LOS ANGELES: Sun, Wind, Dust and Salaries Drive DWP Rate Hikes

Imagine you are dining in a restaurant with a dozen other people and the governor of California. While you are studying the menu, the governor starts ordering for the table.

Platters arrive, and glasses are filled … and more platters and more refills.

Then the check comes.

You know how the rest of the evening goes. Who ordered the market-price renewable energy? Who ordered the coal-free electricity? Who had the rainbow smelt? How much did you put in? We’re still short. Does that include the tip? Tax is HOW much?!

For customers of the Los Angeles Department of Water and Power, the bill has just arrived. Over the next five years, ratepayers will have to shell out an additional $230 million for water and another $900 million for power. Three-quarters of the new money for power is needed to meet state mandates — including the Governor’s Special, a requirement to use 33 percent renewable energy by 2020.

Electricity rates will go up 3 percent per year for the “typical residential” user of 500 kilowatt hours per month. It’s worse for businesses: “Small commercial” users will see their power costs rise 3.8 percent per year, and rates for “high-use residential” customers who consume 900 kilowatt hours per month will shoot up 4.7 percent per year — plus taxes.

The DWP says 85 percent of the additional $230 million in water revenues — a 3.8 percent annual hike for “typical” users — will go toward “infrastructure repair and replacement” and “water quality.” But a big slice of that — 4 percent overall — will go to pay for the Owens Lake Dust Mitigation Project. That’s our DWP-negotiated penance for the construction of the 100-year-old Los Angeles Aqueduct. Since 2000, the DWP has been pouring 25 billion gallons per year of water — drinking water — on a dry lakebed to hold down dust, at a cost to L.A. ratepayers of $1.3 billion. In November, the DWP reached a settlement that allows the use of less water-intensive dust control methods, cutting the annual water use to 22 billion gallons in 2014 but doubling the annual cost to $217 million.

Via: California Political Review

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CALIFORNIA: LADWP Proposes 30 Percent Utility Rate Increase

Los Angeles Department of Water and Power is proposing a 25% to 30% increase in our utility rates over the next five years.  This $1.2 to $1.4 billion in new revenues will be used to replace aging infrastructure, improve the reliability of service, expand our local water supply, transform our sources of power, improve customer service, and support the Department’s $13 billion, five year capital expenditure program.

This hefty rate hike of 5% a year over five years does not appear to be unreasonable based on presentations by DWP’s senior management.  This is also an improvement over the 8% annual increase that was floated several months ago that would have cost Ratepayers over $2 billion a year.

Over the next four months, DWP management will put on a full court press to sell this substantial rate increase to Ratepayers who have serious doubts about the Department and its domineering union.  But even more so, we have a hard time trusting the Herb Wesson, the City Council, and Mayor Eric Garcetti when it comes to our hard earned cash.

One area of concern is DWP’s Stormwater Capture Master Plan which appears to be an attempt by the Bureau of Sanitation and City Hall to dump a significant chunk of the $8 billion urban runoff program onto the Ratepayers.

Last month, the DWP Board of Commissioners approved a $15 million stormwater plan that will cost Ratepayers an estimated $3,000 an acre foot, a significant premium to the $600 that the Metropolitan Water Department charges for untreated water.  At the same time, Sanitation, which has the primary responsibility for stormwater, is not putting any upfront money into the deal.

The Department must also justify selected pet projects, including the $20 million Griffith Park South Water Recycling Project that will end up costing Ratepayers close to $4,000 an acre foot.  Once again, DWP is financing a project that is the responsibility of another City department, in this case, Recreation and Parks.

There are numerous other pet projects, including, but not limited to, the Los Angeles River, the Arts District Clean Tech campus, fire hydrants, below market leases, and the Silver Lake Reservoir.

There are also questions regarding the local solar programs involving the efficiency of the Feed-in-Tariff program, net metering, and utility built solar.  According to the Ratepayers Advocate, the Feed-in-Tariff program is expected to ding Ratepayers more than $250 million extra over the next twenty years compared to other solar alternatives.  And the DWP built solar facility at the Port of Los Angeles is expected to cost 60 cents per kilowatt hour, four times the retail price of electricity.

This raises serious concerns about the efficacy of Garcetti’s $2.5 to $3 billion proposal to construct over 600 megawatts of DWP built solar power within the City of Los Angeles.

This rate review is also an opportunity to address DWP’s major problem: City Hall and the way it treats the Department as an ATM and a favor bank.

As a result of this interference, the LA 2020 Commission recommended the establishment of The Los Angeles Utility Rate Commission that would have direct authority to determine DWP policy, appoint the General Manager, set rates, and work with the GM and her staff to oversee the operations of the Department.  While this recommendation has yet to see the light of day thanks to City Council President Herb Wesson, we need to have a serious conversation about the governance of this City enterprise that is vital to our local economy.

The Ratepayers will also be hit up for about $200 million in taxes on Power System revenues as a result of the 8% Transfer Fee and the 10% to 12% City Utility Tax.  But rather than pocketing this back door tax increase, the City Council and Mayor Garcetti should reinvest this windfall in the power system’s infrastructure since they are in large part responsible for the deteriorating infrastructure because of their unwillingness to make the tough decision to raise rates.

The economics of the proposed 25% to 30% rate increase do not appear to be unreasonable based on management’s presentations.  Whether DWP is deserving of this $1.2 to $1.4 billion revenue hike depends on the willingness of DWP and City Hall to address the Ratepayers’ concerns, protect our wallets, and reform the governance of our Department of Water and Power.

Via: California Political Review

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California: In LA, It’s Back to Basics

Despite record revenues that are expected to exceed $5 billion, the City Council is considering a $4.5 billion tax increase over the next 30 years to fund the repair of our lunar cratered streets because of its inability to control ever escalating salaries, benefits, and pension contributions.

But the failure of the City Council to balance the budget despite record revenues is compounded by its unwillingness to endorse Mayor Garcetti’s “Back to Basics” priorities by “making government more efficient and effective.”

For example, if the City were to sell the Convention Center, it would eliminate over $400 million in debt and increase the City’s cash flow by $60 to $80 million a year.  More than likely, the sale price of this 870,000 square foot white elephant would be considerably more than the debt, generating additional cash to reduce the City’s outstanding debt, fund the repair of a portion of our streets, or finance the revitalization of the Los Angeles River.

As part of any sale, the buyer would be required to develop a world class facility that would attract top of the line conventions to the City, generating huge increases in hotel and sales tax revenues for the City’s treasury.

Furthermore, the development of the 54 acre Convention Center site by a well healed buyer would create a boat load of additional revenue for the City through development fees and higher property taxes, and, at the same time, create thousands of construction and full time jobs that would revitalize DTLA and stimulate our lack luster economy.

The City has also given lip service to “performance based budgeting.” However, the administration has not made any effort to “benchmark” its operations or any of it compensation and benefit policies with those of other governments or alternative providers.  This was a key recommendation to our Department of Water and Power by PA Consulting in its August 2012 report.  The City should also consider “outsourcing” noncore services to more efficient vendors, another common sense recommendation of PA Consulting.

Via: California Political Review

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