Finance committee delays gas rate decision after debate over new cost‑of‑service study and distribution of impacts

The Palo Alto City Council Finance Committee on April 15 extensively debated a proposed FY26 gas financial forecast and a newly completed cost‑of‑service analysis (COSA) that staff said reallocates costs among customer classes and, as modeled, would raise the median residential gas bill by about 22% (roughly $15.20 per month).

Carla Daley, assistant director of utilities, introduced the gas item and reminded the committee that cost‑of‑service studies are performed roughly every five years and must align with legal limits such as Proposition 26. Lisa Belier summarized the staff recommendation and the Utilities Advisory Commission’s (UAC) suggestion to use cap‑and‑trade‑derived funds to provide a one‑time $73.20 climate credit to reduce the immediate impact on residential customers to about 13% for FY26; staff estimated that credit would cost about $1.6 million.

Why it matters: staff told the committee the new COSA uses a more granular ‘‘average‑and‑excess’’ allocation method and subdivides the large G2 commercial/multiunit customer class by meter capacity. That refinement shifts charges between classes: some…