EXEC
UTIVE SUMMARY:
P
asadena Water and Power (“PWP”) has completed a comprehensive Electric Rate Study to ensure that electric rates remain equitable, cost-based, and aligned with the City’s long-term goals of fiscal responsibility, infrastructure modernization, and achieving 100% carbon-free electricity by 2030. Conducted in partnership with NewGen Strategies and Solutions, LLC (“NewGen”), the study includes a full cost-of-service (“COS”) analysis, financial modeling, and extensive public engagement. The study confirms that current electric rates are insufficient to meet projected revenue needs, with a shortfall of approximately $67.9 million over 2 years.
I
n addition to the rate adjustments, PWP recommends a full restatement of the Light and Power Rate Ordinance (Chapter 13.04) except for items related to Net Energy Metering and any new provisions for local solar that will have further discussion. This restatement will modernize the ordinance by eliminating outdated provisions, aligning terminology with current industry standards, and streamlining governance by moving all rate figures to the Electric Utility Rate Resolution. The updated ordinance also anticipates future needs, including time-of-use pricing, advanced metering infrastructure, and expanded support for distributed energy resources such as electric vehicles.
P
WP’s proposed rates remain among the most affordable in the region. The utility continues to prioritize equity by offsetting fixed charges for income-qualified customers and energy efficiency programs. Public engagement has been central to the process, with outreach efforts including webinars, open houses, and a dedicated website.
Feedback from residential and commercial customers has informed the rate design and highlighted interest in clean energy options, electric vehicle incentives, and bill transparency tools. PWP recommends that the City Council set a public hearing for March 2, 2026, to present the proposed rate adjustments and ordinance restatement, and to gather community input. If approved, the new rates would take effect beginning March 16?, 2026, or as soon thereafter as practicable.
BACKG
ROUND:
T
he electric rate study has been ongoing since May of 2024 to review and rethink the electric rates and rate ordinance. The rate study has included the following presentations, approvals, and direction throughout the process:
• May 6, 2024 - Council approved of the contract with NewGen • October 22, 2024 - Introduced the rate study and process • January 13, 2025 – Approved the removal of the obsolete Direct Access ordinance provisions
• March 11, 2025 - Presented the community engagement plan and strategy • June 9, 2025 - Amended the Stranded Investment Reserve provisions in the municipal code and establish a Working Capital Reserve Policy • June 24, 2024 - Presented Power Fund revenue requirements projections and scenarios
Set a Public Hearing for the Recommended Electric Rate Adjustments February 23, 2026
• J
uly 14, 2025 - City Council directed PWP to proceed in ratemaking with a two-year rate adjustment plan
• December 15, 2025 - MSC directed staff to return to MSC with the cost-of- service report and rate alternatives prior to recommending City Council set a public hearing date
• January 13, 2026 - MSC requested advice from the City Attorney’s office prior to setting a public hearing date
ANALYSIS:
T
he following table represents a strategy to meet the revenue requirements for a two- year study period sufficient to support the operating expenses and capital investments for the study year period ending in FY2027. This alternative will draw down an additional $32 million of cash reserves if implemented in March 2026, October 2026 and March 2027.
T
able 1: Percentage Bill Adjustments by Class
Classes
Phase 1
March 2026
Phase 2
October 2026
Phase 3*
March 2027
Residential 7% 7% 7%
Commercial - Small 7% 7% 7%
Medium - Commercial 7% 7% 7%
Large - Commercial 7% 7% 7%
Street Lighting 7% 7% 7%
Traffic Signals 7% 7% 7%
Total System 7% 7% 7%
P
ricing and impact schedules will be developed based on MSC direction and City Council’s approval.
T
he pricing for the residential customer and impact is detailed in Tables 2-4.
Set a Public Hearing for the Recommended Electric Rate Adjustments February 23, 2026
T
able 2: Residential Customer Class Proposed Pricing per Phase T
able 3: Residential Customer Class Price Changes per Phase F
ull rates and pricing are as stated in Attachment A: Utility Rate Resolution Pricing.
RE
COMMENDATIONS:
S
taff recommends adoption of the rate adjustments to meet the revenue requirement needs to provide safe, reliable services to PWP customers at an affordable rate.
S
taff also recommend an amendment to a substantial portion of the rates with a reorganization of the structure in a clear and coherent format.
I
mplementation Timeline
P
WP is recommending that a public hearing be opened March 2, 2026, to receive comments on the recommended adjustments to the electric rates. Following the City
Set a Public Hearing for the Recommended Electric Rate Adjustments February 23, 2026
Counc
il’s action to set a date for the public hearing, the City Clerk’s Office will notice in accordance with standard procedures. Table 6 outlines the approximate timeline and implementation schedule for the proposed rate actions.
Tab
le 11: Timeline
COUNCI
L POLICY CONSIDERATION:
The r
ecommendations are consistent with the City Council’s goals to maintain fiscal responsibility and stability; improve, maintain, and enhance public facilities and infrastructure; and increase conservation and sustainability.
ENV
IRONMENTAL ANALYSIS:
The es
tablishment of a date to conduct a public hearing for the consideration of electric rate adjustments and the drafting of related resolutions and ordinance amendments are administrative actions that would not cause either a direct physical change in the environment or a reasonably foreseeable indirect physical change in the environment.
Therefore, the proposed actions do not constitute a “project” subject to CEQA, as defined in Section 21065 of CEQA and Section 15378 of the State CEQA Guidelines.
Since the action is not a project subject to CEQA, no environmental document is required. Furthermore, the recommended electric rate adjustments themselves would be statutorily exempt from CEQA. Section 15273 of the State CEQA Guidelines identifies a statutory exemption for "Rates, Tolls, Fares, and Charges" and states (in part) that:
a. CE
QA does not apply to the establishment, modification, structuring, restructuring, or approval of rates, tolls, fares, or their charges by public agencies which the public agency finds are for the purpose of:
1. Meeting operating expenses, including employee wage rates and fringe benefits,
2. Purchasing or leasing supplies, equipment, or materials,
3. Meeting financial reserve needs and requirements,
4. Obtaining funds for capital projects, necessary to maintain service within existing service areas, or
5. Obtaining funds necessary to maintain such intra-agency transfers as are authorized by city charter.
Date Action Item
March 2, 2026 Open Electric Rates Public Hearing
March 16, 2026 First and Second Reading of Updated Electric Rate Ordinance
March 17, 2026 or as soon as
practicable thereafter Effective Date of First Rate Action Set a Public Hearing for the Recommended Electric Rate Adjustments February 23, 2026
F
ISCAL IMPACT:
T
he rate increases are expected to generate revenue of approximately $84 million annually. The incremental revenues will be used to offset increased operating and capital costs of the electric system.
A
ttachment A: Utility Rate Resolution Pricing
Respectfully submitted,
___
________________________
DAVID M. REYES
General Manager
Water and Power Department
Prepared by:
___
________________________
Lynne Chaimowitz
Assistant General Manager
Water and Power Department
A
pproved by:
___
________________________
MIGUEL MÁRQUEZ
City Manager