LADWP Rate Hike Postponed by City Council

By Published On: January 11, 2008

The Los Angeles City Council delayed a controversial Los Angeles Department of Water & Power electricity rate hike. The department hoped to increase rates this month but they’re not expected to take effect before February. The council balked at the rate rise, and grilled the muni about its rationale after listening to advisory neighborhood councils’ protests. “Our infrastructure really has been neglected for decades,” David Nahai, LADWP’s new general manager, told Circuit. The department will address the council’s concerns, Nahai added. The department seeks a 2.9 percent increase in its base power service rate this month, another 2.9 percent increase this July, and a final 2.7 percent increase in July of 2009. Planned infrastructure improvements aimed at making the muni’s power distribution system more reliable account for about a third of the rate request. The muni’s aging infrastructure has been cited as a cause of frequent blackouts in sprawling Los Angeles. The rate hike would be the first increase since 1992. However, that does not take into account higher utility bills arising from the recent decision to lift the freeze on passing through to customers the rising cost of fuel for its power plants and renewable energy. The department also needs to rebuild its aging workforce. With about 8,000 employees, down from 11,000 in the early 1990s, the department has relied on overtime to keep its system running. Now, it hopes to rebuild its staff by training and hiring new workers. Meanwhile, it seeks to retain workers eligible for retirement by providing them with incentive pay. “All that doesn’t really auger well for cutting down costs,” Nahai noted. However, the neighborhood councils question the need for the hike, saying it–coupled with the recent decision to pass through rising fuel and renewable energy costs–will create a rate shock effect. It would quickly boost the average household bill by 30 percent, according to Jack Humphreville, who serves on the neighborhood council oversight committee for the department. He claims that the proposed rate increase is driven by “money hungry constituencies,” which include the city itself–because it enjoys regular transfers of money from the muni’s revenues to its coffers–and the muni’s unionized workforce. Humphreville and the neighborhood councils want the department to pursue money saving measures before resorting to any rate increase. In sending the proposed rate hike back to the department for further consideration, the city council asked the department to address a number of questions. Among them is how the increase will affect low-income customers and help solve a staffing shortage. The council also voiced concern that the muni needs to do more to maximize revenues from its real estate holdings. Other major issues include insuring that the muni’s accompanying rate restructuring proposal–which would give a break to customers in the hot San Fernando Valley where air conditioners frequently hum–is equitable. The council also wants the muni to work with local leaders to develop an oversight committee to review how it spends increased proceeds to modernize its aging power infrastructure.

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