The Los Angeles City Council voted Tuesday to approve a rate hike for customers of the Los Angeles Department of Water and Power (DWP). The rate increase would boost utility bills by just under 11% and last for two years. The measure passed by a 10-4 vote, with opponents citing labor costs as a reason for voting against the increase.
The rate hike requires a second vote by the Council to become official due to the measure not passing unanimously. That vote will take place next week, at which time the measure is expected to pass with a simple majority.
DWP says the rate hike is needed to upgrade the utility's aging infrastructure, some of which is a century old. The cash raised by the increase will also fund energy conservation measures such as weatherizing ratepayers' properties and boosting DWP's potential to meet state requirements that a third of its power be renewably sourced by 2020.
The Sierra Club's Beyond Coal campaign has expressed conditional support for the rate increase, based on what DWP will do with the cash. "DWP has no choice but to spend money on deferred maintenance," the Sierra Club's Evan Gillespie told ReWire. "But the hike is also an important step in helping DWP get off coal-fired power."
DWP still gets 39% of its power from coal-fired plants, and though the utility has met an interim goal of 20% renewables more or less on schedule, it did so by issuing short-term renewable power purchase contracts. "DWP bought short-term power from out-of-state landfill gas generators to make 20%," said Gillespie, "and that's less than ideal. An infusion of cash should allow the utility to sign long-term power purchase agreements with renewable energy generators closer to L.A., or in Los Angeles through expanding its feed-in tariff program. If this rate hike goes toward funding those kinds of goals, then it'll be a concrete step away from coal-fired power."
Council members Mitchell Englander, Jan Perry, Bernard Parks and Dennis Zine voted against the increase. Englander told the Los Angeles Times that labor costs were among his concerns with the rate hike. A consultant hired by the city, PA Consulting, found that some DWP jobs paid significantly above the local industry average. DWP has countered those allegations in a statement to the Times, which they have made available on their website:
[E]ven if the scenario for labor savings set forth by PA and the Ratepayer Advocate were achieved, by their own analysis, it would reduce future rate increases by approximately 1% - 2%, and those one‐time savings would take many years to realize. While this level of savings is important, and we need to actively pursue savings where they are achievable, it must be understood in the context of the overall long‐range cost drivers in water and power, which are largely driven by legal mandates with major new capital project obligations that reach into billions of dollars.