City Council Agenda Report
Meeting Date: June 16, 2026
From: Todd Dusenberry, General Manager of Public Utilities Department: Public Utilities
Submitted by: Adriana Ramos, Principal Management Analyst Subject
Electric Rate Schedules, Energy Cost Adjustment Billing Factor, and Renewable Energy Cost Adjustment Factor
Recommendation
Adopt Resolution No. 2026-029 to Amend Electric Rate Schedule Nos. CS, D, GS-1, GS-2, LS1, LS-2, OL-1, PA-1, PA-2, PA-TOU, TC-1, TOU-I, TOU GS-1, TOU GS-2, TOU PA-1, TOU-D, TOU-G, TOU-V, TOU-Vt, and GP regarding electrical rates to be charged for electrical energy distributed and supplied by the City within its boundaries.
Background
The pace of change in the utility market is rapidly increasing. Key factors influencing this shift include business development for acquiring new customers, customer attrition, supply chain challenges, rising costs for energy, natural gas, and construction, the procurement of renewable energy, climate change, and regulatory and legislative mandates. These factors have directly affected the Vernon Public Utilities (VPU) Fiscal Year (FY) 2026-27 Operating and Capital Budgets.
To ensure the continued financial and operating success of VPU and the competitiveness of our customers, it is essential to navigate the challenges of long-term growth, resource planning, and maintaining safety, customer satisfaction, and reliability. Effectively managing the significant amount of data required for informed decision-making is critical in this process.
A Cost of Service (COS) Study is an essential analytical tool that utilities use to determine their revenue requirement and design rates that fairly reflect the associated costs for providing service to all customers. Conducting a COS is the best practice for publicly owned utilities. The most recent Electric Cost of Service and Rate Design Study (Study) for VPU was completed in 2023.
The prior COS Study was completed in 2019.
To review and update VPU’s revenue requirements, VPU sought approval from the City Council on February 4, 2025, for an agreement with NewGen Strategies & Solutions, LLC (NewGen).
This agreement provides VPU with utility cost-of-service analysis, rate design, financial planning services, and recommendations for rate adjustments.
The Study enables VPU to make informed decisions and recommendations regarding utility finance, operations, power supply, and long-term capital investments. It emphasizes the importance of understanding customer competitiveness, cost constraints, and the necessary measures to stabilize expenses in a volatile global economic and political environment.
This approach incorporates VPU's financial and operating data, market information, and community input to provide a comprehensive perspective. This integrated approach enables VPU to make sound decisions on financial management, operational strategies, resource planning, and long-term capital planning. This Study also enables VPU to make informed decisions to meet its Safety, Reliability, and Customer Service standards, Financial Reserve Policy targets, maintain the recently achieved “A” ratings from S&P and Moody’s, review and reduce operational costs, and use all utility resources to minimize any rate adjustment to all customers.
VPU staff engaged in multiple customer outreach meetings regarding VPU’s financial and operating plans, which included communication about the utility’s Electric COS Analysis and Rate Design Study (Study), as well as solicitation of customer feedback regarding the state of the utility. Furthermore, the City and VPU staff held a Special Business and Industry Commission meeting and hosted a Business Breakfast on May 28, 2026 and June 3, 2026, respectively. There was consensus from the Commission to recommend an electric rate increase of 4% for Fiscal Year 2026-27, revisiting the need for an increase in FY 2027-28 at or near the City’s budget midyear, and keeping the Energy Cost Adjustment and Renewable Cost Adjustment (referred to as RPS) as separate billing factors. On June 4, 2026, a public notice of the proposed Adoption of the Resolution Amending Electric Rate Schedules was published in the Los Angeles Wave (Huntington Park Bulletin).
VPU staff recommends that a proposed 4% increase in the electric rate, effective July 1, 2026, be applied to all electric customer rate classes, except TOU-I (General Service-Large Interruptible). In accordance with Vernon Municipal Code (VMC) Section 13.26.020, “any change in rates to be charged and collected for energy supplied by the Vernon electric system from and after July 29, 1982, shall be set by resolution of the City Council.” Therefore, VPU staff is seeking adoption of Resolution No. 2026-029 to amend the Electric Rate Schedule Nos. CS (Customer Service Fee), D (Domestic Service), GS-1 (General Service), GS-2 (General Service), LS-1 (Lighting-Street and Highway Utility-Owned System), LS-2 (Lighting-Street and Highway Customer-Owned Installation), OL-1 (Outdoor Area Lighting Service), PA-1 (Power-Agricultural and Pumping Connected Load Basis), PA-2 (Power-Agricultural and Pumping Demand Basis), PA-TOU (Power-Agricultural and Pumping Time-of-Use), TC-1 (Traffic Control Service), TOU-I (General Service-Large Interruptible), TOU GS-1 (General Service), TOU GS-2 (General Service), TOU PA-1 (Power-Agricultural and Pumping Connected Load Basis), TOU-D (Domestic Service), TOU-G (General Service-Large), TOU-V (General Service-Large), TOU-Vt (General Service-Large), and GP (Green Power) regarding electrical rates to be charged for electrical energy distributed and supplied by the City within its boundaries. It should be noted the TOU-I Interruptible schedule is only being amended for title consistency. A redline of the revised Electric Rate Schedules is provided for reference (Attachment 3).
In addition, following the results of the Study, staff evaluated various options regarding the impact of any future base rate and Energy Cost Adjustment Billing Factor (ECABF) and Renewable Energy Cost Adjustment Factor (RECAF) on customers. On June 2, 2026, the City Council gave VPU staff direction to maintain the ECABF and RECAF $0.0100 each in FY 2026-27 to meet its revenue requirements and minimize rate adjustments to customers. However, VPU staff will continue to review the RECAF monthly, which may change subject to energy market conditions.
The proposed resolution has been reviewed and approved as to form by the City Attorney’s Office. If approved, the proposed rate increase and ECABF and RECAF adjustments will become effective on July 1, 2026. Electric rate schedules can be found on the City’s website in the Public Utilities section under the Rates & Fees tab.
Fiscal Impact
The recommended 4% electric rate adjustment is estimated to generate $7,084,122 million in additional electric revenue and has been included in the Electric Fund, Sale of Electricity, Account Number 055-450-575-450010, for the proposed FY 2026-27 Budget.
Attachments
1. Resolution No. 2026-029
2. Public Notice
3. Revised Electric Rate Schedules (Redline)