Get Full Government Meeting Transcripts, Videos, & Alerts Forever!
Get email alerts on the Utilities Forecast topic
No spam. Unsubscribe anytime.
Preliminary utility forecast shows multi-utility rate increases to rebuild reserves
Summary
Staff presented preliminary five-year utility forecasts showing proposed FY27 rate increases across utilities (electric ~6%, gas ~9% including COSA adjustments, water ~10%) to rebuild depleted CIP and operations reserves and fund planned capital projects such as grid modernization and seismic water-tank work.
City staff presented a preliminary five-year utility financial forecast showing proposed rate adjustments for multiple enterprise utilities aimed at rebuilding depleted reserves and supporting capital programs.
For the electric utility staff presented a preliminary FY27 projection of a 6% rate increase, primarily driven by capital-investment needs for grid modernization, distribution maintenance, and the need to replenish a near-empty CIP reserve; staff said Palo Alto electric rates remain roughly half of PG&E for residents on a median basis.
The gas utility forecast assumed council approval of the 2026 COSA adjustments and incorporated lower-than-expected 2025 gas sales; staff presented a 9% overall gas rate increase for FY27 with a 14.5% distribution increase component, noting $16.5 million in federal grants that will support main replacements and reduce near-term capital pressure.
Water projections showed a 10% preliminary FY27 rate increase (driven by a 16% distribution change and a 1% wholesale SFPUC increase) tied primarily to capital spending for seismic upgrades to two reservoirs/tanks and ongoing water-main replacement; staff said funds are being set aside now to smooth out future rate impacts.
Wastewater collection faces notable increases as well; staff noted operations and CIP reserves are low following deferred main-replacement work and that a prior $3 million interfund loan from the fiber fund must be repaid or refinanced. Staff outlined a plan to restore reserves ahead of main-replacement construction years (noted in FY28 and FY30).
Staff also described several cost-containment efforts, including optimizing grid modernization financing, pursuing a Western transmission exchange agreement that could yield $2'$5 million in annual savings by moving federal hydro power via federal transmission lines, and pursuing opportunities in the extended day-ahead market. Lena Perkins of the utilities team summarized the transmission exchange agreement and the financial value of dispatching federal hydro across federal transmission.
Committee members asked about the drivers and assumptions (weather effects on gas usage, timing of debt issuance, AMI project financing and payback, and the influence of data-center growth on load forecasts). Staff said the forecasts rely on consultant-provided sales-tax and load models, IRP scenarios for data-center growth, and conservative assumptions for PARS and CalPERS modeling elsewhere in the meeting.
No committee action was required; staff will incorporate feedback into the long-range forecast and present additional details during upcoming budget sessions.
