Utilities Rates

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Utilities Rates Overview

We hope this web page will provide you with the information you need to understand the drivers behind this year's rate changes, what the City of Palo Alto Utilities (CPAU) is doing to reduce costs, and the value of what you get for what you spend.

Information on Rate Changes in 2022

The Utilities Advisory Commission (UAC) reviewed preliminary financial forecasts for the Electric, Gas, Water and Wastewater Collection utilities at its December 1, 2021 meeting (Staff Report #13659(PDF, 3MB)), and the Finance Committee reviewed the same preliminary forecasts at its February 1, 2021 meeting (Staff Report #13839). 

The UAC reviewed and voted to approve staff’s final recommendations for the Water, Wastewater Collection, Gas and Electric utilities at its March 2, 2022 meeting, each passing 4-0, with Commissioners Bowie, Scharff and Smith absent.

The Finance Committee reviewed staff’s proposals for the Water, Wastewater Collection, Gas and Electric utilities at its April 19, 2022 meeting, which were all passed unanimously (3-0).

The Finance Committee reviewed staff’s proposals for the Stormwater Management rate at its May 3, 2022 meeting, which was passed unanimously (3-0).

Council reviewed the proposals and passed all of the rate changes at its meeting on June 13, 2022 (Staff Report 13661).

View the Proposition 218 letter(PDF, 180KB) that was mailed out on April 20, 2022.  

Effective April 1, 2022, the Electric Hydro Rate Adjuster went into effect for every CPAU customer. Read about the Hydro Rate Adjuster(PDF, 4MB) in the April utility bill insert. 

A summary of the rate changes requested is shown below:

Utility

Systemwide Average

Rate Increase

FY 2023 Estimated Revenue Impact

Electric

5.0%

$7.9 million

Gas

4.0%

$1.5 million

Water

8.9%

$3.9 million

Wastewater Collection

3.0%

$0.6 million

Stormwater Management

4.2%

$0.3 million

Fiber

4.2%

$0.02 million

 

Key drivers behind this year’s proposed rate changes for each utility are as follows:  

Water

Palo Alto’s water supplier, the San Francisco Public Utilities Commission, declared a water shortage emergency calling for voluntary water use reductions throughout the Regional Water System. These water use reductions increase the water rate because the primarily fixed costs of the system are spread among fewer units of water sales. Additionally, Palo Alto the distribution increase is needed to pay for necessarily water main replacements as well as seismic retrofits/replacements of three reservoirs.

Wastewater (Sewer)

Costs are increasing to replace and maintain pipes that transport wastewater (sewage) as well as facilities that treat wastewater. The Regional Water Quality Control Plant (RWQCP) is the wastewater treatment plant owned and operated by the City of Palo Alto that serves Palo Alto and several surrounding communities. Rehabilitation and replacement of plant equipment at the RWQCP that has been in use for over 40 years is necessary to ensure the city can provide wastewater treatment operation safely and in compliance with regulatory requirements for the discharge of treated wastewater 24 hours a day.

Gas

Costs related to the Gas Utility’s resumption of main replacement projects and the cross-bore safety verification program are increasing. In order to move towards full cost recovery while minimizing rate impacts in light of pandemic-related economic challenges, staff recommends a distribution rate increase to all customer classes of 6%, which staff estimates will result in a 4% system average rate increase, if supply rates remain unchanged. Recent market indications have led staff to project supply cost increases of about 3% per year for the forecast horizon, but these circumstances could change based upon market conditions, as well as trends in the cost of environmental offsets and PG&E’s revised projections for transmission costs.

Electric

Short-term impacts to electric costs arising from dry hydro conditions are a main driver of the need for revenue increases, as well as rising operations costs for contract line-crews and capital costs for infrastructure improvement. Transmission costs continue to rise, also contributing to the need for revenue increases. Projected capital expenses are higher due to the rebuilding of existing underground districts, substation upgrades, the Foothills rebuild, utility pole replacements and line voltage upgrades. The City is also evaluating the cost and scope of other system resiliency projects which may increase costs and rates in the future.

Annual Rates Review

Water Commodity Rate Pass-Through

The commodity portion of the City’s water rates cover the wholesale cost per CCF (hundred cubic feet) of water from Palo Alto’s wholesale water provider, the San Francisco Public Utilities Commission. The commodity water rate is passed-through automatically via periodic rate adjustments to account for increases in wholesale water charges. Pass-through rate changes are expected to be annual, however there may be times when the pass-through is implemented on a periodic basis depending upon how the San Francisco Public Utilities Commission sets its rates. Customers will be provided notice of any adjustments via their billing statements. Currently the commodity water rate is $4.10 per CCF and the San Francisco Public Utilities Commission projects it will increase to between $4.72 per CCF and $5.13 per CCF.

CPAU evaluates revenues and expenses on an ongoing basis. Rate changes are typically recommended to coincide with the City's fiscal year schedule (July 1 through June 30). To stay updated on important Utility and City matters, sign up to receive:

2021 Utility Rate Information

On June 21, 2021, the Palo Alto City Council approved staff’s proposed utility rate changes for fiscal year 2022 which runs from July 1, 2021 through June 30, 2022. Rate changes include a 3% increase for the Gas utility, 2% increases for Storm Drain Services and the Dark Fiber utility, and updates to the Electric PaloAltoGreen charges as well as Net Energy Metering compensation rates. The City is not changing general Electric and Water rates for fiscal year 2022. Learn more about the rate changes in Staff Report 12240.

On August 9, 2021, the Palo Alto City Council approved staff’s proposed Wastewater utility rate change of  3% overall to take effect September 1. Wastewater rate changes will vary by customer sector. 

Utility Resources Supply Information

The mission of the City of Palo Alto Utilities (CPAU) is to provide safe, reliable, environmentally friendly and cost-effective utility services. Read more below about these services.  

How Can I Save on Utility Costs?

Visit cityofpaloalto.org/waystosave or call (650) 329-2241 for information on energy and water efficiency services, rebates, and other resources to keep utility costs low. Rate assistance is available for qualified residents at cityofpaloalto.org/financialassistance.

Electricity

Effective January 2013, Palo Alto achieved an "all green" carbon neutral electric supply portfolio. Palo Alto gets its electricity from several sources. The exact numbers from each source vary annually.

Gas

 The City uses a "market-based" purchase strategy(PDF, 402KB). This means that gas rates change every month based on market prices.  The City of Palo Alto adopted a carbon neutral gas portfolio in 2017. Click here to learn more

Water

Palo Alto is fortunate to get its water from the Hetch-Hetchy system, one of the most pristine, high-quality sources in the country. Like all Californians, we face the risk of not having enough water to meet ever-growing needs in some years; a challenge that is not going away. Recurring drought cycles are a permanent feature of water supply in this state. Learn more about our water supply through our Urban Water Management Plan and Water Resources websites.

Infrastructure Projects

Electric

CPAU is always performing ongoing maintenance on its equipment. Several infrastructure projects to replace aging lower voltage lines are ongoing. The new, higher voltage lines will better serve Palo Alto's growing electric needs. 

Gas

CPAU leads the industry with an aggressive capital improvement and maintenance program, continuing our work to upgrade, replace and improve the gas distribution infrastructure to reliability and safety. 

Water

Palo Alto's water supplier, the San Francisco Public Utilities Commission (SFPUC) is in the process of completing the Water System Improvement Program (WSIP), a $4.8 billion dollar infrastructure improvement program to seismically retrofit the facilities that transport water to the Bay Area. Debt service costs to fund WSIP infrastructure upgrades will continue to increase over the next few years and will be paid off over approximately 30 years. Parts of the SFPUC’s system not included in the WSIP will also need rehabilitation after the WSIP is completed.

  • CPAU continues a proactive program to upgrade its own water distribution pipelines as well. The City is undergoing a multi-year project to rehabilitate, replace and install new reservoirs and wells. These efforts will bolster our local emergency water supply system. 
  • Both the SFPUC and CPAU projects are investments in the long-term viability of our superior water supply. 

Sewer

CPAU continues to maintain and replace sewer lines that are reaching the end of useful life. Since July 2011, the City has engaged in an industry-leading program to search for and identify any gas line crossbores into sewer pipes. This program will help ensure customer safety when dealing with blocked sewer lines. One of the main drivers for the increase in the Wastewater Collection Utility’s costs (and therefore rates) over the next several years is the cost for wastewater treatment as the City makes several upgrades to the Regional Water Quality Control Plant. Future projects include secondary treatment upgrades as well as replacement of the headworks facility.