Utilities Rates

While most of our utility bill costs are lower than or competitive with neighboring communities, CPAU continually strives to control costs while ensuring that we deliver safe and reliable utility services.

Median Residential Utility Bill Comparison

Note: Bill amounts do not include Taxes and Fees; calculated based on rates effective in FY26 at Palo Alto median usage levels 

¹ Most other cities do not have a Stormwater Management Fee since it requires voter approval; Palo Alto was forward thinking to pass this fee to help protect critical infrastructure from flooding

The purposes of rate adjustments are to preserve fair cost recovery for the services provided, maintain long-term financial stability, sustain financial support for ongoing utility operations, develop funding for planned replacement of aging infrastructure, support adequate reserve levels, and support infrastructure replacement and repair. The proposed rate increases are essential for maintaining safe, reliable, and environmentally sustainable utility services. Rate increases in fiscal year 2027 are necessary to support capital improvement projects, infrastructure maintenance and replacement, and to replenish depleted Utilities financial reserves to allow the City to continue to provide high quality utility services to the community.

• Increased costs for wastewater treatment and facility upgrades at the Regional Water Quality Control Plant (RWQCP). Palo Alto’s wastewater flow to RWQCP has increased, resulting in higher operational costs for wastewater treatment. The RWQCP is aging and the City needs to upgrade equipment to ensure that we continue to effectively clean wastewater before it is discharged to the Bay or treated for reuse as recycled water.
•  Upgrades to the City’s electric grid distribution system. The City needs to replace aging electrical poles, wires and equipment with newer infrastructure that allows for additional electric capacity, safety, and reliability throughout the City.

• Maintain healthy utilities financial reserves. Utility financial reserves were used for emergencies, such as the pandemic and drought, and unexpected cost increases during the Winter 2022-2023 high energy prices, to protect customers from large rates spikes. These financial reserves are depleted and need to be replenished to maintain utility services.

• Expanded use of bank draft to reduce credit card fees. 
• Scheduled larger CIP projects every other year achieving efficient project management and lower construction costs (estimated $50K per CIP project). 
• Implemented mobile workforce applications, reducing administrative data entry time, freeing up staff for other work. 
• Electric Utility 
• Selling surplus Resource Adequacy and Renewable Energy Credits ($20+ million/year). 
• Negotiated improvements to Western hydroelectric contract ($2 million/year). 
• Negotiated layoff of transmission asset generating $550k/year. 
• Water Utility 
• Agreement with Valley Water yielded $16 million in funding for reverse osmosis facility to improve recycled water quality and $250K to $1M/year. 
• BAWSCA water bond refunding in 2023 achieved lower debt service payments ($185K/year 2023-2034). 
• Water, Gas, and Wastewater 
• Established cross-functional field crew to install water, gas, and sewer services simultaneously at new construction sites, reducing hours spent in the field by minimum 20%. 

Rate changes are typically made once a year at the start of the City’s fiscal year on July 1. Public meetings and hearings provide customers with opportunities to learn about proposed rate changes and to participate in the process.

Below is the rates public meeting schedule for the Fiscal Year 2027 rates (July 1, 2026 - June 30, 2027), dates are subject to change:

• June 15, 2026: City Council: All Rates
• April 21, 2026: Finance Committee: Gas Rates, Electric Rates
• March 31, 2026: Utilities Advisory Commission: Gas Rates (Agenda Item #2), (Electric Rates (Agenda Item #3)
• March 17, 2026: Finance Committee: Wastewater Collection Rates (Agenda Item #1), Water Rates (Agenda Item #2), Refuse Rates (Agenda Item #3)
• March 4, 2026: Utilities Advisory Commission: Water Rates (Agenda Item #3), Wastewater Collection Rates (Agenda Item #4)
• November 18, 2025: Finance Committee: Preliminary Rates (Agenda Item #3)
• November 5, 2025: Utilities Advisory Commission: Preliminary Rates (Agenda Item #5)

As a municipal utility, the City bases its rates on costs. These rates are kept at the lowest level necessary to provide safe and reliable service to customers. Each year, the Utilities Department makes financial forecasts and rate adjustments are recommended to maintain the financial health and safe operations of each utility. These are sent to the Utilities Advisory Commission (UAC) and the Finance Committee. 

Finally, the City Council approves utility rates in June, through the adoption of the annual budgets. View the City’s budget webpage for more details at paloalto.gov/budget.

The City is required through Proposition 218 to notify utilities customers about proposed water and wastewater changes in advance of a public hearing. The City will mail a Proposition 218(PDF, 624KB) Notice to all utility customers, detailing proposed changes to FY 2027 water, wastewater, and refuse rates.

On February 1, 2026, natural gas rates for Palo Alto Utilities customers went into effect, implementing the changes Council approved on the December 1, 2025 City Council Meeting (Agenda Item #5). For a typical residential customer using 17 therms per month in the summer and 51 therms per month in the winter, the average monthly bill across the year is expected to increase from $73 to $79 per month. Your bill may be higher or lower based on your individual usage and rate schedule.

The City of Palo Alto’s gas utility rates are designed to fairly and adequately recover the cost of providing service to customers, in compliance with California law. Over time, the cost to provide gas service changes due to investments in pipelines, maintenance, safety upgrades, and other necessary system improvements. Rate changes are periodically required to ensure that costs are fairly assigned to each type of customer.

Your natural gas bill includes the cost of the gas itself (including gas commodity, transportation, and environmental charges) as well as the cost to safely deliver that gas to your home (the distribution charge). These rate changes revise how distribution charges are shared among different customer groups, such as residential, commercial, and industrial customers. Residential median bills were estimated to increase by about 8%. This ensures that residential customers pay the actual cost of providing service to homes.

Transportation Charges

The City utilizes PG&E’s transmission lines to move gas to Palo Alto and passes those costs through to customers. PG&E has raised rates for gas transmission services. On October 7, 2024, City Council approved an increase in the maximum pass-through limit to customers from $0.25 per therm to $0.30 per therm. Staff anticipate that the PG&E transmission pass-through rate will increase approximately 5 percent annually over the next five years.