Trying to strike a balance between the desires of bondholders and water users, Glendale officials on Monday proposed gradually increased rates over the next five years to keep the city-owned utility in the black.
“We have to come up with something that will protect the utility, protect the ratepayers, make the utility viable [and] protect the interests of the bond rating agencies,” said Glendale Water & Power Commissioner Deborah Dentler.
Officials are working to pull the utility out of projected water-side deficits and build an $11-million reserve, especially as the cost of imported water continues to increase.
The commission’s two-pronged proposal came a few weeks after Glendale Water & Power officials laid out a daunting scenario: without a rate increase the utility would run out of reserves in a few years as the cost of imported water and operations increase and maintenance delayed by low revenues takes its toll.
It also comes after water rates were raised 3.8% in December.
The commission recommended two options to the City Council that would gradually ratchet up water rates annually for five years. The annual rate increase differs slightly in each proposal, but the end result would be essentially the same, officials said.
A single-family household customer spending $39.45 a month would instead pay $41.13 a month the first year, according to the projections. A customer spending $203.67 a month would pay $226.59.
The second proposal boosted the lower end user up to $41.77 and the higher-end user to $220.80.
“In either scenario, the impact to the customer is negligible,” said Glendale Water & Power Commissioner Armen Adjemian.
Dentler suggested a 1% revenue increase in the first year — less than the suggested initial 2% to 3% — describing it as a gesture to show the public that officials understood people were hurting financially. But General Manager Glenn Steiger said a 1% revenue increase wouldn’t be enough to get bondholders on board.
In addition to the rate increases, staff has proposed issuing $120 million in electric and water bonds.
“If you go down to 1%, we’re going to struggle with bonding,” Steiger said, adding that the rate increases would get the utility back to solvency, but couldn’t pay for necessary capital improvement projects.
Moody’s Investors Service and Fitch Ratings downgraded the utility’s water debt with a negative outlook.
“We can’t keep kicking the can down the road,” said Commissioner Zanku Armenian.
Officials have said those who use more water are driving up Glendale’s need to buy water from Metropolitan Water District of Southern California, which is more expensive than local groundwater.
And the proposed changes don’t include the impact that may come from Metropolitan increasing prices in the future. If that happens, customers could see costs go even higher.
The matter is scheduled to come before the City Council next week.