A Twenty-Year Projection of the Palo Alto Utility Rates Based On 2011 Price Increases

With the looming “bankruptcy” of California, and the US Treasury, it seems that looking at these sorts of municipal service rate changes over a 20-30 year period of time is more important now, than ever. The City of Palo Alto, which owns the Utility that provides commodity services like: natural gas, water, electricity, sewerage, and garbage pickup, is raising its rates by a staggering 12.5%, claiming underling “cost increases” as a driver. The following two tables take a look into the future, to see what rates will be like if the City were to keep imposing this same 12.5% rate increase over the next twenty years--

Twenty-Year Projection of Proposed Utility Rates (By Monthly Costs)
Wastewater S1-Residential Water W1-Residential 0-6 CCF 7-29 CCF Over 29 ccf Over 29 ccf Water Meter Reading 8.8%/8.1% 8.10% 35.80% 8.10% $3.89 $6.57 $10.38 $8.26 $5.74 $9.70 $47.92 $12.19 $8.48 $14.32 $221.30 $18.00 $12.52 $21.14 $1,022.09 $26.56 Units Unlimited %Change 13.20% 2012 $31.59 2017 $58.73 2022 $109.16 2027 $202.91

Per Month

100%

$15.00

$40.00

$65.00

$90.00

Twenty-Year Projection of Proposed Utility Rates (By Yearly Cost)
Wastewater S1-Residential Water W1-Residential 0-6 CCF 7-29 CCF Over 29 ccf Over 29 ccf 8.8%/8.1% 8.10% 35.80% 8.10% $46.70 $78.87 $124.50 $99.11 $68.93 $116.42 $575.01 $146.29 $101.76 $171.86 $2,655.66 $215.95 $150.21 $253.69 $12,265.10 $318.78 Units Unlimited %Change 13.20% 2012 $379.13 2017 $704.72 2022 $1,309.93 2027 $2,434.91

(Alternative) Water Meter Reading

Per Month

100%

$180.00

$480.00

$780.00

$1,080.00

Notes: 1) The rate change was used for the full twenty-year projection. This is unlikely to be true, and will probably go up and down on a yearly basis. However, given the never-ending costs associated with updating a utility system that probably has at least $2B in hardware that needs to be periodically replaced, it is difficult to believe that the City Council will be able to ignore these costs as it has in the past. 2) The City NEVER provides these sorts of projections. It always focuses on just “this year’s” changes. When people see these price rises on a twenty-thirty year timeline, it changes their view of just how acceptable these price increases are. 3) The City seems to use geometric multipliers for cost increases. If it were to switch to linear multipliers, this would reduce the costs for utilities in the coming years substantially—at the cost of revenue for the Municipality. 4) The City is not raising the gas/electricity at this time, as there are fixed-price contracts in place that would defy any City claims of price increases. 5) The City is promoting the reason for these cost increases as “cost recovery”, without actually providing a fully documented budget for the Utility that highlights how much additional revenue these rate increases will generate, or how hose monies will be spent. This should be a requirement prior to rate increases being proposed by the City. 6) The Meter Reading charges are a disgrace. Notice how the costs escalate, in the coming years if the rate is increased $5 (not 100%). The 2011-2012 proposed rate will generate $120/residential account (for 2012). There is no mention of switching to automated meter reading in the near, or long-term future. Given the growing adoption of “smart meters”, the costs of these devices will be down in $250-$350 range. The PAU is now spending somewhere in the $1+M to read meters. This is all in salaries, benefits, and overhead costs. With “smartmeters”, these meter reading costs would go down to very little. However, with this proposed rate change, the Utility would collect $120/account just to collect a few utility use numbers. These meter reading fees amount up to highway robbery. 7) By the way, a CCF (100 Cubic Feet) of Water contains about 748 gallons. It’s astounding that the City has to cast our utilities use data in such arcane metrics. Maybe CCF is OK for natural gas, but it’s a fair guess that no one ever thinks in those terms when around-the-house water use is discussed. 8) Why can’t the City provide a WEB-page for people to cast their votes? Is it possible that if it got to be “too easy” for people to let these guys know what they think, that the “free ride” might come to an end for the folk at 250 Hamilton? While it’s not likely that every commodity price will see its price increased yearly, still, it pays to consider what the bills would be like if the City decides to raise them by that amount. Wayne Martin Palo Alto