DWP: Green or Lean? Let the People Decide

GUEST WORDS - The Department of Water & Power has returned following last year’s Energy Cost Adjustment Factor controversy with a new effort to raise rates in order to meet its financial obligations on both sides of the utility.  For this fiscal year alone, they are seeking a 4.2% hike to water rates and a 6% increase to electric rates, assuming that the City Council does not act on their request until this winter at the earliest (a safe bet).

The pain doesn’t stop with this first wave of increases as the utility predicts that it will need similar adjustments in the following two years for a total of 15.3% for water and 16.8% for power.   These numbers are hard to swallow given the state of the economy and other fees that are moving along simultaneously, such as for sewer services.  The Council has understandably been cool to the idea of adjusting DWP rates at this time.

Further off in the not too distant future will be additional proposed increases to meet the State’s mandate of 33% renewable energy by the end of 2020.  An analysis by the California Public Utilities Commission (CPUC) in 2009 deemed this goal “highly ambitious, given the magnitude of the infrastructure buildout required.”  The likelihood is that few, if any, utilities will meet this deadline based on the experience with previous benchmarks.  

None of the state’s three largest private utilities reached 20% renewable energy by the end last year, though Southern California Edison is close (19.3%) and Pacific Gas & Electric is within sight of the goal (15.9%).  San Diego Gas & Electric is at just 11.9%.  There appears to be no penalty to any of these utilities, which together provide more than two-thirds of the state’s electrical sales.  

In fact, the latest Renewables Portfolio Standard Quarterly Report states that “While the RPS target is 20% by 2010, the CPUC has implemented flexible compliance rules that allow load serving entities to defer deficits for up to three years when using an allowable excuse.”

The DWP recently polled stakeholders on how aggressive it should be in pursuing a green agenda, even offering to end a contract with a coal burning power plant four years early.  This is a fairly aggressive idea given that, if implemented, such an action would cost ratepayers $33 million minimum, plus an unknown replacement energy purchase cost every year through 2019, when the contract is scheduled to expire on its own.

While the goal of reducing our dependency on coal is noble, it has to be noted that this plant would likely just sell its energy to someone else, and the DWP can’t even afford to maintain its current renewable rate of 20% without a rate increase.  How the utility plans to completely eliminate coal by 2020 when they can’t get even a small rate hike approved is unclear.  Doing so will require either one huge rate increase or a series of small ones.

The Mayor released his “Green LA Plan” in May of 2007, which sets an even higher goal of 35% by 2020 for the City’s renewable energy supply.  This has been followed by several years’ worth of setbacks for rate hike proposals, beginning with the ill-fated Measure B in 2009, the ECAF standoff between the Council and the Board of Water & Power Commissioners in 2010, and of course today’s discussion about revenue needs.

Some have suggested that the solution for how to address the latest rate increase proposals is to refer the matter to the newly created Office of the Ratepayer Advocate, which has yet to be fleshed out or staffed.  Another option is to hire the consultant who looked at the ECAF proposal and have them provide some neutral analysis to the Council so that it can better decide whether the full increases requested are merited.

While these are both good ideas, there seems to be a major fundamental question that no consultant or knowledgeable advocate can answer.  How much is the public willing to pay in order to end the DWP’s dependence on coal?  Perhaps what we need to do is ask the voters what they think.  This is the only way to force us all to choose between our desire to be the greenest kids on the block and the reality of our financial limits.

There is a mayor’s race in early 2013, which is soon enough to give the DWP and the Council the feedback they need in order to plan for the 2013-14 Budget and beyond, including the question about what to do with the Navajo coal plant.  This would allow the new mayor to have clear guidance in planning his or her agenda for energy while also allowing the DWP to stop being Los Angeles’ version of a political piñata.   

The City Council has the ability to place a legislative referendum on the ballot to ask voters to weigh in on this topic.  They could use the response to this question as either political cover to oppose future rate increases or an excuse to adopt rate hikes that might generate a great deal of opposition from some quarters.  Business and environmental groups could both launch campaigns to convince voters of their sides’ arguments.

This would truly be a new experiment with direct democracy for Los Angeles.  Usually such issues are just one of many on a long checklist that candidates have to address during a campaign and may not draw individual attention at all.  Having a separate vote on this major question, which will tremendously impact the future of businesses and local residents in Los Angeles, would bring this issue the attention it fully deserves.

(Erik Sanjurjo is the Vice President of the Hollywood United Neighborhood Council. He also worked for the Los Angeles City Council for over a decade on policy issues.)

Tags: DWP, rate increases, Green LA, Mayor Villaraigosa, direct democracy, democracy, ballot referendum, City Council, water and power, green energy, green, environment

Vol 9 Issue 63
Pub: Aug 9, 2011