Utilities Rates

A: Despite rate increases, Palo Alto customers still benefit from lower utility rates compared to neighboring utilities like PG&E. Palo Alto customers pay about 40-50% less for electricity compared to neighboring communities served by Silicon Valley Clean Energy (SVCE), San Jose Clean Energy (SJCE), and Peninsula Clean Energy (PCE).

Palo Alto's Electric Rate Comparison ($/kWh) to Other Utilities

1. Average rates are approximate based on average usage, demand, most similar rate schedule for each utility.
2. Proposed Palo Alto rates effective July 1, 2025.
3. PG&E and Community Choice Aggregation (CCA) Rates Effective January 1, 2025.

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 comparison table does not include Utility Users Tax (UUT); calculated based on rates effective 3/1/2025 at Palo Alto median usage levels.

Rate increases are necessary to support infrastructure maintenance and replacement, and to replenish depleted financial reserves to allow the City to continue to provide highquality utility services to the community. Factors contributing to the need for increases include:

• 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.

• Use more bank drafts to lower credit card fees.
• Schedule big construction projects every other year to save $50K per project through better planning and lower costs.
• Use mobile apps for staff to save time on data entry and focus on other tasks.
• Create cross-functional teams to install water, gas, and sewer services together, saving 20% of field work time.
• Sell surplus energy credits to generate $10+ million per year.
• Negotiate better hydroelectric contracts, saving $2 million annually.
• Increase efficiency by standardizing processes across five utilities.
• Adjust staffing and services to meet changing needs.
• Review and prioritize big infrastructure projects to ensure the most important ones get done first.
• Automate and streamline processes to make work faster and more efficient.
• Review and renegotiate long-term supply contracts to cut costs.
• Partner with other agencies to advocate for lower electric, gas, and water system costs.
• Implement a new customer information system that reduces support costs.
• Train customer service representatives on water and energy issues to reduce phone call transfers.
• Optimize timing and amount of debt issued for grid improvements, cutting costs for electric customers.
• Group gas main replacements to reduce contractor costs, saving $5K-$10K per project.

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.

Palo Alto community members can provide input at the City Council meeting in June, or by contacting us directly at UtilitiesCommunications@paloalto.gov.

The City is required through Proposition 218 to notify utilities customers about proposed water and wastewater changes in advance of a public hearing. In May 2025, the City mailed a Proposition 218 Notice(PDF, 607KB) to all utility customers, detailing proposed changes to FY 2026 water and wastewater rates.

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.