LA City Council OKs smaller DWP rate hike

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The Los Angeles City Council voted today to increase Department of Water and Power electricity rates by 0.6 cents per kilowatt-hour, effective Thursday through the end of June.

The proposed hike in the DWP's Energy Cost Adjustment Factor surcharge still requires the approval of the city's Board of Water and Power Commissioners — and Mayor Antonio Villaraigosa indicated he may not endorse it to them.

"I am pleased to see that the council has recognized the need for a rate increase, the importance of investing in renewables, and the need for greater accountability and transparency at the DWP,'' he said.

"However, because the council actions reduce the investment in renewable energy, do not appear to provide the minimum amount need to address the undercollection, and do not include protections for residents and employers, I have serious reservations about recommending these proposals for
commission approval,'' he added.

Villaraigosa appointed the members of the Board of Water and Power Commissioners.

The rate hike approved today was the minimum that an independent analysis showed was necessary to shield the DWP from a feared bond rating downgrade, but it is smaller than what the DWP and Mayor Antonio Villaraigosa were seeking — 0.8 cents per kilowatt-hour.

"Today we took a vote to take a responsible first step forward,'' City Council President Eric Garcetti said. "We can't guarantee there won't be future rate increases, but what we did guarantee today is that there will be a responsible and transparent process — that's what we have to do in the worst
economy since the Great Depression.'''

PA Consulting, which conducted the independent analysis, estimated the average monthly DWP electricity bill would go up about 4 percent as a result of the proposed rate hike.

The council voted 9-5 for the rate hike, and unanimously for a set of measures aimed at ensuring the DWP will spend money efficiently.

Of the rate hike approved today, 0.5 cents would be used to help the DWP address its failure in recent years to collect enough money to offset fluctuations in the price of coal and natural gas.

The remaining 0.1 cent would be deposited into a trust fund devoted exclusively to investments in renewable power. The mayor had proposed a similar trust fund — dubbed the "lockbox'' — but called for a larger amount to go into it.

He said the money would be used to create 18,000 jobs over a decade by training workers to make homes and businesses more energy efficient, and by allowing owners of buildings with solar panels to become direct sources of renewable power for the DWP.

During a rally preceding today's City Council meeting, Villaraigosa said "There's no way that I would raise (DWP) rates without a lockbox for green power, without a lockbox that would put us in a position to create jobs and to move toward cleaner energy.''

Villaraigosa warned that without the lockbox, the DWP could fail to meet renewable energy standards set by the state, and could be fined hundreds of millions of dollars.

The council voted 10-4 to approve the lockbox even though the independent analysis recommended against it.

Testifying before the City Council's Energy and the Environment Committee early this morning, PA Consulting's Andrew Rae said the proposal for the lockbox "doesn't have any specifics behind it.''

"Once it's approved, you can't really regulate how it's spent,'' he said. "It's for renewables, it's for energy efficiency, but unlike now, where each project comes before the council, that wouldn't be the case.''

Garcetti defended the lockbox, however, saying "This will give those folks who want to see a cleaner Los Angels and cleaner energy some confidence that it is in a dedicated trust fund.''

The lockbox has also been endorsed by former Vice President Al Gore and Governor Arnold Schwarzenegger.

Earlier this month, DWP Acting General Manager Raman Raj threatened to withhold $73.5 million that the utility had promised to remit to the city's general fund if the originally recommended rate hike was not approved by March 31.

Without that money, the city's budget deficit — already at $485 million over the next 14 months — would go up even more.

Councilwoman Jan Perry today introduced a motion asking the city attorney whether the city can take money out of the DWP's Debt Reduction Trust Fund, estimated to hold $547 million.

"I'm not going to keep ramming my head up against a plate glass window with them,'' Perry said of the DWP. "(If the DWP doesn't) want to do it, we'll find another way to do it.''

KPCC's Molly Peterson contributed audio to this report