City gets $24 million to settle lawsuit; only $6 million proposed to go to reduce electricity rates

Palo Alto has been overcharged for electricity by the federally-owned Central Valley Project, which includes the hydroelectric generators at the Lake Shasta Dam. The feds have conceded that the power agencies including Palo Alto were overcharged and is now paying a settlement that, in the case of Palo Alto, amounts to $24 million.

By the Daily Post staff

The federal government has agreed to refund the city of Palo Alto $24 million for overcharging on electricity, at the same time the city is working toward refunding residents for overcharging them for natural gas.

The city will receive the $24 million to settle a lawsuit alleging the Bureau of Reclamation overcharged the city for hydroelectric power for 28 years.

The city plans to use $6 million, or 25% of the settlement, to reduce electricity rates for customers by 5% starting on July 1.

Another $10 million would be used to repay loans, and $8 million would go into savings under the city’s proposed plan, which council must approve. The city was involved in a lawsuit as part of the Northern California Power Agency, a collection of cities that own their own utilities.

The agency sued the federal government in 2019 arguing it hadn’t followed legislation passed by Congress in 1992 that set rules for the Central Valley Project, a federally-owned water system that also sells hydroelectric power from its dams.

What about the Miriam Green case?

The city is also waiting for a judge to approve its settlement agreement with resident Miriam Green, who filed a class action lawsuit in October 2016 arguing that the city’s transfer of profits on natural gas bills to other city projects was an illegal tax. Natural gas rates must match the cost of service, she said.

If the courts approve the settlement agreement, the average Palo Alto resident would get $156 back in his or her pocket, City Attorney Molly Stump said.

“The city hopes to receive approval to issue refunds as soon as possible, which is especially timely in light of recent gas price spikes,” Stump said.

Green won in Santa Clara County Superior Court, and the city appealed the ruling. The two sides reached a settlement agreement in September, with the city agreeing to pay $17.3 million to natural gas customers and Green’s lawyers.

The Court of Appeal is expected to rule on the class-action settlement by mid-April, Stump said.

After that, the trial court must take several procedural steps to finalize it.

Individual refund amounts will depend on how much natural gas customers used between Sept. 23, 2015 and June 30, 2022.

Current customers would get their refunds as an on-bill credit, and former customers would get a check.
The refund would come in three parts: after the settlement is signed, then one year and two years after that.

Council on March 27 will also talk about giving customers 20% rebates on their January natural gas bills after rates tripled.

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