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Divided Council Approves Steep GWP Rate Hikes

Posted by on Aug 15th, 2013 and filed under Glendale, News. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

By Ted AYALA

After a bitterly contentious meeting last week, the Glendale City Council voted on Tuesday 3-2 to approve steep electricity rate hikes for Glendale Water & Power (GWP) customers that supporters urged were necessary to maintain the agency’s infrastructure and quality of service. The two dissenting votes from Councilmembers Frank Quintero and Zareh Sinanyan were grounded in skepticism over the need for the hikes as well as the hit it will deliver to GWP customers’ pocketbooks. Councilmember Laura Friedman, who along with Councilmember Ara Najarian and Mayor Dave Weaver supported the rate plan, said last week that the hikes were needed to ensure the GWP’s solvency. Reports from city staff had predicted that the agency would flounder by 2017 without the rate increases.

In a Facebook posting that followed last week’s meeting, Sinanyan said he felt the rate increases were “unfair to […] residents and businesses.”

Both he and Quintero approved smaller rate increases spaced out across three years.

Their proposal – a four-year plan which would raise the rates by 4% each year – “would not achieve positive operating income until the final year of the plan,” according to City Manager Scott Ochoa.

Councilmember Najarian said that their plan was “not viable.”

The approved rate increases will be spread across five years ending in 2018 with the sharpest rate increase set for the first year of the plan. The increases will begin with an 8% increase, followed by gradually lowering increases of 7%, 5%, 2%, and 2%. Further increases are possible after fiscal year 2018, though council said they would be of a comparatively more modest nature.

Najarian said that he “appreciated” the concerns of GWP customers over the rate increases, but said that there were no feasible alternatives to the proposed rate increases.

“I think that nobody [in city council] likes to raise the rates – I’m sure of that,” he said. “But this is the only way to do it. I don’t see any other way. I can’t leave the utility dry. That’s not a prudent course of business.”

The rate increases will begin taking place within 31 days. City staff has estimated the compounded increases would amount to 29.1% for residential customers, 25.9% for commercial customers, and 22.9% small commercial customers.

Addressed at this meeting and last week was that these were the first GWP rate hikes since 2007, a fact that City Manager Ochoa pointed out made it necessary to impose sharp rate hikes before the agency’s situation worsened.

“[GWP was] running out of money,” he said. “We had not increased rates, yet we continued to build out.”

Another reason for the GWP’s diminishing revenues was the shuttering of major retailers, including Mervyn’s and Borders. Their tax dollars, city staff noted, helped keep the GWP afloat and mitigate rate increases for customers.

Years of cuts due to the ongoing recession have also forced the city council’s hand. City Manager Scott Ochoa said that further cuts were not possible without cutting the quality of the city services.

“Nobody wants their particular ox to get gored,” he said of residents’ pleas to stave off cuts from their pet services.

The increases, while improving the GWP’s finances, would not solve all the problems facing it. The agency’s cash reserves, though projected to be replenished by the rate increases, will still be $10 million short of its $124 million mandate. The increased funds would be enough to allow the agency to take up capital improvement projects and state-mandated renewable energy projects without having to resort to loans.

Council did, however, unanimously approve augmenting the GWP’s discount for low-income customers, increasing it from $10 to $13.

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