Environment & Science

DWP customers could see big hikes in energy bills, new carbon surcharge

Los Angeles Mayor Antonio Villaraigosa attends the National Clean Energy Summit 2.0 at the Cox Pavilion at UNLV August 10, 2009 in Las Vegas, Nevada.
Los Angeles Mayor Antonio Villaraigosa attends the National Clean Energy Summit 2.0 at the Cox Pavilion at UNLV August 10, 2009 in Las Vegas, Nevada.
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Customers of the L.A. Department of Water and Power may soon see the price of renewable wind and solar energy in their mailboxes. Mayor Antonio Villaraigosa is proposing a surcharge to pay for lightening the city's carbon footprint and shifting the DWP away from coal power.

Four times a year, the DWP's commissioners review energy rates to try and peg them to the cost of power the utility's buying. Last month an independent consultant recommended a drastic hike in those rates, in part because of price fluctuations in oil and gas energy markets. Now the mayor wants a separate surcharge to fund renewable energy, which contributes less to global warming than coal, oil and gas do.

Villaraigosa said volatile markets, along with deadlines for cutting the city's global warming impact set by AB32, make higher rates a reality. "Yes, we're going to have to raise rates, but I refuse to do so only to keep the status quo," the mayor said. "Our new rate structure will include a carbon reduction surcharge, designed to wean our addition to fossil fuels."

Power from wind and solar sources is more pricey than power from coal. Villaraigosa has promised to end the city's reliance on coal within 10 years. DWP interim chief David Freeman says by promoting renewables, the surcharge will help the city avoid much larger penalties that the state could levy under California's laws that limit greenhouse gases. Freeman and Villaraigosa say failing to meet AB32 mandated goals could cost the utility and the city hundreds of millions of dollars.

A rate adjustment may be necessary to cover the cost of coal and gas energy. And now the mayor proposes a separate carbon surcharge to create a trust fund for future wind and solar projects, including rooftop residential solar. "The new renewables fund will pay for energy efficiency investments and residential and business-based solar that will allow people to reduce their own bill," the mayor said.

Thrifty and low income customers would pay a smaller surcharge. The point, the mayor says, is to encourage people to use less power. Villaraigosa says once the plan goes through, the average customer will pay 30 to 40 dollars a year into the separately managed trust fund.

Together, the quarterly rate adjustment and the carbon surcharge could raise rates for customers between 8 and 28 percent.

L.A. City councilman Tom LaBonge called the DWP on the way to the press conference to find out how he'd do under the plan. As a medium-rate user, he'd pay more. "I myself and my family pay about 92.16 a month for power," LaBonge said. "It will cost us an additional $11, approximately, for Charles, who's 12, and Mary Catherine, who's 16, to live in a cleaner Los Angeles."

LaBonge and the rest of the council may yet weigh in on the proposed carbon charge. Not everyone shares his enthusiasm. Councilwoman Jan Perry has said rate hikes and new fees may be hard to justify unless the DWP shows it's lowered operating expenses as far as it can.

The utility's acting director, David Freeman, says that meeting clean energy goals is important even in a rough economy. "Mother Nature has not taken a holiday just because we are in a recession. We have set a standard here in Los Angeles that the mayor is living up to at a time when most public officials across this country are taking a powder."

To answer critics, the mayor says a ratepayer advocate in the city controller's office would keep watch on the trust fund. "I'll be candid – ratepayers haven't always gotten the biggest bang for their buck with renewable purchases," the mayor said, "and they certainly haven't gotten enough in terms of job creation. Today both of those things change."

The Mayor's Office says the trust fund could create 18,000 jobs in the next decade – most, city officials say, in the private sector. Many of those jobs could be in wind development. The city plans to activate a "feed-in tariff" system, by which customers who have installed solar and other renewable projects on their properties can sell excess power back to the grid. Labor and environmental leaders on hand for Villaraigosa's announcement Monday expressed big hopes for the proposed surcharge, and the trust fund's ability to promote clean energy and new jobs.

DWP customers already have an option to take part in a program called Green Power for a Green L.A. According to the utility's Web site, for an extra cost of three cents per kilowatt hour, residential or small non-residential customers can choose to purchase 20 percent to 100 percent of their energy from renewable sources.

Around 19,000 of the DWP's 1.4 million customers have signed up for Green Power for a Green L.A. The pot of money generated by those voluntary contributions will remain separate from the money a mandatory surcharge would bring in.

Any quarterly rate tweaks and new surcharges get a public hearing before water and power commissioners. The commission will meet Thursday.