City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Utilities
Meeting Date: October 7, 2024
Report #:2409-3441
TITLE
Adopt a Resolution Amending Rate Schedules G-1 (Residential Gas Service), G-2 (Residential Master-Metered and Commercial Gas Service), G-3 (Large Commercial Gas Service), and G-10 (Compressed Natural Gas Service) to Raise the Upper Limit on the Monthly Transportation Charge; CEQA Status: Exempt Under Public Resources Code 15273(a)
RECOMMENDATION
Staff recommends City Council adopt a resolution amending Rate Schedules G-1 (Residential Gas Service), G-2 (Residential Master-Metered and Commercial Gas Service), G-3 (Large Commercial Gas Service), and G-10 (Compressed Natural Gas Service) to raise the upper limit on the monthly Transportation Charge from $0.25 per therm to $0.30 per therm effective November 1, 2024.
EXECUTIVE SUMMARY
One component of the City’s natural gas rates is the Transportation Charge. This charge is a pass- through of the City’s cost to transport natural gas across Pacific Gas & Electric Company’s (PG&E) pipelines. PG&E’s rates have increased and are projected to increase further; therefore, staff recommends increasing the upper limit on the Transportation Charge on all of the City’s gas rate schedules from $0.25 per therm to $0.30 per therm effective November 1, 2024.
BACKGROUND
Natural gas purchased by the City for its customers is brought to Palo Alto via PG&E’s transportation pipelines. The rate the City pays for those transportation services is based on PG&E’s Gas Transportation Service to Wholesale/Resale Customers (G-WSL) tariff. This schedule applies to Palo Alto and other cities and agencies that procure natural gas for resale.
PG&E’s rates are under the purview of the California Public Utilities Commission (CPUC). Staff receives minimal notice as to when transportation rate changes will take effect or what the final rate will be.
In October 2016, to address timing uncertainties and avoid potential discrepancies in fund collection for transportation charges, City Council adopted a Resolution 96291 stipulating that the City’s Gas Transportation Charge should be: 1) itemized separately on gas rate schedules and customer bills; and 2) adjusted to reflect PG&E’s G-WSL rate.
In June 2022, Council adopted Resolution 100502 increasing the upper limit on the Transportation Charge from $0.15 per therm to $0.25 per therm due to increasing PG&E costs related to improving storage facilities, decommissioning older facilities, wildfire mitigation, and greenhouse gas mitigation costs.
ANALYSIS
In September 2024, PG&E’s Gas Transportation Rate listed for Palo Alto on PG&E’s G-WSL tariff increased to $0.27 per therm. PG&E’s Gas Transportation Rate for Palo Alto was $0.22 per therm for the six prior months. Increases in PG&E’s transportation costs continue to be related to improving storage facilities, decommissioning older facilities, wildfire mitigation, and greenhouse gas mitigation costs. It is expected based on staff’s analysis that the rate will increase approximately 5% annually over the next five years. In order to pass through the entire gas-related supply costs, staff recommends increasing the upper limit on the Transportation Rate on the City’s gas rate schedules from $0.25 per therm to $0.30 per therm effective November 1, 2024.
FISCAL/RESOURCE IMPACT
The maximum Transportation charge is currently $0.25 per therm, and PG&E’s G-WSL rate is $0.27 per therm. The under collected revenue amount for the months of September and October 2024 is estimated to be about $60,000 which can be temporarily absorbed by gas utility reserves. If Council approves the recommended resolution, transportation costs will be fully recovered via the pass-through rate effective November 1, 2024.
STAKEHOLDER ENGAGEMENT
If the proposed resolution is adopted by Council, the Rate Schedules reflecting the adjusted Transportation Charge range will be updated accordingly on the City’s website.
ENVIRONMENTAL REVIEW
The Council finds that setting a higher limit on the Transportation Charge on the City’s gas rates schedules to meet operating expenses is not subject to the California Environmental Quality Act (CEQA), pursuant to California Public Resources Code Sec. 21080(b)(8) and Title 14 of the 1 Resolution 9629 https://www.cityofpaloalto.org/files/assets/public/v/1/city-clerk/resolutions/reso-9629.pdf 2 Resolution 10050 https://www.cityofpaloalto.org/files/assets/public/v/1/city-clerk/resolutions/resolutions- 1909-to-present/2022/reso-10050.pdf
California Code of Regulations Sec. 15273(a). After reviewing the staff report and all attachments presented to Council, the Council incorporates these documents herein and finds that sufficient evidence has been presented setting forth with specificity the basis for this claim of CEQA exemption.
ATTACHMENTS:
Attachment A: Resolution
Exhibit A: G-1 Effective 2024-11-01
Exhibit B: G-2 Effective 2024-11-01
Exhibit C: G-3 Effective 2024-11-01
Exhibit D: G-10 Effective 2024-11-01
APPROVED BY:
Dean Batchelor, Director of Utilities