Utility rates in Palo Alto are set to go up by 6 percent in July, an increase that utilities officials attribute largely to growing transmission costs and new renewable energy projects coming online.
The rate change was part of a wider package of adjustments that the Palo Alto City Council approved on Monday night. As part of its 8-1 vote, with Councilman Greg Tanaka dissenting, the council also raised water rates by 3 percent and raised wastewater rates by 11 percent.
The council adopted the rate changes with little discussion. Its Finance Committee had reviewed all the rate changes last month, during its review of the fiscal year 2019 budget. After requesting and considering different alternatives for rate structures, the committee ultimately endorsed most of recommendations from city of Palo Alto Utilities staff.
In the case of water rates, the Finance Committee recommended that the increase be brought down from the proposed level of 4 percent to 3 percent, a suggestion that the council approved Monday.
In discussing the rising electricity costs during a presentation of the item to the Finance Committee last month, city of Palo Alto Utilities officials cited the cost of transmitting electricity as a major factor in the rate increase.
"One of the main drivers for the electric rate increase that we are requesting is increases to our electric supply costs, mainly driven by transmission costs we're seeing from bringing in renewable power systems throughout the state of California," Rates Manager Eric Kennison told the committee.
In addition to these factors, the city's electric operation has increased its capital spending and has seen its operational costs rise. According to a recent Utilities Department staff report, total electric utility costs were historically around $130 million annually. Between fiscal years 2016 and 2019, annual costs went up to about $170 million and are expected to stay there at least until 2022, according to staff.
The electric rate change is expected to add $2.35 to the median bill in the summer months, raising it from $40.13 to $42.47.
As the sole dissenter, Tanaka said that he cannot support increases to utility rates unless he is assured that operating costs will remain steady and not go up. He said he does not see that in the Utilities operation.
"We simply need to live within our means," said Tanaka, who sits on the Finance Committee.
Others supported the staff recommendation. Councilman Greg Scharff, who chairs the Finance Committee, said the committee had considered all the rate changes over a series of three meetings and concluded that these were the "lowest rates we can get to."
"We need this money to run the utility," Scharff said.
Vice Mayor Eric Filseth, who also sits on the Finance Committee, concurred. He warned against the dangers of underinvesting in utilities, particularly on the capital side.
"The result is something like San Bruno, in an extreme case," Filseth said.