Air Quality Management District Board of DIrectors
[email protected]

Posted by Albert K Henning
a resident of Duveneck/St. Francis
on Mar 8, 2009 at 10:48 pm

Councilor Kishimoto doesn't seem to get it.

It's not 'expenses and dollars at the utilities.' It is, rather, expenses of city government. CPAU does a fine job. Let them keep more of their money, and I daresay they will invest it in development of cleaner, cheaper, greener, more sustainable forms of energy, to the benefit of ratepayers, either residential or business.

She also doesn't understand that the current economic crisis, the worst since 1929, throws all previous assumptions, and policies based on those assumptions, out the window. In particular is the assumption that CPAU generates a 'profit', and that the general fund is the shareholder of CPAU, who benefits from this 'profit'.

Residents are the shareholders of CPAU, not the general fund. If the view of council is that CPAU's reserves constitute a 'profit', the return the profit to the true shareholders. Or, use it to develop new sources of energy. But stop the unsustainable transfer of reserves to the general fund.

Posted by Anna
a resident of Downtown North
on Mar 9, 2009 at 6:23 am

Mr Henning clearly gets it. This "profit" the CPAU gives to the general fund is nothing more than a "tax".

The ratepayers of CPAU are largely identical to the shareholders of CPAU. We cannot pay ourselves a profit. The city government can take the part of the rates we pay that are above the cost of generating utilities and transfer it to the general fund rather than allowing it to remain in our pockets. That is not a profit. It is a tax.

Posted by pat
a resident of Midtown
on Mar 9, 2009 at 10:09 am

Kishimoto says, “The profits which would go to PG&E shareholders instead come to the city general budget.” Where it can be spent on “The Color of Palo Alto” and the Senior Games on other nonsense. Kishimoto is so out of touch with reality that she is now running for State Assembly!

Posted by Marvin
a resident of Charleston Gardens
on Mar 9, 2009 at 10:14 am

I wonder why Kishimoto uses her personal e-mail address for Council communications. Shouldn't she be using her City Council e-mail for this so that there will be a record of this communication.
What does the city attorney say about this practice? She is not the only council member to do this.
The fact that Kishimoto is out of touch and only interested in her own self-promoting interests should not come as a surprise to anyone who had been following her career on the council.

Posted by Mike
a resident of Crescent Park
on Mar 10, 2009 at 11:18 am

What is to keep Palo Alto utilities from finding a gas price spike at PG&E during a spring-summer or fall period, and 'average it out' by applying it to our rates in the winter which is when most of us must use the largest amount of gas for heating?

Using such a scheme I could show that on the average PA tracks the market prices-when in reality the untimely application of higher rates yields a much higher revenue volume for the utilities group, and much larger bills for us the users.

That seems to be what happened. Lowering the rate in July will not make much of a difference to me or I suspect most others in Palo Alto.

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