Primary Source: DWP and city officials pitch their rate increase proposal
Shortly after unveiling on Monday a plan to increase rates by between 8% and 28% on Los Angeles electricity users to cover the fluctuating cost of coal and natural gas and boost the city's efforts to get more of its energy from renewable sources, Department of Water and Power General Manager S. David Freeman, environmental activists supporting the proposal and other city officials stopped by The Times to pitch their plan to reporters and editorial board members. Much of the discussion focused on how revenue generated by the so-called carbon surcharge on each customer of 2.7 cents per kilowatt-hour of electricity consumed would be divvied up to pay for the increasing cost of fossil fuels -- the city currently gets most of its energy from sources such as coal and natural gas -- and improving conservation. Also discussed were the potential financial consequences the city faces if its continues to generate much of its electricity in out-of-state coal-fired power plants and how this proposal signals a change in the DWP's mission from a utility that provides power cheaply to one that does so cleanly.
Below are audio clips of the discussion divided roughly by topic. Those in attendance at the discussion to support the proposal were Freeman; Matt Szabo, L.A. Mayor Antonio Villaraigosa's deputy chief of staff; David Libatique, the mayor's energy policy director; Rhonda Mills, the Center for Energy Efficiency and Renewable Technologies' Southern California director; and Bill Corcoran, senior regional representative for the Sierra Club. The Times staff members at the discussion who asked questions are editorial writers Dan Turner and Robert Green, and reporter David Zahniser.
Freeman introduces the city's proposal by first citing a recent Times editorial calling for increased conservation efforts during periods of high unemployment. He emphasized that the utility's efforts to increase its renewable energy use would be focused on creating jobs in Los Angeles.
Editorial writer Dan Turner asks Freeman to which funds the revenue generated by the rate increase would be directed; Freeman responds, "We're deeply in the hole on the items in the ECAF that exist today like coal; railroad rates have gone up." He talks briefly about the process of increasing the DWP's surcharge, called the Energy Cost Adjustment Factor (or ECAF), noting that in 2006 the City Council and the utility, "in its infinite wisdom, quote end-quote," placed a cap on the ECAF increase of 1/10th of 1% per quarter, limiting the city's ability to pay for the fluctuating costs of both renewable and non-renewable energy sources. He points out that 2 cents of the surcharge will allow the DWP to "break even," while the 0.7 cents will be devoted to expanding the city's renewable energy portfolio.
Reporter David Zahniser asks how far the 0.7-cent increase gets the city to meeting Villaraigosa's goal of 40% renewable energy use by 2020. Freeman says he hopes the rate increase will get the city beyond its 20% goal by 2010, but without the rate increase the city's renewable energy use could drop to 13% over the next five years.
Turner asks another question about what the 2.7 cents will pay for. Freeman says half of the 2-cent increase will pay for current energy efficiency efforts, and half will go toward covering the fluctuating price of coal. He also notes part of the revenue will be devoted to increased payments into the city treasury. Matt Szabo says the rate increase will also be "retrospective; it's because we've been under-collecting, which is why there is a need to have an increase of this size at all." There's also some discussion of the process by which the city will pass the DWP rate increases.
Turner notes a consulting firm report that said the DWP rate increase would inflate its customers' bills to levels equal to or higher than private utilities. Freeman says the report didn't take into account the pending rate increases at those utilities.
The the Center for Energy Efficiency and Renewable Technologies' Rhonda Mills speaks about the importance of reducing L.A.'s demand for coal-generated electricity, noting that the city could face hundreds of millions of dollars in fees should the federal government impose carbon penalties.
Turner brings up the criticism raised whenever rates increase that unionized DWP workers receive generous pay and benefits compared to other city employees. Freeman replies that DWP workers receive salaries comparable to what other local utilities pay their employees.
Greene raises the issue of DWP transparency. Freeman says the DWP, while continuing to make improvements in this area, "isn't any more opaque" than the other publicly owned utilities he's run, noting that the highly technical nature of the DWP's work doesn't lend itself to transparency. He says the biggest change from when he previously headed the DWP during the 2001 energy crisis was that customers were happy "that we kept the lights on." He continues, "We weren't any more transparent then than we are now.... Now we're raising the electric rates in a time of recession." He says the DWP will hold meetings with the City Council more often.
The Sierra Club's Bill Corcoran says weaning the DWP off dirty energy won't happen overnight, so the city needs to start budgeting now for the transition. He also points out that "there is a suite of federal regulations forthcoming" that will force owners of coal power plants to undertake expensive cleanup efforts. Mills says, "It's at the peril of the rate payer, really, if in a few years if we don't do it."
Photo: The solar array on a covered parking lot at DWP headquarters in downtown Los Angeles.
Credit: Brian VanderBrug / Los Angeles Times