City of Palo Alto Utility Rate Changes FY 2013 Facility Managers’ Meeting August 16, 2012 Ipek Connolly, Senior Resource Planner

2 Summary of Rate Changes  Electric -> – No change since July 2009  Gas -> – Supply charge: All customers on market-based commodity charge (similar to G-3) – Distribution charge: Varying adjustments based on cost of service.  Water -> – Commercial: +18% – Irrigation: -8%

3 Summary of Rate Changes (continued)  Wastewater -> – Overall: +5% – Billing basis for all customers: Average winter water use  Refuse -> – No change for commercial customers  Storm Drain -> – +2.9% based on CPI

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6 Gas Utility Rate Changes  Commodity rate changes monthly based on spot market gas price Based on budget estimate: 35% decrease to supply charges for non-G-3 customers  Overall increase to distribution charges  Cost of Service alignment by rate class: – G-2 distribution rate: +18% – G-3 distribution rate: +93%

7 Need for Rate Adjustments  Council direction to move to market-based commodity rates for all customers  No rate adjustment since 07/2009 – Decrease in commodity costs – Increase in distribution costs Investments in infrastructure Cross bore program Energy efficiency investments General Fund transfers  Cost of Service Study for full compliance with Proposition 26

9 Need for Water Rate Increase  Rising cost of water supply due to investments in infrastructure, reliability, safety ($2.5 million) –Water purchase costs increase –City’s CIP program costs increase  Revenue loss due to lower water demand ($2.4 million) in both FY 2012 and FY 2013

10 SF’s Wholesale Water Rates

Need for Wastewater Utility Rate Increase Rising cost of treatment due to required capital expenditures for the Treatment Plant ($0.6 million) Rising cost of collection system operations ($0.4 million)