Planned Utility Restructure Causes Concern Among Customers

A representative from Raftelis Financial Consultants, Inc. addressed the audience.


A bag of varied news from Glendale Water & Power (GWP) elicited mixed responses from a group of local residents at the Adult Recreation Center off of East Colorado Blvd. on Thursday.

The utility is seeking to move forward with a new five-year rate increase for its customers. That increase would be the first part of a proposed nine-year plan. If approved by the Glendale City Council next month, customers can soon expect to see substantial changes to their water and power bills.

The first part of the GWP rate restructuring plan would continue through the 2022-23 fiscal year.

The cost-of-service analysis (COSA) proposed for electrical and water customers, which was done by NewGen Strategies & Solutions, LLC of Richardson, Texas and Raftelis Financial Consultants of Los Angeles respectively, would see modest increases across the board for GWP customers. However, residential and commercial electrical customers will see wide disparities in how the plan will impact them. Residential customers will see an average rate increase of 9.2% over the next five years, while businesses will see their rates drop from 3.7% for small commercial customers to 7.9% for large commercial customers on average.

Cumulatively the rate increases system-wide will average out to 0%, .,5%, and then 1% over three years.

Steve Zurn, general manager of the GWP, said that the rate disparities stem from findings his agency discovered five years ago that demonstrated commercial customers being overcharged.

“Each rate class pays [its] equal cost of service,” he said. “We began to address the issue five years ago [in the previous COSA] and it continues. The residential class is underpaying while our commercial class was overpaying more than their share. What we’ve proposed [in this COSA] is that over the next nine years we incrementally raise the residential rates in order to reach the equity required by law.”

Tony Geordis of NewGen said that residential electrical rates are significantly lower than Prop. 26 requirements. These rates would also include structural changes required by the law. The new COSA would move those rates closer to those requirements by fiscal year 2022-23.

“GWP was substantially under-collecting from the residential class,” he said. “They weren’t collecting as much as the costs incurred to provide services, whereas the commercial class was being substantially overcharged.”

Residential customers will begin to see the increases on the second year of the proposed rate plan. In order to mitigate the impact on these customers, GWP will phase in its required increases over a period of nine years beginning fiscal year 2019-20.

“We’re slowly adjusting the rates for a gradual turn,” Georgis added. “We don’t want to give anyone rate shock. We’re trying to slowly rebalance this.”

It was a theme that Zurn expanded upon.

“What could have been an immediate 25% increase is being buffered a bit over nine years,” he explained. “We think that’s the best way to do it. Glendale is a residential utility. Of the 89,000 meters in the city, 75,000 are residentials. So if you can imagine distributing the costs of all of the infrastructure, most of it is going to residential customers because that is where most of our customers are.”

Low income customers using an estimated 280 KWh per month will see their gross bill increase from a current average of $53.67 to $60.97 in fiscal year 2022-23. They will also enjoy a small boost in their monthly discount from $13 to $15. Residential customers using an average of 404 KWh per month will see their bills grow from a current average of $75.89 to $82.88 during the same period.

Conversely, commercial customers will see the biggest drop in their rates in the first and second years of the plan, followed by more modest ones in the closing three.

The new COSA will also redesign time-of-use rates in order to better incentivize off-peak usage and the use of electrical vehicles.

On-peak pricing will be increased beginning in fiscal year 2020-21. On-peak times are currently from 8 a.m. to 9 p.m. With the new COSA, that window is expected to shrink to 11 a.m. to 9 p.m. beginning fiscal year 2020-21.

“It’s hard to get people to drop their air conditioning during the hottest part of the day,” said Zurn. “But that’s the draw. If you want to consume most of that electricity during that highest demand period and pay the highest dollar amount, great. If you’re okay with that, fine, write the check. You can literally see our systems begin to drag down during those highest-peak periods. It’s more of an incentive for customers to change their habits of [electrical] consumption.”

Residential and commercial customers will all see their water rates increase over the next five years. System-wide the increases average out to 1%, 1%, 1.5%, 2%, and 2% over the next five years.

The first year residential customers will see on average a small decrease in their bill, while commercial and irrigation customers will see increases every year of the plan.

A single-family monthly bill on average will increase from $74.60 to $78.19 through fiscal year 2022-23.

Residential customers in the audience vented their exasperation over what they perceive as being penalized for saving water despite being encouraged to do so. Officials from Raftelis assured residents that GWP had no choice but to raise rates given the legal requirements of Prop 218, but that customers who save water will still see their bills go down despite rate hikes.

Water demand remains down from fiscal year 2015-16 when the city’s annual water demand stood at 11,194,404 HCF (hundred cubic feet). Actual demand clocks in at 10,633,946 HCF and is forecasted to grow to 11,153,857 HCF by fiscal year 2022-23. That would still be marginally less than demand levels from fiscal year 2015-16, which notched 11,194,404 HCF.

Single families would be paying a median monthly rate of $73.09. That rate falls well below the average charged by Los Angeles Water & Power (LADWP) and Crescenta Valley Water District (CVWD) of $108.13 and $84.18 respectively. Pasadena Water & Power (PWD) average rates and proposed increases for Burbank Water & Power (BWP) would on average total less than what their neighbors in Glendale pay, with $62.81 and $61.37 per month respectively.

The new COSA follows a prior one from 2012 that GWP was banking on helping to shore up a budget shortfall of $11.5 million it had then been suffering. That COSA, prepared by Willdan Financial Services of Temecula, led to single- and multi-family customers being undercharged while overcharging customers with fire lines. The result was an additional budget shortfall of $9 million incurred by Willdan’s faulty figures that would not be discovered until 2014. Its erroneous figures were initially brought to the city’s attention by the late Harry Zavos, a local resident.

Glendale would later settle with Willdan for $1.1 million.

Bartle Wells Associates of Berkeley was later contracted by the city to propose a new COSA that repaired the problems of the Willdan one.

“We were in the hole. We were under water,” said Zurn. “Now we are above water and rebuilt our reserve. The [settlement with Willdan] did not get us back all that we lost [through its faulty COSA]. But in some respects [the lawsuit] was more about taking a stand. That money went back to the water fund.”

The proposed COSAs by NewGen and Raftelis will be put forward before the City Council on June 5. Upon their approval the plans would go into effect beginning July 1 of this year.