Electric rates may rise
Glendale Water & Power expects to increase electricity rates more than 6% over multiple years to generate roughly $13 million annually — continuing a steady course of ever-rising costs for consumers as the utility struggles to balance operating costs with income.
The rate increase proposal has not been announced publicly at City Hall, but was included in a report last month from Fitch Ratings, which said the electric rate increase was needed to bolster the utility’s thin revenue margins. City officials, who confirmed the 6% figure this week, say that without a rate increase, needed capital improvements will be delayed.
The city plans to host four outreach meetings about the proposed increase this month before it’s reviewed by the Glendale Water & Power Commission and eventually the City Council later this summer.
The proposed electric rate boost comes after the city earlier this year changed water rates to charge residential customers more depending on how much water they use. The city is set to get less than a 1% revenue boost the first year, 2% the next and then 4% and 5% the next two years after that.
Glendale’s average residential water customer now pays $60.36 per month under the new rate, which is a few dollars more than Burbank and about $15 less than Crescenta Valley, according to the latest Glendale Water & Power report.
Since 2007, water rates have increased about 38.8%, but that was after years of no change.
According to Fitch Ratings, the electric rate increase is needed to bolster revenues on the electric side of the utility.
Meanwhile, the City Council approved transferring $21 million, 10.4% of Glendale Water & Power’s electricity revenue, to the city’s General Fund — which pays for most public services like public safety and libraries — even as a debate over the practice rages on.
Critics contend the transfer is illegal and contributes to the need for the utility to raise rates.
Last year, the city halted its $4-million transfer from Glendale Water & Power’s water side as a precaution after recent court cases threw the legality of the practice into doubt. But the state proposition that limits how property-related assessments can be spent excludes electrical services.
And city officials have argued that Glendale Water & Power revenue should be fair game to City Hall, as both are part of one entity.
“Not only is it legal, but Glendale Water & Power is part of Glendale. It’s not an independent company somewhere,” Mayor Frank Quintero said at a council meeting two weeks ago. “It’s producing revenue for the rest of the departments.”
Councilwoman Laura Friedman echoed his sentiments, adding that without the transfer, the city may not be able to provide the parks and other amenities residents want.
Other cities, such as Pasadena, transfer utility money to city coffers, but the industry standard — between 7% and 8% — is less than Glendale’s rate. As the protracted recession rippled through City Hall, officials became dependent on increasing the electricity transfer, according to Fitch.
After reducing the transfer for this fiscal year by $250,000, officials said they plan to continue that trend over time. But that came after a $2-million increase in 2011 following the end of the roughly $4-million water transfer.
While water assessments hinge on the state proposition, the electricity debate centers on the city charter.
The charter requires the utility’s money to be split into several accounts, including a surplus fund. The charter allows the city to transfer 25% of the fund as long as the council doesn’t think doing so harms the financial position of the utility.
For weeks, Glendale resident and retired law professor Harry Zavos, who led the charge against the water transfer, has been trying to convince officials that doing so on the utility’s electrical side bucks the charter’s intent.
But City Atty. Mike Garcia said last week that the electricity transfer is legal, and Finance Director Bob Elliott said the funds listed in the charter are not in line with modern accounting principles.
Officials maintain the transfers aren’t injurious, even as the water side faced a $21-million deficit in March and Fitch reported unrestricted cash for the electric fund declined 27% to $42.3 million over about four years ending in June 2012.
“The intention of the framers of our charter [was] that we would indeed transfer money for the general benefit of the overall community,” Ochoa said at a council meeting this week. “I fail to see that there is some nefarious reason behind that.”
Fitch gave the utility’s electricity side an A+ rating with a stable outlook last month, but the proposed rate increase was in part what stopped the bond rater from downgrading the utility.
“They need a revenue increase to support costs, including the transfer,” said Kathy Masterson, a senior director at Fitch.
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