As community-owners of Palo Alto’s municipal utilities, residents should understand these four issues, especially when considering rate change proposals:
- Value—what you get for what you spend on utilities
- Supplies---what are the sources and their status
- Infrastructure---what are the current conditions and planned improvements
- Rates--what changes are currently proposed and why
Value
When we do our job right, you shouldn’t have to think much about your utilities. But we encourage you to take a moment to think about them now. Consider that:
ELECTRICITY: For about $1.30 per day, the average household can purchase enough electricity to run their refrigerator, TVs, computers, the lights in every room, hair dryers, space heaters, power tools in the garage, possibly a clothes dryer, stove, oven and anything else they plug in.
NATURAL GAS: For under $1 per day in the summer and just over $4 per day in the winter, the average household can buy enough gas to heat their entire home, operate a gas stove and oven and also heat water for cooking, showering, bathing and clothes washing.
WATER: For under $2 per day in the winter, the average household can buy enough water to drink, cook, do dishes, wash hands, wash clothes, flush toilets as well as take showers and baths. During warm weather, when water use typically doubles in order to irrigate yards and gardens, fill pools etc, the average price tag is still under $3 per day.
Supply Status
- Electric---Palo Alto gets its electricity from several sources. While the exact numbers vary annually, ~ 20% of those sources are what the state considers “eligible” renewables (solar, wind etc.) and another ~50% are contracts for non-carbon-emitting hydropower.
Despite the recent dry weather, there is plenty of water in storage, so our lower cost hydropower supplies are still plentiful. Meanwhile, as we look ahead long-term, one big issue under consideration is whether Palo Alto should move towards an “all green” carbon-neutral electric supply portfolio.
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Natural Gas---The current natural gas supply in this country is substantial and the market price has dropped dramatically in recent years. While previously the gas purchase strategy was to commit to longer-term contracts to ensure stable rates, Utilities staff and the City Council have agreed that following a short-term “market-based” pricing strategy makes more sense now. Council just approved the new Gas Utility Long-term Plan.
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Water---Palo Altans get their water from the Hetch-Hetchy system, one of the most pristine, high-quality sources in the country. But like Californians, we have to face the statewide problem of not having enough water to meet ever-growing needs---a problem that is not going away. The recent extremely dry winter underscores the recurring drought cycles that are a permanent feature of water supply in this state.
In the short term, the above-normal precipitation during winter 2011 means that water supplies---including that of the Hetch-Hetchy reservoir from which Palo Alto gets its high-quality water---are sufficient to meet this year’s needs, despite our lack of rainfall in winter 2012.
Infrastructure Conditions
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Electric—In addition to routine maintenance projects, the Utilities Department is implementing numerous capital improvement projects to replace aging lower voltage electric lines with modern higher voltage ones. For details on these and other major capital projects, click here.
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Natural Gas—Leading the industry with an aggressive pipeline maintenance program, the City has replaced over 100 miles of aging gas mains (out of 207 total miles of pipeline) with new lines made of state-of-the-art materials. Click here to learn more about the gas supply system, including specific pipeline materials and projects in different areas of town.
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Water— Palo Alto’s supplier, the San Francisco Public Utilities Commission (SFPUC), continues to implement its massive 4.6 billion dollar infrastructure improvement program to upgrade old pipelines and build new secondary pipelines to enable the Hetch-Hetchy supply system to recover quickly from an earthquake or other natural disaster. At the same time, the City continues to implement an aggressive program to upgrade its own water distribution pipelines as well as finishing its multi-year project to rehabilitate, replace and install new reservoirs and wells to bolster our local emergency water supply system. Both the Hetch-Hetchy upgrade and City 's emergency water project represent smart investments by Palo Altans in the long-term viability of our superior water supply.
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Sewer---Projects continue to maintain and replace sewer lines reaching the end of their useful life. For details on current major projects, click here. Since July of 2011, the City has also been engaged in an industry-leading program to search for and identify any gas line crossbores in the sewer pipeline system to ensure the safety of customers dealing with blocked sewer lines.
Recent Rate Changes
Please note: The water, sewer and gas rate changes were approved by the City Council on June 18th and changes went into effect July 1.
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Electric---NO CHANGE. While no changes are needed for the next fiscal year, staff intends to conduct a pilot study of specialized time of use rates later this year to encourage night-time electric vehicle charging. You can view the current residential electric rates here.
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Natural Gas—DOWN. Commodity rates will be based on short-term market prices and therefore will fluctuate from month to month. By definition, that means gas rates can't be predicted prescisely. However, based on current market trends, staff is anticipating supply costs to be substantially lower for the year ahead which means the monthly gas rates are expected to drop 10-30% compared to current levels.
In addition to the gas commodity, your gas bill includes costs for some other things---such as the expense of infrastructure improvements and customer services---and those costs will be going up. However, the overall impact to the average household of the lower commodity costs will mean lower gas bills.
It’s important to remember that even with this changed strategy, your usage levels---not prices---will remain the biggest factor impacting your home’s gas costs. Therefore, efficiency improvements remain the best way to manage your gas bill. Using fewer therms will always cost you less and reduce carbon emissions.
Changes to the gas purchasing strategy and details on recently approved rate changes can be viewed here.
Average residential bills are expected to go up about $9 per month, with the biggest impact being during the summer high-water use months. Click here for full details on the recently approved new rates for both residential and commercial customers. (See Attachment C of this document for the full cost of service analysis and the rationale behind the rate adjustments.)
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Sewer (Wastewater) --- UP, under $2 per month for the average resident. This roughly 5% increase is needed to meet the long-term anticipated sewer pipeline improvement costs and the costs to treat the wastewater before it goes into the Bay. Click here for full details on the new rates for both residential and commercial customers and the rationale behind them.
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Total Bill Impact---DOWN slightly for the average resident. Varies for commercial customers. For the average resident, if all utility costs are considered---including electricity, gas, water, sewer, storm drain and refuse---the total bill is estimated to be roughly $4 less under adopted rates.* The City has been working hard to hold the line on utilities rates and this overall increase is primarily driven by the water supply and delivery system infrastructure improvements, which have to be paid for regardless of how much water customers use.
*This average bill estimate assumes continued low market prices for natural gas.
