The Long Beach Utilities Department is holding a series of budget hearings starting this month as the Utilities Commission readies a proposed budget to send to City Hall for inclusion in the next fiscal year’s spending plan, which starts in October.
For the first time, the city’s natural gas rates will be included in the presentation because voters approved a merger of the city’s water and gas utilities in November.
The merger moved gas operations out of the city’s Energy Resources Department and created the Utilities Commission, which now oversees contracts and budgets for water, sewer and gas operations.
“This year’s budget process will be a unique opportunity to learn about our department spending and priorities, and the first time we incorporate gas services into the discussion,” Utilities Commission President Gloria Cordero said in a statement.
“Thanks to the utility consolidation, this will be a great opportunity for the public to see a new level of detail about the gas budget. I encourage all to attend and share their thoughts.”
Shortly after the utilities were combined, Long Beach customers saw historically high gas prices due to a prolonged period of cold weather, pipeline maintenance and other pressures on the industry that added hundreds of dollars to customer bills in the early part of 2023.
Department officials had promoted the fact that having both utilities run through the same commission would bring more transparency because while water and sewer rates have been set in public meetings for years, gas rates have not.
The upcoming meetings will detail any price changes being sent to customers in the coming year and update residents on things like any network repairs or other capital improvement projects the utilities plan to complete in 2024.
Water, sewer and natural gas rates are still expected to be set differently because of the nature of how the resources are sold. Water rates are set at the beginning of the year and generally remain unchanged, but natural gas is purchased monthly with the price determined at the beginning of each month.
That dynamic contributed to the wild fluctuation in pricing that customers experienced earlier this year. The department said it could look into price hedging in the future, a practice that would allow the department to artificially keep gas prices low by paying a premium for a pre-negotiated ceiling for the commodity.
Last week, department officials gave a mid-year review of the gas fund and indicated that it could seek to establish a minimum and maximum reserve policy for the fund, which could allow the department to pay for unexpected maintenance or to buffer customers from price spikes, something that it did in January.
Currently, the gas fund is projected to be slightly below an initial reserve floor of $23.9 million that was included in Thursday’s presentation. Growing the reserve could require rates to be increased or for the department to reduce the amount of funds transferred to the city’s general fund at the end of each year.
Lauren Howland, a spokesperson for the department, said it’s too early to know how that could be fixed if the commission moves forward with a new reserve policy, but it would be part of the upcoming budget discussions.
The Utilities Department continues to transfer millions of gas revenue to the city’s general fund through Measure M, something that also resulted in millions of water and sewer fees going to the city’s general fund before a court ruled against the city’s 2018 law, which was approved by voters, saying it was unconstitutional.
The ruling required the city to pay back the water utility nearly $31 million in 2022.
Gas utilities are not protected the same as water utilities, and those transfers are still allowed. Since 2018, the department has sent between $10 million and $20 million per year to the general fund, and this year’s transfer is projected to be about $14 million, according to the department.
Measure M established a 12% cap on the transfer based on annual gross revenue, but department officials said that is not an automatic mark and that the transfer amount is often made after negotiations with City Hall.
The full Long Beach budget is expected to be released later this year with the City Council set to approve the budget by the end of September. The city is currently projecting a small budget deficit of around $6 million.
Here are the upcoming meeting dates:
- Wednesday, May 17
- Thursday, May 25
- Thursday, June 8
- Thursday, June 22
All meetings are scheduled to be held at 9 a.m. inside the Long Beach Utilities administration building located at 1800 E. Wardlow Road.