Customers would see a 9.7% rate hike on average.
“I’m still not comfortable with the residential rate allocation,” Jones told Pasadena Now. “I have some concerns about the legal implications of our actions and the specifics of Prop. 26. I’d like the City Attorney’s Office to prepare information for us prior to discussing this item and making a recommendation [to the City Council].”
Prop. 26 requires that government-imposed charges (fees, levies) must not exceed the reasonable costs of the service or regulation provided, and the amount must bear a “fair or reasonable” relationship to the payor’s burdens or benefits; if a charge exceeds these limits or isn’t for a direct service/benefit, it’s reclassified as a tax, requiring a supermajority vote, two-thirds Legislature, or local voter approval, to enact, preventing hidden tax increases.
If residential customers are over-allocated costs to subsidize other customer classes or policy goals, the rate could be challenged as an illegal tax under Prop. 26.
“Proposition 26 passed in 2010 basically says three words that rates have to be fair and reasonable, and that leaves a huge amount of arena for interpretation.” said Cole.
The committee unanimously voted to table the item at Tuesday’s committee meeting. Rick Cole and Jason Lyon expressed support for more information.
Tyron Hampton did not attend Tuesday’s meeting, but has also expressed concern about the rate increases.
General Manager David Reyes will work with the City Attorney’s Office to gather information.
The item will come back to the committee at a future meeting. Reyes said any future meeting would be re-noticed to ensure public awareness and that staff would publish materials earlier than usual to allow time for public review.
Pasadena Water and Power faces a $67.9 million revenue shortfall over the next two years. The forecasted shortfall is driving the increases.
New rates would take effect March 1, 2026, if approved.
The increases would roll out in three steps. The first comes in March 2026. October 2026 brings the second. The final phase hits in March 2027.
Pasadena Water and Power’s revenue requirements average $259.6 million for the two-year period, the report said. Forecasts show total needs of $334 million in fiscal 2026 alone.
Equipment and material expenses have jumped 75% to 100% since 2019.
Clean energy procurement costs have doubled in five years. The utility is also investing in battery storage and wildfire resilience.
Without rate adjustments, Pasadena Water and Power’s $409 million in reserves would drop $134 million by fiscal 2029.
Local residents have decried the rate increase. In 2024, the City Council approved rate increases for water and sewer services.
“The true culprits are chronic wasteful spending, a history of financial mismanagement, and bloated executive salaries that prioritize a top-heavy bureaucracy over the hardworking residents who pay the bills,” said former mayor Bill Paparian, in a guest opinion piece that appeared in Pasadena Now. “These internal failures, not just external pressures, are forcing ratepayers to subsidize inefficiency and extravagance. Pasadena deserves better accountability, not another hike.”
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