City Council leans toward electricity rate hikes in Glendale

The City Council took the first step toward increasing electricity rates Tuesday night, even after public speakers pleaded to not boost their bills and one woman was on the verge of being tossed out of council chambers.

The majority of the council said they were open to five years of increases through 2018, beginning with an average 8% increase, followed by 7%, 5%, 2% and 2%. The compounded increase would be 29.1% for residential customers, 25.9% for commercial customers and 22.9% for small commercial customers, according to a city report.

Under the plan, an average single-family homeowner who pays $103.15 monthly now, would see rates increase by $9.16 to $122.31 next fiscal year and then an additional $21.38 through 2018 to $133.69.

The plan must still be approved by a roll-call vote next Tuesday before it takes effect. While Councilman Ara Najarian introduced the ordinance Tuesday, he said he may want to tweak it next week and Councilmen Frank Quintero and Zareh Sinanyan are adamantly against it.

Mayor Dave Weaver and Councilwoman Laura Friedman supported the rate plan.

“I will support the staff recommendation as much as I know it hurts people,” Weaver said. “We can’t sit still and do nothing and hope the future is going to take care of it.”

The proposed rates include “adjustment charges,” which could boost electricity charges if new state environmental rules drive the utility’s costs up or sales volumes fall below projections.

In addition to ratcheting up rates, officials plan to issue $60 million in bonds, which city officials would use to complete capital improvements, such as work on the Grayson Power Plant. Officials plan to spend $94 million on capital improvements over the next five years.

While the council increased water rates last year, it hasn’t approved raising electricity rates since 2007. But that didn’t stop residents and business owners from complaining. About 140 people packed council chambers and the entryway to City Hall during the meeting.

Council members were interrupted several times during their comments by angry resident Laina Baltrenas, who opposes the rate increases. Weaver called to have her removed from the council chambers, although she quieted down and never was booted.

Roughly 30 people, including resident Mike Minasyan, spoke against the rate increases, claiming it would be difficult for them to pay for the soaring costs.

“The people who are scraping by, it’s going to be harder for them,” Minasyan said.

The proposed rate plan includes raising the utility’s $10 discount for low-income customers to $13 by 2018. But, the uptick means less money may be available for solar panel rebates and other public benefit programs.

It wasn’t just low-income earners who opposed the rate hikes. Stan Tempchin, director of facilities and engineering at Glendale Adventist Medical Center, said the plan will hurt the hospital, too, urging the council to consider more gradual increases.

The Glendale Chamber of Commerce has come out against the rate hikes as has the Glendale chapter of the Armenian National Committee, which collected about 600 signatures from rate opponents.

However, Ira Bland of the Glendale Assn. of Realtors said his group agrees with the proposed increases.

“We understand we are way past the time of just saying ‘No,’” Bland said.

The utility’s monetary situation has been souring for years after officials put millions of dollars into capital infrastructure that Glendale Water & Power didn’t have available. At the same time, the loss of large retail stores during the protracted recession and reduced customer energy usage due to cooler weather have stymied revenues.

Bond rating agencies have taken note and earlier this year, Fitch Ratings gave the utility a negative outlook due to its lack of net income. The utility’s cash reserves dropped by more than half from $100.9 million in 2009 to $47.8 million last year, according to a city report.

While this year’s revenues are expected to hit $158 million, after declining more than $30 million since 2008, officials forecast that the utility will become insolvent by 2017 without rate increases.

“We will be in a place where this utility is bankrupt,” Councilwoman Laura Friedman said, noting that opposing the rate hike would be irresponsible.

The rate increases are expected to bring electric reserves up to $114 million, still below the council-set $124-million limit, by the end of the five years and get the utility on a path where it doesn’t need to borrow money to do capital improvements and so it can handle rising costs of renewable energy use mandated by the state.

Several public speakers called on the utility to cut costs before raising rates, but City Manager Scott Ochoa said it has been paring back expenses already. The city increased Glendale Water & Power employee contributions into their own retirement benefits, saving the utility $399,000 and cut utility staff by 84 positions last year to save $11.1 million, according to a city report.

The five-year rate plan may not be the end of rate increases, either. Officials have said that after the hikes have kicked in, the city may have to raise rates even more, although they will be smaller boosts of about 1% or 2%.

--

Follow Brittany Levine on Google+ and on Twitter: @brittanylevine.