Still haunted by the memories of last winter's sharp spike in gas prices, Palo Alto is preparing to buy some insurance to make sure it doesn't happen again.

The downside of the new strategy, which the City Council's Finance Committee endorsed Tuesday, is higher costs for the city and its customers in the long term. The upside is that cost increases next winter will be capped and customers won't need to worry about their gas bills doubling or tripling like they did between last December and February.

The committee, which consists of Vice Mayor Greer Stone and council members Pat Burt and Julie Lythcott-Haims, supported a proposal from Utilities Department staff to revamp the city's gas-procurement strategy in the winter months.

The current strategy, which has been in place for over a decade, banks on short-term gas purchases with rates tied to the monthly index price, which changes every month, Karla Daley, assistant director at Utilities Department, told the committee.

The council adopted the current policy in 2012, a time when gas was relatively cheap and increasingly ample thanks to fracking. The council then decided to shift from a "laddering" strategy, in which it locked itself to a specific price for several months, to the approach in use today.

Daley said at Tuesday's meeting that the strategy "cruised along for 10 or 11 years without a whole lot of attention paid to it until January 2023." That's when commodity prices for gas spiked from under $2 per therm to about $4 per therm, forcing the city to raise rates.

The Utilities Department tried to mitigate the damage by tapping into $1.84 million from a reserve, but that did not prevent some customers from seeing wild increases in their bills.

"This was a pretty extreme spike -- nothing like which we saw before," Daley said.

Gas prices are now largely back to where they were before the spike. The council, however, is thinking differently. Council member Julie Lythcott-Haims noted that some of the factors that contributed to last winter's spike -- including Russia's invasion of Ukraine and a cold winter -- may once again be in play at the end of this year.

"We would all feel like fools if this winter the exact thing happens," Lythcott-Haims said.

The preferred solution is something that utilities officials say is very rarely done: an insurance policy of sorts. The Utilities Department has worked with suppliers to craft policies that would allow the city to cap its costs for gas supply at $2 per therm.

The city would, however, have to pay an adder fee between $0.075 and $0.11 per therm. This would translate to an increase of $3.78 to $5.94 for an average winter residential bill, which is about $99.80.

It would also add between $1.26 and $1.98 an average residential summer bill, which is estimated at $40.52, according to utilities staff.

Unlike car and housing insurance, policies like Palo Alto's proposed gas strategy are pretty rare, according to city staff.

"We had to reach out to suppliers and see if they can structure something for us," said Jason Huang, resource planner at the Utilities Department.

The new approach, Huang said, would protect both utility reserves and customers from price spikes. The stability, however, will come at a price -- an additional 4% to 6% on the gas bill.

"This is a higher cost in the long run because it is an insurance policy," Huang said.

The committee agreed to advance the new strategy, even as committee members insisted that they do not want to overreact to last year's unprecedented spike. Stone called last winter's increase a "true blip" and said he doesn't like the idea of increasing the average gas bill.

"That's not something we're expecting to see again," Stone said.

But he ultimately agreed with Lythcott-Haims and Burt that the new strategy makes sense. Burt argued that it functions just like every other kind of insurance -- it adds costs but helps mitigate "big hits."

"It's important to remind ourselves in this case of what a crisis it was during this spike and how concerned our ratepayers were and how much it affected their perspective on the performance of our utility, and our local government in general," Burt said.