Palo Alto advisory commission backs 10% water rate increase, urges use of savings to shore reserves

The Utilities Advisory Commission on Tuesday recommended that the City Council adopt a 10% increase in water rates for fiscal year 2026 and urged that any cost savings identified by staff or the commission be applied toward reducing the planned draw from rate stabilization reserves.

Commissioners said the increase seeks to balance operating cost pressures and depleted reserves against the long-term cost of deferring capital projects. Lisa Belair, senior resource planner, told the commission the proposal relies on using $3 million from the rate stabilization reserve in FY25 and $1 million in FY26 and deferring about $7.1 million of capital improvement projects across the five‑year plan to keep the near‑term rate increase at 10%.

The commission’s recommendation follows staff analysis showing wholesale supply costs from the San Francisco…