By Ted AYALA
Glendale City Council embarked on a course for electricity rate hikes on Tuesday night, provoking an angry response from members of the public starkly opposed to increases in their energy costs. Opponents of the increases packed the council chambers and at times turned noisy and rancorous – enough so that Mayor Dave Weaver had to halt the meeting several times to restore order and at one point threatened to eject a disruptive audience member from the meeting.
Earlier this summer, Glendale Water & Power (GWP) had conducted public outreach concerning the proposed rate hikes throughout the city. At an outreach meeting held in Sparr Heights on June 20, the reaction from the audience was mostly negative.
The proposed rate hikes, which would begin in fiscal 2014 and end in 2018, would see the sharpest increase in the first year – 8% – followed by gradually declining increases of 7%, 5%, and 2% in the final two years. According to a city report, the increases would amount to a total of 29.1% for residential customers, 25.9% for large commercial customers, and 22.9% for small commercial customers across the duration of the five-year plan. Estimates by city staff see the GWP returning to an operating profit of approximately $13 million by fiscal 2018.
Council hasn’t ruled out the possibility of additional rate hikes after 2018, though the increases at that point would be far less drastic.
One of the key motivating factors for the rate increases, said City Manager Scott Ochoa, was to ensure that the GWP cash reserves meet the $124 million limit mandated by the council – of which its current reserves fall short.
“Because we have not increased the base rates during the recession, we now have the responsibility to replenish the reserves and restore the infrastructure program,” he said.
Even with the approval of the rate hikes, Ochoa informed council that the influx of revenue would still keep the utility’s reserve approximately $10 million short of its mandate. However, it would restore the health of the reserves to a level that would allow the GWP to eschew loans in order to fund capital improvement and renewable energy infrastructure projects mandated by Sacramento.
He also added that the GWP can no longer resort to cuts in order to shore up its finances, saying that the utility is an “extremely lean organization” after several rounds of cuts, which included shedding 84 positions from its payroll last year, bringing the number of GWP staff to the lowest level seen since the mid 1990s.
“At this point, there are no easy trade-offs to make,” he said.
Public reaction to the proposed rate increases was sharply negative from residents and business owners.
“Now we, the people of Glendale, are asking you to listen to us,” said Frank Gallo. “People’s lives will be deeply affected by those rate increases. Many of us already have trouble paying off our bills as it is.”
Ira Bland, president of the 1500-member Glendale Association of Realtors and speaking on behalf of the organization, was among the few that spoke in support for the increases, saying that although painful, they will stave off more painful choices that would have to be faced in the future.
“We understand that the quality of life we all enjoy in Glendale is dependent on the outstanding [services] this city offers,” he said. “Although we, just like you, don’t like the idea of paying more in electric rates, after serious study we have concluded that the city has little choice but to adopt the proposed rate plan. We understand that we are way past time the we can just say ‘no.’ We no longer have the luxury to put off rate increases.”
Before the gavel called the meeting to order, the council was already divided on how to proceed, with Councilmembers Ara Najarian – who introduced the ordinance Tuesday – Laura Friedman, and Mayor Dave Weaver in support of the rate increases, while Councilmembers Zareh Sinanyan and Frank Quintero stood opposed.
Weaver said that while he understands the pain the rate increases will cost, they are a necessity.
“Let’s look at the reality. Overall revenue has decreased by $30 million,” the mayor said before he listed off numerous costly new regulations and mandates imposed on the city by the state and Congress. “We just don’t have the revenue.”
Councilmember Frank Quintero, though, said that he “wasn’t persuaded” by the city report advocating the rate increases, saying that the numbers as they stand there “just don’t work.”
“A 3% to 4 % [increase] over a three-year period would be the max for me,” he said. “[This ordinance] is a non-starter.”
Transfers from the city’s general fund were, according to Councilmember Zareh Sinanyan, the main culprit of the GWP’s ongoing financial woes.
“If an entity can’t take care of its own infrastructural needs and transfers money from another entity, that transfer can’t be right,” he said. “Do we have a systematic solution in such a way that we don’t have to constantly depend on this transfer? I think it’s fundamentally unfair to ask our residents to sustain this cost.”
Sinanyan, however, stopped short of calling an end to transfers of funds beginning next year.
“That’s just not doable,” he added.
Explaining her support for the proposed rate increases, Councilmember Laura Friedman said that even with the rate increases enacted, residents would be paying less in energy costs than they did in fiscal 2008, even as GWP infrastructure aged.
“The utility had lowered its rates at a time its costs went up [and] doesn’t pocket money,” she said. “This is a big picture [solution].”
She also warned that the utility would go insolvent if the proposed rate increases aren’t enacted, resulting in the sale of the GWP to a for-profit organization.
“The easiest [thing] in the world for me to do is to [oppose the increases]; people would love me and I’d be the hero of a lot of people,” she continued. “But what happens when I’m off council in four years – and then the next council walks into a bankrupt utility? You pay less now, you pay big later.”