Get Full Government Meeting Transcripts, Videos, & Alerts Forever!
Get email alerts on the Utility Rates topic
No spam. Unsubscribe anytime.
Palo Alto UAC to rework gas cost study after council remand; forms review subcommittee
Summary
After public objections and council direction, the Utilities Advisory Commission voted 6–1 to form a temporary subcommittee to work with staff and a consultant on a new gas cost-of-service analysis under Proposition 26, seeking greater transparency on methodology and any use of cap-and-trade funds.
The Utilities Advisory Commission on July 9 voted 6–1 to form a temporary, non–Brown Act subcommittee to work with staff and the city’s consultant on a new gas cost-of-service analysis (COSA) after the City Council remanded the 2025 COSA for further review.
The move follows public comments and council concern about the consultant’s 2025 COSA, which critics said shifted costs toward low-usage residential customers. Assistant Director Carla Daley and Senior Resource Planner Lisa Blair briefed the commission on draft design principles that staff proposed to guide a fresh COSA. Assistant City Attorney Amy Bartel reminded commissioners that “Prop 26 isn’t that deep. It simply says rates need to be cost based,” and that the city can adopt additional policy preferences so long as rates remain defensible under that legal standard.
Why it matters: Council asked the UAC to re-examine the 2025 COSA’s methodology and to provide a revised, transparent analysis the council could consider before new rates become effective in January 2026. Commissioners and public speakers said the earlier study lacked sufficient documentation of the methodological changes that produced a roughly 49% projected increase for tier-1 residential distribution rates in the consultant’s draft, and they urged staff to make the drivers and dollar impacts explicit.
Public commenters pressed the commission for clarity. Hamilton Hitchings of Palo Alto Neighborhoods summarized citizen concerns, saying the draft COSA proposed “a 49% increase in tier 1 gas local distribution rates despite an overall 8.7% distribution rate increase.” Jeff Levinsky urged the commission to require that any future COSA document “the reason for each proposed rate change,” show “the magnitude of that change in dollars,” provide traceable calculations and offer alternatives.
Commission discussion focused on three themes: (1) transparency — that methodological changes between the 2020 and 2025 COSAs be itemized and dollarized; (2) legal constraints under California’s Proposition 26 — the city must link rates to reasonable cost of service; and (3) whether and how to treat climate funds (cap-and-trade) as possible offsets to customer bills. Several commissioners — and the council earlier — explicitly rejected using cap-and-trade funds as a long-term rebate for gas use and asked staff to prioritize non-rate revenues if offsets are needed.
Outcome and next steps: The commission adopted a motion to proceed using Proposition 26 as the legal baseline and to create a temporary, non–Brown Act subcommittee to work with staff and the consultant to develop a gas COSA intended to produce rates effective Jan. 1, 2026. The roll call vote on that motion was: Metz — yes; Tuker — yes; Croft — yes; Scharf (chair) — yes; Mater (vice chair) — yes; Gupta — no; Phillips — yes. Motion carries 6–1.
Staff said the project timeline is to present design principles to the finance committee in August, complete a gas COSA and bring results to the UAC in September, the finance committee in October and Council in November for rates effective Jan. 1, 2026. Commissioners instructed staff and the new subcommittee to prioritize: (a) documenting all methodological changes vs. the 2020 COSA with numeric drivers; (b) evaluating whether certain customer classes (for example, master-metered multifamily and small commercial) should be subdivided; and (c) preparing traceable analyses so the council and public can follow the calculations.
The commission emphasized it will not prejudge the COSA’s eventual outcome; several commissioners said they would reject a COSA that uses the consultant’s average-and-excess allocation for demand-related costs if that methodology continued to shift consumption-sensitive costs onto basic, low-usage residential customers. The subcommittee’s membership will be announced by staff and will hold regular check-ins with the full UAC so formal decisions are taken publicly.
Looking ahead, staff expects to return to the UAC with the consultant’s work and with documentation of methodological changes; the UAC’s subcommittee will meet with the consultant during the analysis. If the subcommittee finds material questions remain, the commission can ask for further analyses or modifications before forwarding recommendations to Council.
