The Long Beach Utilities Department has approved three different rate increases as part of its fiscal year 2025 budget — though the changes will be subject to a public hearing and City Council approval before becoming official.
The Utilities Commission approved its $378 million budget — which is comprises a $180 million water fund, a $165 million Gas fund and a $33 million sewer fund — for the upcoming fiscal year last month.
That proposed budget, which will still need to be OK’d by the City Council as part of its larger citywide budgeting process later this year, includes proposals for an 11% increase to water rates, an 8% increase to sewer rates and a 4% increase to gas rates. The city’s fiscal year runs from Oct. 1 to Sept. 30.
In total, according to the Utilities Department, all three rate increases will amount to about an extra $9 per month on the average customer’s total utility bill.
About $6 of that will come from the additional water rates, $2 from increased gas rates and $1 from increased sewer rates, the department said.
The rate increases, according to Utilities Department Director of Finance Brandon Walker, are expected to generate approximately $6 million for the gas fund; $11 million for the water fund and $1 million for the sewer fund.
Those extra dollars, officials said in a Friday, July 12, interview, are needed to cover massive deficits in the department’s budget — which, without the rate increases, would require the Utilities Department to dip into its emergency reserves and impact its ability to provide services.
The department’s finance arm, for example, projected a nearly $10 million deficit in the gas fund for the 2025 fiscal year without any rate increases — alongside an approximate $2 million shortfall in the water fund.
There are several factors playing contributing to the Utilities Department’s financial difficulties, ranging from increased costs of labor and inflation to the costs of climate change adaptation.
“Inflation is impacting everything in our industry and across the nation, and so our costs have just creeping up,” Chris Garner, the department’s general manager, said Friday.
The Utilities Department, aside from providing gas to all residents in Long Beach and Signal Hill, is also responsible for maintaining the city’s infrastructure to transmit that product.
There are about 1,900 miles worth of natural gas pipelines in Long Beach, Garner said, some of which are up to 80 years old.
“We maintain it; we have a very good system,” Garner said. “But we have to continually upgrade and improve the system.”
And the costs of doing that — ranging from necessary materials to the labor — continue to rise.
Long Beach Utilities also heavily relies on SoCalGas natural gas transmission and storage, department officials said during a public budget workshop in May.
And SoCalGas — facing similar cost increases — has significantly raised its price to provide transmission and storage services for Long Beach.
In the 2023 fiscal year, according to the budget workshop, SoCalGas raised its transmission rates by 63%, followed by an additional 77% increase for the current fiscal year.
And, Garner said, while the costs of operation have continued rising for the Utilities Department, the rates have remained relatively stagnant in recent years, particularly for natural gas.
“One of the obvious impacts,” Garner said, “is we’ve only had one natural gas rate increase in the past eight years.”
Things are equally — if not more — complicated with the water fund, Garner said.
Long Beach has its own local supply of groundwater, which accounts for about 60% of the city’s water, while the remaining 40% is providing from outside sources, namely the Metropolitan Water District.
Because Long Beach has its own water supply, Garner said, the city is responsible for costs related to pumping, drilling and ensuring good water quality with the city’s water treatment plant.
“All those costs are increasing,” Garner said. “I think it’s safe to say that for the water industry as a whole, you’re going to continue to see pressure to raise rates on an annual basis going forward — Long Beach won’t be any different.”
And akin to the increased costs of transmission for natural gas from SoCalGas, the MWD — the city’s main water importer — has also increased its cost for Long Beach to ship in water from external sources, putting additional pressure on the Utilities Department’s budget.
“We get about 40% of our water from (MWD) and they’ve increased rates back-to-back for years,” Walker said, “(including) 8.5% increases (the) prior year and this next year also.”
Another problem for the water fund, according to the Utilities Department, is the impact of increased water conservation in Long Beach and statewide — alongside unseasonably wet winters over the past couple of years.
Though water conservation is a good thing, Garner said, it also means that the Utilities Department makes fewer sales — and therefore less money.
“As conservation takes hold, and in Long Beach, we’re way ahead of the game on conservation,” Garner said, “we reduce the volume of sales that we can pass fixed costs through, and (that) impacts our rates.”
And when Long Beach gets more rain than usual, as was the case over the past two years, there’s a similar impact on the Utilities Department.
“It’s confusing for the customers, because they hear there’s a drought and that’s impacting our costs,” Garner said, “and then we have a real rainy season, and we say the same sort of thing.”
But what happens when it rains more than usual, Garner said, is that people use less water — whether that’s watering their lawns less frequently or having a lower need for irrigation.
“It’s a good thing for the customers. They use less water, and helps us replenish our storage,” he added. “But it also reduces our sales for that year.”
The Utilities Department also increased its water rates by about 9% — or around $5 per bill — in the fiscal year 2024 budget in an effort to recover from multiple challenges, including lasting impacts from the pandemic and the heavy rainy season.
But, Garner said, as costs associated with water pumping, treatment and importing continue to increase each year, the Utilities Department will likely have to continue passing a portion of those costs on to the consumer.
There is some good news, though.
The department’s sewer fund is projected to be relatively stable in the next fiscal year, with no anticipated shortfall — largely because that fund is supported by developer fees, Walker said.
“The sewer fund is fine for this current year,” Walker said, “but you’re going to see pressures over the next few years.”
Another thing to look forward to, Garner said, is the Utilities Department’s investment in capital improvement projects as part of the upcoming fiscal year.
The approved budget allocates about $70 million across all three funds for capital improvement and infrastructure projects — $50 million of which will fund Long Beach’s efforts to build out its local groundwater production.
That money will help the department do additional drilling to access local ground water wells, which, Walker said, is crucial to strengthening the city’s water supply and reducing its reliance on expensive imported water.
“It’s a concerted, proactive investment in local groundwater production and extraction to be able to access that cheaper water,” Walker said.
The department is hoping to gradually increase it’s supply of local groundwater over the next several years, which should eventually result in Long Beach residents having more affordable bills as the department avoids the high cost of imported water.
The Utilities Department will host a public hearing for residents to learn more about the proposed rate increases — as required by state law — at 7 p.m. Monday, Aug. 19, at the department’s Administration Building, 1800 E. Wardlow Road.
Though the water and sewer rates will be up for debate at the hearing, the proposed gas rate increase won’t be, as those are exempt from the state law requiring the public hearing.
The Long Beach City Council, meanwhile, will decide whether to OK the Utilities Department budget and proposed rate increases in September.