Finance committee backs electric rate proposal to fund grid modernization; staff recommends $300M program, bond planned in FY26

The Palo Alto City Council Finance Committee on April 15 recommended adopting the FY26 electric utility financial forecast and rate adjustments that staff said are needed to support a multi‑year grid modernization program and restore utility reserves.

Staff presented an overall electrical rate adjustment described in the packet as a roughly 5.1% increase for FY26, with larger percentage changes in distribution charges and smaller changes in supply-related charges. Lisa Belier, senior resource planner, told the committee the proposal reflects near‑term spending on grid modernization, a new warehouse and laydown yard, replacement emergency generators and other capital work; staff expects to issue the first bonds later in fiscal year 2026 to help finance the program.

The forecast also incorporates a large $24,000,000 refund received in 2023 from a successful litigation against the U.S. Bureau of Reclamation, which temporarily boosted supply reserves that year, staff said. Committee members were shown comparative rate data indicating Palo Alto’s electric rates remain markedly lower than Pacific Gas & Electric (PG&E) — staff cited a figure “around 50 to 60% lower” for Palo Alto residential customers compared with PG&E — while noting Palo Alto’s rates are higher than those for the City of Santa Clara.

Why it…