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DWP Outlines Need for Rate Increases

By Matt Wilhalme, 7/28/2011

Utility Faces Struggle to Maintain Systems and Invest in New Programs


Los Angeles Department of Water and Power customers are in for a rate increase as the department struggles to find ways to not only maintain the system, but also invest in sustainable energy for the city’s future.

DWP General Manager Ron Nichols explained the basis for rate increases for DWP customers. (photo by MAtt Wilhalme)

At a DWP ratepayer meeting at Hollywood City Hall on July 25, more than 30 members of the community came out to hear DWP’s explanation of the need for rate changes.

The DWP, which distributes more than 450 million gallons of water every day, and more than 77 million kilowatt-hours of electricity daily – double that on a hot summer day – will be increasing customers’ water rate by about 15.3 percent and their power rate by 16.8 percent over the next three years.

For a typical residence, it will amount to about a $2.24 increase on their monthly water bills each year for the next three years. For electricity, the same type of residence can expect a yearly increase of about a $4.04.

Laws or regulations mandate many of the changes that are causing the need for rate increases, said Ron Nichols, DWP general manager. One such law, SBX12, requires that DWP use 33 percent renewable energy sources by 2020.

But, in a voluntary move, DWP set a renewable energy goal of 20 percent by 2010, which they were able to accomplish by using millions of square-feet of solar panels, 500 wind turbines and many small hydroelectric projects.

“For most people who don’t live and work in the water and power industry, they probably don’t recognize that the industry on a whole is evolving,” Nichols said.

To keep up with that evolution, DWP plans to invest in several strategic programs over the next three years in both water and power. DWP is seeking community input in order to determine what specific investments the community would like to see through surveys and participation in ratepayer meetings.

One proposed project is a $16 million investment, over three years, in water conservation to continue and enhance their current long-term conservation efforts. Another is a $319 million investment in power reliability to replace poles, cables and breakers.

But Chrys Tobias, a Hollywood community member for more than 43 years questioned DWPs investment in “green technology”.

“There is no way they can create enough green energy to power all of Los Angeles,” Tobias said at the meeting.

Others questioned the speed at which DWP would install and begin using new smart energy readers to collect usage information from customers.

The average lifespan for power poles is about 145 years, but with DWP’s current budget it can only afford to replace them every 160 years, according to Nichols. The numbers for the water distribution system are even worse, for the more than 700,000 feet of pipes that are more than 100 years old, the DWP can only afford to replace those lines every 340 years, according to DWP.

With its current revenue, DWP will not be able to meet basic business needs, let alone the strategic investments, according to Nichols. Additionally, DWP’s credit rating has been downgraded, Nichols said. He described the downgrade as a move from a “AA” rating to a “AA-” which amounts to $73 million in interest.

“I would rather have that money to put toward fixing pipes and replacing pipes and putting more money into energy efficiency and other programs as opposed to simply paying more money to the banks and not being able to do that,” Nichols said.

In areas where DWP has the power to use discretionary spending, it has been working to make cuts in order to offset the cost to customers, which have amounted to a net reduction of nearly $500 million. DWP customers will still be on the hook for about $159 million in the first year of rate increases alone – a total of more than $1.3 billion over the next three years.

According to the DWP, its customers pay some of the lowest rates in the state when compared to Southern California Edison, Pacific Gas & Electric and San Diego Gas & Electric, but the utility is encouraging customers to learn more about the rate increase by attending ratepayer meetings or by visiting www.ladwp.com.








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