The Municipal Services Committee voted Tuesday to strip a proposed $7.6 million hike from the city’s water and power budget for fiscal year 2026, though committee members acknowledged rate increases are likely coming later.
The committee voted to remove the rate increase after two hours of debate over Pasadena Water and Power’s fiscal year 2026 operating budget, which had included a hike taking effect on January 1.
Committee members said adopting a budget based on rates that haven’t been studied or vetted by the public and approved by the council was premature.
“I think particularly right now to be signaling before we’ve even done the rate increase and adopting a budget based upon not breaking even, but breaking even and then another $7 million at a time when we are transferring more money to the general fund — I’m not ready to embrace that strategy,” said Councilmember Rick Cole. “I want to see the rate study. I want to have a dialogue with the community.”
According to PWP Director David Reyes, the department is currently undertaking a rate study. Reyes said on Tuesday that the results of the study will be presented to the committee, likely around June 24.
A budget increase cannot be implemented without approval from the full City Council. Public engagement would also be part of the budget process.
“We’re not asking for a rate increase tonight,” Reyes said.
The contemplated increase would have generated approximately the equivalent of inflation costs for the utility, according to PWP Assistant General Manager of Finance and Administration Lynne Chaimowitz.
The budget also increases the utility’s annual transfer to the city’s general fund from $18 million to $28.5 million – a 58% jump that drew sharp criticism from public speakers.
Jeanette Foster, who said she spoke representing electric ratepayers, said customers have already paid for capital improvements through “aggressive monthly rate adjustments” that increased energy charges by 59% from January 2023 to 2024.”
“Rate payers are being asked to pay three times over: first by two years of monthly rate adjustments, second by an additional transfer of $10.5 million to the general fund, and third, by a proposed rate increase of $7.6 million to support the clean energy goals of resolution 9977,” Foster told the committee.
Environmental advocate Cynthia Cannady criticized the budget for lacking specific climate emergency provisions.
“Where is the climate emergency? In this operating budget I searched, there’s very little in this budget that has anything to do with the climate emergency that we face,” said Cannady. “Send this operating budget back. It needs to have in it actual specific provisions that deal with a plan to implement the climate emergency resolution 9977.”
PWP General Manager David Reyes defended the budget timing, explaining that budget deadlines required action before completing the Optimized Strategic Plan and rate study.
“We got way late and got a little sidetracked,” Reyes said, referring to delays caused by January’s Eaton Fire. “This is a planning document and this is not the end of the story. This can be changed at any time by council.”
The power fund budget shows the utility would remain profitable without the rate increase, with projected net income of about $11 million compared to $14 million with the increase. However, financial projections show the utility’s working capital reserves dropping below proposed minimum levels in future years without additional revenue.
The committee’s recommendation now goes to the full City Council for consideration on June 9.
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