From:
To: Jones, Justin; Hampton, Tyron; Rick Cole; Lyon, Jason Cc: Gao, Beilei
Subject: MSC June 24, 3035 - Item 1. Electric Rate Study Update Date: Tuesday, June 24, 2025 11:27:18 AM
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Pasadena Water & Power (PWP) has employed a procedural device to provide incomplete information for two ongoing studies to the Municipal Services Committee:
the
Optimized Strategic Plan and the Electric Rate Study. By presenting these “Updates” as “Information Only”, PWP avoids taking responsibility for any implied results but proceeds as if incomplete results have been approved.
This is particularly apparent in the staff report for June 24, 2025, Item 1 - Electric Rate Study. This Update is labeled “INFORMATION ONLY
.” Information only items contain no
staff recommend
ations. Item 3 is an Optimized Strategic Plan Update, the unfinished report that was supposed to provide base data for the Item 1 Rate Study.
Note that the
word “OPTIMIZED” implies a specific result, not an outline with multiple options, repeating information shared in previous updates.
The Rate Study was supposed to be
based on an actual plan developed by E3, not “developed in parallel” as suggested in the current staff report.
In late 2023, Energy and Environmental Economics, Inc. ("E3") provided a technical review of the inconclusive 2023 Draft IRP which did not produce a plan for action.
The
City Manager proposed reengaging E3 to assist with the development of an Optimized Strategic Plan.
E3’s new contract was approved March 25, 2024.
A mere two weeks
later, Council approved a consulting contract with NewGen -- one year before the expected results from E3’s Optimized Strategic Plan.
Despite PWP’s repeated assurance that the Electric Rate Study would be based on an actual plan, THERE IS NO PLAN.
The rate study “update” shows graphs with four
different energy scenarios that could push systemwide rates from 33 cents to 42 cents by 2031.
However, there is no Base Case showing costs and rates under the current operating model, “Business as Usual”.
NextGen’s September 2024 Rate Study
Introduction noted that Budget Year 2025 Costs would provide base-year data yet the current staff report states that the study baseline is FY 2026 Operating and Capital Budgets.
MSC instructed PWP to revise their FY 2026 Operating Budget to remove unwarranted and unapproved assumptions of a rate increase; no changes were made.
MSC also
instructed PWP to base energy costs on the “hourly method” for calculating the cost of clean energy, yet the Electric Rate cost scenarios use both “annual” and “hourly” basis.
Both consultants rely on “black box” models with unstated assumptions and hidden calculations.
PWP and its consultants continue to ignore City Council’s and the Municipal Services Committee’s direction.
FY 2026 Capital Improvement Program (CIP)
In just three years, the Electric System’s Capital Improvement Program (CIP) FY 2026
ballooned to six times the amount of its FY 2023 CIP while adding only one project that clearly supports goals of Resolution 9977.
FY 2023 FY 2024 FY 2025 FY 2026
Power Capital
Improvement (CIP)
$27,084,360 $56,847,800 $76,128,718 $163,971,500
Documentation for the Power Fund’s FY 2026 CIP designates 29 of the 62 line-items as supporting the goals of Council Resolution 9977. The combined value of $84.1 million for “9977 supporting expenses” comprises 51% of the total CIP budget. However, nearly all the so-called 9977 items are for ongoing maintenance and improvements continued from previous years. As an example, even $3.45 million for Purchase of Vehicles and
Equipment (3500), Priority 36 is attributed to 9977.
A much-needed Battery Energy Storage System (BESS) to be constructed at the Glenarm site is the only item that clearly contributes to local solar/battery storage and supports Resolution 9977.
It is designated Priority #6 - Glenarm Energy Storage (3206) with a total cost of $13,540,000 (FY 2026). However, BESS total cost of $13.45 million overstates the cost to PWP because it includes a federal grant of $9,660,000, 71% of the total.
Other costs attributed to Glenarm are primarily for the cost to maintain the five gas turbines of Glenarm Gas Plant. The main turbine has been broken and under repair in Texas since November of 2024.
Why are no new local solar/battery storage or community solar projects included in the FY 2026 Capital Improvement Budget?
New Positions: FY 2026 Personnel Enhancements
FY 2026 Personnel Enhancements, Other Funds AR 11 Summary Table - Other Funds (Personnel Enhancements).pdf include two new positions paid by the 401 Public Benefit Fund which is supported by state mandated fees collected from ratepayers “to fund assistance programs, energy efficiency, and renewable energy projects”.
Senior Customer Program Analyst @ $155,480 “To design, implement evaluate programs that directly benefit economically vulnerable residents” Customer Program Analyst @ $118,567 “To support the new Senior Customer Program Analyst”
What are the new customer assistance plans that require these positions? When will they be implemented?
Where is Pasadena’s comprehensive plan to provide meaningful rate assistance for economically vulnerable residents?
Conclusions
Based on their computer modeling, E3 determined how much local solar and battery storage will be needed to meet 9977 goals. However, the current draft Optimized Strategic Plan has neither provided an actionable plan with capital cost assumptions to be used in the Electric Cost of Service Study, nor has it developed cost projections for a baseline case assuming no change, “Business as Usual”.
There must be baseline financial projections for the status quo, “Business as Usual” to establish the incremental increase due to new local solar and battery storage.
PWP must develop and adopt a single plan on which to base its rate assumptions. The incremental difference between the baseline case and the adopted plan will reflect cost due to 9977 goals.
Ratepayers were subject to large Power Cost Adjustments initiated in March 2023 due to increased cost of fuel. These adjustments resulted in record income for the Power Fund in FY 2024. Even without adding new zero-carbon energy sources, electric rates will be subject to increases based on the cost of carbon fuel, procurement bottlenecks, and generalized economic inflation.
Why was the Power Fund’s FY 2024 “$10 million surplus” transferred to the General Fund rather than invested in the city’s carbon-free future? Rate assumptions should be based on documented costs from FY 2025, not on undocumented Revenue/Expense projections for FY 2026 which prematurely assume an electric rate increase and capital expense projections with only one new item supporting Resolution 9977.
MSC must require a plan to achieve the goals of 9977. The plan must outline a set of activities to be completed along with planned dates for initiation and completion of these activities.
The adopted plan must also provide sufficient detail to allow development of a cost estimate.
MSC must direct PWP and NextGen to use the adopted Plan as the basis for its electric rate study.