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CITY OF GLENDALE, CALIFORNIA
REPORT TO THE CITY COUNCIL
AGENDA ITEM
Report: Authorization to defer the Electric Rate adjustment scheduled for July 1, 2025, to November 1, 2025, and to distribute the 11.3% average adjustment over three years—5% effective November 1, 2025; 2.95% effective November 1, 2026; and 2.95% effective November 1, 2027.
1. Resolution to defer the July 1st Electric Rate adjustment to November 1st and to adjust and redistribute the 11.3% average adjustment as follows: 5% effective November 1, 2025; 2.95% effective November 1, 2026; and 2.95% effective November 1, 2027 and directing staff to return in advance of November 1, 2025 with an Ordinance with updated rates reflecting the herein authorized rate adjustment and redistribution.
COUNCIL ACTION
Item Type: Action Item
Approved for June 3, 2025 calendar
EXECUTIVE SUMMARY
In November 2023, City Council approved a five-year Cost of Service Analysis (COSA) for Glendale Water and Power (GWP). The average rate adjustments approved were
14.8% effective January 1, 2024; 11.3% effective July 1, 2024; and 11.3% effective July 1, 2025; no rate adjustments were proposed for the final two fiscal years covered within the COSA period.
Understanding that the rate adjustments to date have had a significant impact on customers’ utility bills, GWP is making every effort to mitigate the impact of the final rate adjustment within the five-year COSA period. After a careful analysis of cash balances, reserves, and projected revenues from non-rate sources—such as sales to other agencies and interest income—GWP staff recommends deferring the 11.3% rate adjustment scheduled for July 1, 2025, to November 1, 2025, and redistributing the
11.3% adjustment as follows: 5% effective November 1, 2025; 2.95% effective November 1, 2026; and 2.95% effective November 1, 2027 (percentage for outer years adjusted for compounding). This approach will shift the rate adjustments to occur after the peak customer usage season, reducing the near-term impacts to customer bills.
This shift will still allow for the Utility to recover the needed revenue programmed into operations and capital projects within the COSA timeframe.
Since the final rate adjustment covered by the COSA period is set to take effect on July 1, 2025, having the rate impacts by each customer class completed by this deadline is not feasible. Therefore, at this time, general system average rates are being presented.
The Utility’s COSA consultant, NewGen Strategies, is working on providing the rate 28d
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changes by each customer class. Staff will be coming back to Council when that data is available, likely in August, to provide the rate impacts by each customer class.
RECOMMENDATION
Staff recommends that Council adopt the proposed deferral and adjustment and redistribution of the planned 11.3% average rate adjustment, originally scheduled to take effect on July 1, 2025, to November 1, 2025, November 1, 2026, and November 1, 2027. This deferral will provide relief to ratepayers during the hot summer months, when customer energy usage is customarily the highest, commonly generating the highest customer bills of the year. The proposed adjustment and redistribution will spread the adjustment over three years, reducing the financial impact on ratepayers by avoiding the single large rate adjustment. Instead of the approved 11.3% average adjustment, customers would experience smaller, more manageable adjustments over time. The revenue loss from the redistribution of the rate adjustment can be absorbed within the COSA due to higher revenues received and projected from interest income, sales to other agencies, and expenditure savings in purchased power.
With these proposed changes, the total revenue received and projected will continue to support the utility’s financial commitments. These include debt service payments, maintenance of required debt coverage ratios, and preservation of adequate days cash on hand.
If the City Council does not authorize the proposed rate deferral, adjustment and redistribution, the currently scheduled 11.3% average electric rate adjustment—set to take effect on July 1, 2025—will remain in place. If the City Council does authorize the proposed rate deferral and redistribution, GWP staff will return to City Council in advance of the November 1, 2025 deferral expiration date to present updated rates to reflect the authorized redistribution from 11.3%, 0%, 0% to 5%, 2.95%, 2.95%.
ANALYSIS
On November 14, 2023, the City Council approved a five-year Cost of Service Analysis (COSA) for Glendale Water and Power (GWP), covering fiscal years 2024 through 2028. Although the COSA spans five years, the Council authorized electric rate adjustments to be implemented over a three-year period, with average adjustments of
14.8%, 11.3%, and 11.3%, effective January 1, 2024, July 1, 2024, and July 1, 2025, respectively. The rate adjustments are intended to fund the Grayson Repowering Project, as well as provide partial funding for the Scholl Canyon Biogas Renewable Generation Project, City solar projects, Glendale’s commitment to building and fleet electrification, and to cover the general increase in the costs of wholesale purchased power, renewable energy projects, and fuel. As a majority of the financial commitments for these capital projects occurred during the first three years of the COSA, and as it was necessary to issue bonds to cover those project costs, it was also necessary to incur a majority of the rate adjustments to align with bond covenants.
GWP is proposing to defer, adjust and redistribute the 11.3% adjustment originally scheduled for July 1, 2025. Under this proposal, a 5% adjustment would take effect on November 1, 2025, followed by additional average adjustments of 2.95% on November 1, 2026, and November 1, 2027.
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FY 2026FY 2027FY 2028Total Compounded Rate Impact/ChangeS ytem-wide Base R ate ChangesOriginally Adopted 11.30% 0.00% 0.00% 11.3%Proposed / Adjusted 5.00% 2.95% 2.95% 11.3% R etail R ate R evenuesProjected with Originally Adopted 325,016,450 $ 328,902,696 $ 332,722,360 $ R edistribution:Cost of R edistribution (18,028,929) $ (9,286,645) $ (37,940) $ (27,353,514) $ R evised R evenue Projection:306,987,521 $ 319,616,051 $ 332,684,421 $ Deferral:Cost of Deferral to November 1(6,189,195) $ (3,769,220) $ (3,880,411) $ (13,838,826) $ T otal Annual Impact of Proposed Changes(24,218,124) $ (13,055,865) $ (3,918,351) $ (41,192,340) $ R evised R evenue Projection:300,798,326 $ 315,846,831 $ 328,804,010 $ The deferment and redistribution of the average 11.3% rate adjustment will reduce projected retail revenues by approximately $ 24.2 million in fiscal year 2026, $13.1 million in fiscal year 2027, and $3.9 million in fiscal year 2028, compared to the original revenue estimates in the 2023 Cost of Service Analysis. The Electric Fund can absorb the impact of these changes in revenues for the following reasons:
The actual revenues realized and projected for sales to other agencies, interest income, and carbon emissions are now projected higher than originally forecasted
The actual expenses realized and projected for purchased power and natural gas are now anticipated to be lower than originally forecasted Delay in Capital expenditures on projects have led to higher than anticipated cash balances yielding higher interest revenue with invested cash The table below recaps the proposed rates and numerical impact on projected revenues from the proposed redistribution and deferral of the rate adjustments.
STAKEHOLDERS/OUTREACH
N/A
FISCAL IMPACT
The proposed deferral, adjustment and redistribution of the system average rates as outlined in the report are estimated to impact revenues within the three-year period by $41.2 million (loss). This loss of revenue can be absorbed within the existing COSA due to higher than forecasted revenues in non-rate revenues as well as savings in the expenditures related to Purchased Power.
ENVIRONMENTAL REVIEW
The action requested herein is ministerial and thus not a project for the purposes of California Environmental Quality Act; therefore CEQA does not apply. 48d
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CAMPAIGN DISCLOSURE
Not Applicable.
ALTERNATIVES
Alternative 1: Authorize staff to defer the Electric Rate adjustment scheduled for July 1, 2025, to November 1, 2025, and to adjust and distribute the 11.3% average adjustment over three years—5% effective November 1, 2025;
2.95% effective November 1, 2026; and 2.95% effective November 1, 2027
Alternative 2: Not Authorize staff to defer the Electric Rate adjustment scheduled for July 1, 2025, to November 1, 2025, and to distribute the 11.3% average adjustment over three years—5% effective November 1, 2025; 2.95% effective November 1, 2026; and 2.95% effective November 1, 2027
ADMINISTRATIVE ACTION
Submitted by:
Scott K. Mellon, P.E. Acting General Manager - Glendale Water & Power Prepared by:
Adrine Isayan, Assistant General Manager – Finance & Risk Management Vanik Darabedian, Sr. Utility Financial Analyst
Approved by:
Roubik R. Golanian, P.E., City Manager
EXHIBITS / ATTACHMENTS
None