Recology seeks 30% trash rate hike over next three years

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In October of last year, Recology agreed to issue refunds to customers after the company found that it had set rates that would have overcharged residents by $24 million. Recology was forced to make similar payouts in 2022 ($25 million) and 2021 ($94.5 million). 

Now, Recology is back to the negotiating table with a new proposal: Increase collection rates by 18.2 percent starting in October of this year, followed by additional hikes of 7.5 and 3.9 percent in Rate Years 2027 and 2028, respectively.

By the end of the year, Recology’s current charge of $47 per month per household for basic service would increase to $55.55. 

Recology cites higher operating costs and lower revenue as the reason for the increase from the last time it went through a rate-setting process, in 2023. “A larger-than-usual increase is now needed to bring rates back up to a sustainable level,” the proposal reads. The proposal, which was submitted on Jan. 3, marks the first step in kicking off rate-setting for the next three-year cycle. 

Robert Reed, a spokesperson for Recology, said residential customers in San Francisco currently pay 25 percent less than what their counterparts pay per household in Oakland and San Jose, which employ other companies to collect waste. Even after the proposed rate increase, their rates would remain eight percent lower. (In contrast, Berkeley households, which have municipal trash pick up, pay less than San Francisco’s current rates.)

Because of Recology’s monopoly status, that rate needs to be approved by the Refuse Rate Board with input from the Commission on the Environment, the Commission on Streets and Sanitation, and Jay Liao, the Refuse Rate Administrator, who works within the City Controller’s Office to oversee fair and transparent Recology rates. The board will also hold public hearings. 

“​​An 18 percent increase is high and gives us pause, from a rate stability standpoint,” said Liao. “Given the level of the proposed rate increase, we’re looking at everything in Recology’s rate application to see where we can find savings and bring the rate down.” 

“Ultimately, we want to make sure that any costs incurred are to the benefit of the ratepayer,” Liao added. 

The proposed increase would also cover the cost of capital investments, according to the application, including the partial cost of operating vehicles with lower emissions to comply with state requirements. 

That state mandate, however, was reportedly paused in mid-January, when California withdrew its request to tighten pollution limits, in anticipation of the Trump administration. Recology’s proposal was written before that pause. It is unclear what will happen to the mandate.

“The Recology proposal for a capital reserve is intended to partially defray future capital costs for both zero-emission vehicles and facility modernization required to support ongoing operations,” said Reed. “Zero-emission vehicles have positive environmental impacts, even though they may not be required by law.” 

Recology has held a monopoly on the city’s trash collection for nearly a century. Its contract with the city limits it, as is the case with many regulated monopolies, from collecting profits past a certain amount.

The creation of the Refuse Rate Board arose in the wake of an era in which the Department of Public Works, which used to help set Recology’s rates, supported a rate increase of about 20 percent over a five-year period, in exchange for favors. Two Recology executives pled guilty to bribery charges, and the director of DPW, Mohammed Nuru, went to prison (a Recology consultant, Rudolph Dwayne Jones, was  also charged, but has yet to stand trial).

Given this track record, Recology may have its work cut out for it justifying this increase.

“It’s just outrageous,” said Aaron Peskin, former president of the Board of Supervisors, who created Prop. F, the ballot measure that created the Refuse Rate board. Things are getting more expensive, he added. “But 30 percent? You’ve got chutzpah!”