Glendale Council approves rate increases
In a 3-2 vote, the City Council on Tuesday night approved five years of electricity rate increases through 2018. When compounded, the increases equate to a 29% hike for Glendale’s residents.
The rate increases came after several public meetings about the dire financial state of Glendale Water & Power — officials have said it would have become insolvent by 2017 without increasing rates — and a barrage of criticism from customers, who pleaded last week at a council meeting for smaller increases.
But the complaints didn’t deter Mayor Dave Weaver, Councilman Ara Najarian and Councilwoman Laura Friedman, who voted in favor of the increases.
“It’s my duty as a City Councilman to make sure we have a viable electrical utility,” said Najarian. “I see this as the only way to do it. I know it hurts, but I see no alternative.”
The approved changes are to begin in 31 days, with an average 8% increase this year, followed by 7%, 5%, 2% and 2% in ensuing consecutive years. 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.
Councilman Frank Quintero disagreed with Najarian, noting that he believed five years of 4% increases would be sufficient to fund necessary capital improvements and keep GWP running.
“That’s not a small amount of money. That is a big, big increase,” Quintero said.
But City Manager Scott Ochoa said Quintero’s suggestion wouldn’t get the utility to positive income and would set reserves at $15 million in 2018, far below a $124 million floor set by a 2006 council vote.
Despite this rise in rates, there may be more to come for utility customers. The utility may ratchet up rates more in the future, albeit on a smaller scale of 1% to 2%, officials have said.
Under the approved 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 new rates include “adjustment charges” that could boost electricity bills if new state environmental rules drive the utility’s costs up or sales volumes fall below projection.
The council has not approved a rate increase since 2007, one factor of many that prompted GWP’s financial troubles and warnings from bond rating agencies. In addition to holding back rates, the city lost large retail stores — which once buoyed the utility’s revenue — to the protracted recession and at the same time, officials spent millions of dollars on capital infrastructure that GWP didn’t have available.
The city also transfers about $21 million a year from the electricity side of the utility to the General Fund, which pays for police, parks and other public services. While officials have reduced the transfer slightly and plan to pare it back a bit more over time, angry residents who say it artificially inflates rates want a faster reduction. However, officials say doing that would mean devastating cuts to parks and public safety services.
In addition to the rate increases — which are supposed to boost reserves to $114 million by 2018 — the utility has proposed issuing $60 million in bonds to do capital improvements, including revamping Grayson Power Plant and improving a substation that serves northwest Glendale and Disney’s Grand Central Creative Campus.
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.
Officials said that after the five years encompassed by the rate increases, GWP will be on its way to supporting infrastructure projects without bonds, a prickly subject for some council members.
While council members disagreed about the rate increases, they unanimously supported upping the utility’s $10 discount for low-income customers to $13 beginning this year, but that means less money will be available for solar panel rebates and other public benefits programs, officials have said.
The council approved four years of water-rate increases last year.
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