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

2. 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. 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. 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. 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. 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. 10 SF’s Wholesale Water Rates

12. 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)