Utilities Rates
Utilities Rates Overview
View current utility rates for all customers and view how to read your bill. Learn more about proposed rate changes for the upcoming fiscal year 2024, assistance for high winter energy bills, and utility resource details.
Why Are Rates Changing?
The City of Palo Alto Utilities (CPAU) strives to keep utilities rates as low as possible while providing reliable service.
When expenses fall, we can lower rates. But when expenses rise, we must raise rates to ensure the fiscal integrity of our City services. Rate changes are typically made once a year, on July 1, at the start of the City’s fiscal year.
Under this year’s proposal, rates would rise for gas, wastewater, water, and storm drains. Rates would decrease slightly for electric and remain unchanged for garbage pickup.
5 Key Reasons Rates are Rising This Year
- The City protected customers from utility cost increases during the pandemic. Increased costs for construction, operations, energy, and water were not fully passed through to customers in 2020, 2021, and 2022 and were instead absorbed from reserves. As a result, revenues are too low to maintain normal operations in all utilities.
- Reserves are lower than expected. The City intended to phase in rate increases slowly using reserves, but spiking energy prices and other factors led to very low reserves in all utilities except water.
- Costs continue to rise. Construction inflation is continuing throughout the Bay Area. Energy and water prices remain high. And the cost to transport energy and water are forecasted to rise in coming years.
- Aging infrastructure. Investment is needed to maintain the health of utilities and protect reliability.
These factors are common to utilities throughout California, and Palo Alto continues to deliver utility services at a lower cost than surrounding communities. See more in-depth information about each utility service at the bottom of this page.
Need Help Paying Your Utility Bill?
The City acknowledges that many may be struggling with high utility bills and is offering ways to help.
- Free efficiency assessments. Make an appointment with the City’s energy advisor, the Home Efficiency Genie, to discover how you can use less energy.
- Extended payment. To pay your bill in installments, contact Utilities Customer Service at (650) 329–2161, or visit our Utilities Customer Service web page.
- Rate assistance and free home energy upgrades for income-qualified customers.
- Potential rebates. City Council is evaluating providing customers with gas and electric rebates to help with high energy costs this winter.
Proposed Monthly Bill Changes Starting July 1, 2023
To address the increased expenses faced by CPAU, the department is proposing an overall 3% increase on the residential median bill compared to January 2023.
The average change for a residential customer with six utility services is projected to be around $11 per month. The overall bill changes include:
- -5% decrease* for electric;
- 8% increase** for gas;
- 9% increase for wastewater;
- 6% increase for water;
- 5% increase for storm drain and;
- no change for refuse.
Note that all rate changes would take place in the context of declining gas market prices. The chart below shows how these rate changes would affect the median residential bill. The current forecasted market prices for gas are reflected in the projected future bills, though these projections are uncertain.
Total Monthly Median Residential Bill Changes
*The electric rate change includes a 21% increase to base electric rates and removal of the Hydroelectric Rate Adjuster, which would equal an overall 5% decrease in electric rates for the average residential customer.
**The 8% gas utility rate increase does not include changes in gas market prices. With gas market price changes included, gas bills for fiscal year 2024 (July 1, 2023-June 30, 2024) are expected to be lower than fiscal year 2023 (July 1, 2022-June 30, 2023), though forecasts of gas market prices are highly uncertain.
More About High Winter Energy Costs
Natural Gas Prices
Natural gas market prices jumped to historically high levels this winter due to demand and supply constraints. Nearly every utility experienced the highest prices on record in January 2023. CPAU cannot control market gas prices and does not mark up costs for customers. CPAU purchases gas for its customers at market prices and as a public utility, must pass on those costs to customers in the form of rates.
The drivers of high winter gas bills are discussed in this post from our Utilities Director. It cost CPAU five times more to buy gas in the gas market this January when compared to January 2022. However, Palo Alto's commodity price of wholesale gas fell significantly from $4 per therm in January 2023 to $0.77 per therm in March 2023. In comparison, last year’s commodity gas prices were $0.77 per therm in January 2022 and $0.54 per therm in March 2022.
These gas market price spikes were unprecedented and are not currently projected to be as high next winter. The City currently does some winter hedging against certain types of price spikes, but is investigating changing winter hedging practices to protect against future unexpected price spikes of the type that occurred this winter.
Read about gas utility billing and view current and historical monthly gas rates.
Information from Recent and Upcoming Meetings
- June 19, 2023: City Council consideration of utility rate recommendations from staff, the Utilities Advisory Commission and the Finance Committee
- April 4, 2023: Finance Committee discussion of electric rebate options
- March 27, 2023 City Council Agenda Item #10: Staff report on direction for a residential natural gas rebate program and an update on Green v. City of Palo Alto.
- March 21, 2023 Finance Committee Agenda Items 1 – 4: Staff proposals for Water, Wastewater Collection, Gas, and Electric Utilities, including potential direction for an electric rebate (agenda item #4).
- March 7, 2023 Finance Committee Staff Report #2301-1011: Approval of financial forecast for the Water Utility. Finance Committee discussed alternatives for the Wastewater Collection utility (Staff Report #2302-0944) and asked staff to return with additional information after further evaluation.
- March 1, 2023 Utilities Advisory Commission Agenda Items 1 – 4: Approval of financial forecasts for the Electric, Gas, Water, and Wastewater Collection Utilities.
How to Stay Informed
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Key Drivers of the 2023 Rate Changes By Utility
Click on a service below to find more in-depth information on each utility.
Electric
The Electric utility has experienced significant cost increases over the past 3 years due to the prolonged drought and extremely high power prices. The utility held rates flat during the pandemic and used reserves to absorb the higher costs, while operating at a loss. Over the past year, costs have continued to rise and this has forced the utility to increase rates to account for higher costs.
Moving forward, customer bills are expected to drop by 5% when the new rates go into effect July 1, 2023. While the base rate is proposed to increase 21%, the elimination of the hydroelectric rate adjuster due to improved hydroelectric conditions will more than offset the increase.
Gas
Winter natural gas prices were extreme, but gas prices are improving. March gas bills are expected to be less than 50% of February and April gas bill projections are expected to be even lower. Customer gas bills are expected to continue to decline through June.
Current gas utility revenues are enough to pay for its gas supply plus about 80% of the cost of operating its gas distribution system. Staff is proposing a 21% increase to gas distribution rates effective July 1, 2023, which will translate into about an 8% increase to the overall gas bill. Even with this increase customers are projected to have significantly lower gas bills in the winter of 2024 than in the winter of 2023 due to the unprecedented gas price spikes in the winter of 2023.
Let us help you with energy efficiency measures to keep utility costs down. Visit cityofpaloalto.org/efficiencytips for some no-cost and low-cost ways to help keep your utility bill costs low.
Water
Although winter storms have had a measurable, positive impact, Palo Alto’s water supplier, the San Francisco Public Utilities Commission, is not yet making any changes to its drought water conservation reduction requests until more information is available about water supply conditions as well as state actions regarding the emergency drought declaration.
The ongoing 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 needs to increase distribution rates to pay for necessary water main replacements as well as seismic retrofits/replacements of two 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. The City must rehabilitate and replace plant equipment that has been in use for over 40 years at the RWQCP. This is necessary so the City can safely provide wastewater treatment in compliance with regulatory requirements for discharging treated wastewater 24 hours a day.
Additional Resources
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.
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 $4.75 per CCF.