In an unusual Saturday meeting, the Los Angeles Department of Water & Power set the stage for a rate hike. As yet, it is unspecified but potentially substantial. The muni opened a public process aimed at increasing its revenue to meet a variety of needs during a June 4 joint meeting of its board of commissioners and a key city council committee. The process should provide “the foundation for greater transparency” for the coming rate hike debate, said city council member Jan Perry. Previous rate hike attempts were sunk by acrimony and mistrust. The meeting-- attended by numerous environmentalists and neighborhood council activists--marked the first of many slated to go through the summer The expected rate increase is aimed at putting the department on a sound financial footing so it can rebuild its aging distribution system and move to 33 percent renewable energy by 2020. The muni also is working towards a mandated phase out of power plants that use ocean water for cooling, making significant investments in energy efficiency, and phasing out coal plants by 2030. Today, the coal-fired power supplies 40 percent of the muni’s power. LADWP general manager Ron Nichols told the muni’s board and council’s Energy & Environment Committee that the affordability of these investments under current rates has been exacerbated by the under collection of bills in the poor economy. To date, the department has been unable to collect $270 million from customers, a loss it is covering with its rate stabilization fund. However, that fund is running dry, according to Nichols. Once it does, the department expects to lose $14 million a month due to under collections. “We’re in a deficit mode today,” said Nichols. “We need to up our revenue by the end of the year.” LADWP commission president Thomas Sayles said it is crucial for the department’s power system to maintain its favorable credit rating. Nichols elaborated that if the credit rating drops due to inadequate revenue, the muni’s current $1.2 billion in outstanding variable rate bonds--which today cost less than 1 percent interest--would have to be converted to a fixed rate of at least 5.5 percent. “That’s about $50-$60 million a year for which we get absolutely nothing,” said Nichols. Nichols laid out a process for communicating with the public about the department’s priorities and revenue needs in the coming years that he hopes will culminate in a rate increase effective Nov. 1. His approach marks a departure from the department’s recent history, including a confrontational debate last year under former general manager S. David Freeman over a massive rate hike the council ultimately blocked (Current, March 26, 2010). Environmentalists voiced support for the department’s green agenda, cheering in particular its pledge to phase out coal power. However, some urged the department to speed up its timetable. Natural Resources Defense Council attorney David Pettit told the department to drop its efforts to push legislation in Sacramento that would relax the state’s phase-out schedule for once through cooling at coastal power plants. El Sereno Neighborhood Council liaison Clyde Williams expressed support for a rate hike for the department. Others reserved their support. Greater Wilshire Neighborhood Council member Jack Humphreville urged the department to release specific numbers regarding a rate hike. He also called for the city to quickly appoint a ratepayer advocate approved by voters earlier this year before any action on rates (Current, March 11, 2011).
