• Editorials

        After the Huge Increases in Pasadena’s Water, Sewer, Trash Collection Rates, Can the Public Stop Large Increases in Electricity Rates?

      GUEST OPINION

      a birdsview of adjacent power plant buildings

      Pasadena’s Glenarm Power Plant (Photo – Pasadena Department of Water and Power).

      The Pasadena City Council just approved nearly 50% increases in water rates for Pasadena Department of Water and Power (PWP) customers over the next five years.

      By Scott Phelps

      PWP staff lists several factors for needing more money, including higher costs for buying water from the Metropolitan Water District, which is raising rates by 17% over two years.  The MWD says “that additional revenues are necessary because of low water sales, due to extreme drought and record-breaking precipitation. In addition, Metropolitan’s expenses have increased as inflation has driven up commodity prices, labor and energy costs.” MWD also says that “To avoid raising rates further, the budget also includes significant cost containment measures, including reducing departmental expenditures across various categories.” There has been no cost containment efforts by PWP widely reported. Both agencies have said they will make large capital investments in infrastructure to do things like “ensure the continued reliability of Metropolitan’s distribution system and to increase the system’s resiliency to better respond to climate change.”  Like MWD’s, the budget of PWP is to pay for people, employees and contractors, so like MWD, PWP is requesting and being granted rate increases that are much higher than the rate of consumer inflation, for people and their compensation. Both agencies are fundamentally raising rates to maintain their current staffing levels and systems at increasing costs even though they are both delivering less water to their customers.

      Water rates are going up all around California. What’s different is that our increases are larger, and only one councilmember opposed these increases. In other municipalities there are more divided votes, and city councils have decided to spread the increases out over more years or have reduced the size of the increases after protests. The Pasadena City Council also recently approved an increase of over 100% in sewer rates and large increases in trash collection rates.

      Both MWD and PWP have emphasized that improvements to our water infrastructure are necessary to ensure we have safe water.  This is essentially a scare tactic as there hasn’t been reporting of why there would be unsafe water in these systems. Despite public comments and the regressive nature of raising the fixed charges, there was no report of council members really pushing back on the staff requests and for example asking why staffing and contractor costs couldn’t be reduced somewhat given PWP is having to provide less water, so that the issue of expenses rising faster than revenue could be addressed on both the expense side and the revenue side. Reporting indicates that they instead opted to use logical fallacies. One councilmember used the slippery-slope fallacy, saying that a public health crisis would result unless the trash collection increases were approved. The mayor said there was no choice—-an excluded-middle argument. He has previously said it’s good that we have PWP to keep the lights on, in effect opting out of providing any oversight.

      Electricity Rates

      Pasadena City Council members also have indicated that they will likely increase electricity rates in the coming year. The stated primary reason is to transition to 100% carbon-free sources of energy by the year 2030. It is doubtful that these increases are really necessary. The Fiscal Year 2023 Pasadena Department of Water and Power (PWP) audit shows that more energy was sold, revenues grew by 10%, and the 2023 profit from electricity was $25 million. The audit also shows that the Light and Power Fund continues to have a cash reserve of $320 million, over 500 days of operating expenses, so its financial status is very solid.

      Given the coming change in the nature of electricity generation, PWP should have lower expenses for a model of energy provision based on solar energy and battery storage which is now at or below the cost of carbon-based energy generation.  And PWP did recently obtain a $10 million grant to fund the battery storage that will be needed to help transition to renewables. That is great, and it shows that the costs of this change are capital infrastructure costs. Such costs are very appropriate uses of the Light and Power Fund’s large cash reserves, as opposed to increasing the rates charged to residential and commercial power users.  The Inflation Reduction Act (IRA) opens an opportunity for PWP to procure many more of just this type of grant – this $10 million should be just the beginning.  Further, according to the International Renewable Energy Agency, the cost of photovoltaic solar electricity has dropped exponentially over the last ten years, and the cost is at or below traditional carbon-based sources of electricity generation. Data from the National Renewable Energy Laboratory also shows tremendous cost drops in the price of battery storage.  Meanwhile, presenters at Councilman Madison’s town hall in May showed Pasadena citizens that tens of billions of dollars of solar energy are wasted in California every year, in part because of lack of battery and transmission infrastructure during peak hours of solar electricity availability.  All of this adds up to a tremendous opportunity for PWP to transition to renewable energy while securing extremely competitive costs from renewable sources.  It does require diligence and hard work, for example transparent, competitive bidding for photovoltaic and battery system installations in an increasingly competitive industry with decreasing cost curves, and maximizing grants that the federal government has made available for the first time to municipalities to facilitate clean energy transitions just like Pasadena’s plan.

      More Oversight of PWP is Needed

      Rather than use fear-based arguments to automatically grant PWP’s increases, which too often is the way the California Public Utilities Commission (CPUC) operates vis a vis the big investor-owned utilities, council members need to admit that they don’t have the time or the expertise to analyze the requested rate increases and propose alternatives. For example, the justification for the water rate increases includes an estimated $74-80 million in costs for upgrading the Sunset Reservoir. The project description says “This treatment system will allow PWP to utilize more of the city’s groundwater supply.” Expertise is required to determine if this is necessary given that it is one of fourteen reservoirs in the city system when we are using less water in the city than we used to, and to determine why a neutral, 2023 third-party construction cost estimate says the project would cost far less. Our water bills already include a Capital Improvement Charge (CIC), which “covers ongoing improvements to the Pasadena water system.” A PWP citizens oversight commission and an independent, targeted forensic audit of how those funds have been spent would be good ideas. California’s big utility companies for years used funds from maintenance fees charged to ratepayers for executive bonuses and other unauthorized uses, and it wasn’t that long ago that ten years of extreme misuse (embezzlement) of PWP funds was discovered after persistent questioning by a then-city council member. Pasadena City Council members need to ask critical questions, and they just aren’t doing that.

      The LA Times editorial board has recently written about CPUC-granted rate increases, noting that “Rate hikes have become bigger and more frequent, rising even faster than inflation for customers of the big three monopoly utility companies . . .” and that “Ratepayer advocates in California have floated the idea of legislation that would prohibit utilities from increasing their rates faster than inflation.” On the issue of the spending by utilities, the editorial board writes that “they have little incentive to be frugal because they can pass on the cost to ratepayers while also taking a healthy profit.” There is a bill in the state legislature that addresses some of these utility rate excesses. These rate and spending increases sound quite similar to the situation we are in with regards to PWP, which is not surprising as anytime a monopoly or a small number of suppliers exists in a part of the economy, consumers bear the burden of higher costs. Let’s hope that the public pushes back more firmly on their city council members when they consider PWP’s request for higher electricity rates than they did when the city council considered higher sewer, trash collection and water rates.


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