Amid sweltering heat and growing anger from residents left for days without power, the Los Angeles Department of Water & Power’s board took one step forward and one step back on renewable energy September 4. The board also discussed a rate increase aimed at upgrading the muni’s aging distribution system--an infrastructure that’s sparked repeated blackouts in recent years. On renewable energy, the board expanded the muni’s solar incentives program--despite concerns it would subsidize wealthy residents at the expense of moderate and low income customers--but delayed acting on a major wind power purchase agreement. The decisions came in the course of a long, often-heated meeting, which broke briefly at 5:30 p.m. to give those attending a chance to move their cars in this vehicle-based city before city employees locked the downstairs parking lot for the night. The five-member board--which has one vacancy with the recent departure of Mary Nichols to chair the California Air Resources Board--struggled to reach its decisions in the face of mounting state pressure to use more renewable energy and rising public heat about the reliability of its power grid and how well it manages money. Based on concern about financial prudence, the board tabled a complex wind power purchase agreement. It was aimed at enabling construction of a major wind power project in Utah to supply 2 percent of the muni’s power. LADWP, which is striving to achieve a 20 percent renewables portfolio standard by 2010, currently gets 8 percent of its power from green resources. In delaying the project, the board asked its staff to provide better justification for the proposed agreement at its next meeting in two weeks. “If the project goes south we’re first in line” for financial liability, admonished muni commissioner Nick Patsaouras. However, staff explained that the proposed agreement is not unlike others in which the department has long participated. For instance, the muni has operated under a similar agreement for delivery of power from the Intermountain Power Project, a major coal-fired facility in Utah, explained Ronald Vazquez, LADWP chief financial officer. The complex agreement essentially would provide the project developer, UPC Wind Management, financing to construct a 200 MW wind project in Beaver and Millard Counties in Utah. Under the deal, the Southern California Public Power Authority would issue bonds to prepay for the energy from the project on behalf of three of its members, including LADWP, which would receive 92.5 percent of the power, Burbank, which would take 5 percent, and Pasadena, which would receive 2.5 percent. The 20-year agreement then would allow the munis to pay for the power either as they use it or in advance at a savings. The electricity is expected to cost anywhere from an average of $70.62/MWh up to $80.02/MWh over the life of the contract depending upon whether the federal production tax credit is renewed and whether or not the utilities opt to assume ownership of the project at the ten-year mark. LADWP’s total annual expenditures could range from $33.2 million to $35 million a year under the agreement. Board president David Nahai agreed that the deal goes “far beyond” a standard power purchase agreement. However, he said, “I feel comfortable with what we have here.” Nevertheless, he agreed to delay approval of the deal until the staff could satisfy Patsaouras. While the board balked at the wind power deal, it approved a major increase in the muni’s solar power incentive program to bring it into alignment with the California Solar Initiative under SB 1. Under the action, department spending on solar incentives will rise from $13 million to $33 million a year, said Bill Glauz, the muni’s solar program manager. The extra spending is aimed at boosting installed photovoltaic power production capacity in Los Angeles from 12 MW to 280 MW by 2016. The city will pay incentives of up to $4.50 per watt, which is set to decline in 10 steps as solar installation milestones are met, explained Glauz. Patsaouras complained, however, that the program largely will subsidize well-to-do residents who could afford to install solar panels anyway and provide little benefit for low and moderate income residents. “There are all kinds of environmental justice aspects to this,” agreed Nahai, who urged the staff to develop further revisions to the program to spread its benefits to a wider array of city residents and businesses. City staff concurred that so far installations have been centered on large homes in prosperous sections of the city, but they pointed to fire department rules requiring a margin of four feet around solar panels as an obstacle to installations on small- and medium-sized homes. Eventually fire officials want solar panels to be installed with “quick release” mechanisms enabling crews to quickly open roofs to fight fires, explained Glauz. The board also discussed a rate increase, which it plans to vote on October 2. The hike must later be approved by the Los Angeles City Council to take effect. The rate hike would boost the flat monthly service fee from 30 cents to $1.50. It would restructure rates to incorporate seasonal variation, time of use factors, increased block usage, and increased minimum charges. The revised rates also would provide greater incentives for energy efficiency measures. The department would use the added revenue to upgrade its distribution system and finance new energy efficiency and renewable energy programs. “The utility is at a crossroads,” said Nahai. “We need to invest to maintain reliability.” If approved as planned, the new rates would take effect beginning next year. They would increase annual revenues to LADWP from power sales by $33 million next year, another $75 million in 2009, and another $75 million in 2010.
