The new Los Angeles ratepayer advocate endorsed an 11 percent electricity rate increase over a two-year period. \u201cI recommend approval of the power rate proposal as it stands,\u201d independent muni ratepayer advocate Fred Pickel told the Los Angeles Department of Water & Power board Aug. 22. The price increase--in the making for much of the past year--would boost rates 4.9 percent in fiscal year 2012-13 and 6 percent in 2013-14. Pickel said he sees no practical way around the increases because they help assure system reliability, meet legal mandates, and provide energy efficiency programs to customers. He noted that energy efficiency programs are the number one demand of the muni\u2019s customers. Department of Water & Power general manager Ron Nichols said the rate hike would be brought to the muni\u2019s board for approval on Sept. 18 and then to the Los Angeles City Council\u2019s Energy & Environment Commission for review Sept. 19. If approved by that panel, the rate proposal tentatively is to go to the full council Sept. 25. Nichols said that Pickel\u2019s review \u201creaffirms that the cost increases our power system is facing to comply with legal mandates and invest in basic reliability are unavoidable and absolutely necessary.\u201d Looking longer term, Pickel said that throughout the decade LADWP would remain under \u201crate pressure\u201d due to mandates to become greener, plus replace its aging system. At the same time, its power sales are likely to decline, he said, meaning the muni will have to find new ways of doing things. While regulators have decoupled energy sales from meeting revenue requirements for decades for the state\u2019s investor-owned utilities, LADWP has not yet fully done the same. The department\u2019s rates, according to an LADWP report to Pickel, include capacity charges and fixed customer service charges. However, to eliminate the risk of future revenue shortfalls, the current rate hike proposal also would enhance current capacity charges to include an \u201cautomatic decoupling mechanism\u201d to \u201cestablish annual base revenue targets.\u201d If collections were higher, customers would get a credit and if they were lower customers would be billed for the difference over the next year. The proposal further would create a rate stabilization fund that would be refilled through a customer levy if drawn down. Under the rate hike, the muni plans to spend $3.1 billion on capital improvements over the next two fiscal years. Pickel said more than $7 billion in investments are needed over the next five years. To cope, he said the muni would have to trim labor costs and contract out for more tasks. Pickel\u2019s review marks the first rate study by the new Office of Public Accountability & Ratepayer Advocate approved by Los Angeles voters. The office was created after the muni proposed a massive rate hike in 2010. Then, the muni sought a 28 percent increase under former general manager S. David Freeman--which the city council ultimately blocked (Current, July 1, 2011). LADWP also amped up its muni\u2019s energy efficiency program by entering an agreement with SoCal Gas to coordinate efforts. The aim is to help utility customers in their joint territory install more efficient appliances and retrofit buildings to save both energy and water. LADWP\u2019s plans to use part of its efficiency budget over the next two fiscal years--2012-13 and 2013-14--coordinating with SoCal Gas to leverage higher levels of savings than it otherwise could achieve itself. LADWP\u2019s total efficiency budget in those two years is $128 million and $139 million, respectively. LADWP also plans to spend up to $8 million over the next two years for energy retrofits at public schools. The muni identified how it can cut energy use at the schools by 20 percent, according to a staff report.