HERCULES -- Residents of the Promenade neighborhood near the city's waterfront could face electric rate hikes totaling about 40 percent in the not-too-distant future, a consultant recently told the City Council.

Promenade's 200-plus houses are supplied by the Hercules Municipal Utility, which elsewhere in its service area charges residential rates about 30 percent higher than Pacific Gas & Electric Co. But under a 2001 deal between the city and the developer of Promenade, the neighborhood has gotten rates pegged at 10 percent below the PG&E rate, Bob Streich of Nexant Inc. told the council Tuesday. That would come out to a discount of more than 40 percent compared with what other HMU customers pay. The deal expires at the end of the year.

The municipal utility buys power from PG&E and redistributes it locally.

Nexant, in a report, suggested bringing Promenade rates up to those paid by other HMU customers in three phases spaced six months apart, beginning early next year. The decision will be up to the City Council, the utility's governing board.

"You are the rate-setting body," Deputy City Manager Elizabeth Warmerdam told the council, which will take up the matter in the new year.

The city, meanwhile, is continuing to prepare to sell the money-losing utility. The council hired Nexant in June 2012 as general manager to oversee the utility's operations and ensure that it is in compliance with energy, environmental and other regulations to maximize its sale value.


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Streich told the council the utility is in good shape physically but that it has fallen short of several state requirements, including for purchases of "green," or renewable, energy.

The utility is prepared to build the infrastructure to serve Town Centrale, the recently renamed, half-finished Sycamore North residential-and-retail project, according to the Nexant report.

Streich recommended completing the last phase of a build-out of the utility, to be financed by bonds; he did not quantify the cost. He likened the current system to a backbone supplied by a single source; the improvement would consist of a loop that would provide an additional avenue to supply the backbone if the first source fails, he explained.

Contact Tom Lochner at 510-262-2760. Follow him at twitter.com/tomlochner