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LADWP Power Rates Overview





What Drought?

GIVE THE RATEPAYERS A BREAK - On March 30, Governor Brown declared an official end to California’s three year drought as the Sierra Nevada snow pack is 160% of normal and the State’s large reservoirs are so full that they are releasing water in anticipation of the melting snow pack.

The Colorado River Basin has had record snowfalls, so much so that Lake Meade and Lake Powell are expecting to receive 1.5 trillion gallons (over 4.6 million acre feet) from the “mammoth melt.” This represents over eight times the City’s annual consumption.

The snowfall is so massive, both in the Colorado River Basin and the Sierra Nevadas, that officials are concerned about massive flooding.

And in Los Angeles, the local rainfall was over 150% of the average and, more importantly, the snowfall in the Eastern Sierras was over 165% of the average.  

So why does our Department of Water and Power and Our Dear 11% Mayor continue with the Phase 3 drought condition that reduces our allocation of Tier 1 water by 15%, has Tier 2 rates 65% higher than Tier 1 rates, and results in significantly higher rates for already beleaguered homeowners, especially those in the Valley?

According the recently adopted Urban Water Management Plan that is mandated by the State whose governor said we are no longer in a drought, DWP states that the Department must be able to provide reliable and high quality water over the next 25 years.  At the same time, local and traditional sources of water have become scarcer because of regulatory issues.  

Locally, contamination of the San Fernando Ground Water Basin has impacted water deliveries.  In the Owens Valley, environmental requirements related to Mono Lake and dust mitigation have reduced deliveries to the Los Angeles Aqueduct. Water from the Sacramento Delta has been impacted because of the infamous Delta Smelt while supplies from the Colorado River are subject to greater demand created by the growth in other Western states, resulting in higher prices for purchased water from the Metropolitan Water District.

As a result, DWP has embarked on a strategy of increased conservation and the use of recycled water and storm water. These programs will reduce the need for outside supplies by a projected 150,000 acre feet a year, representing 21% of the projected consumption in 2035 and almost 30% of current consumption.

Needless to say, this is an expensive proposition requiring investments of several billion dollars which will be supported by higher rates, especially for homeowners.

But Ratepayers are going to have the opportunity over the next several months to get a better understanding of the Water System’s rate structure and its component parts that generates over $812 million a year in revenue and $228 million in operating profits before depreciation and interest (a 28% margin).  

On Saturday, June 4, the DWP management will present its multiyear financial plan and revenue requirements to a joint meeting at City Hall of the City Council’s Energy and Environment Committee and the DWP Board of Commissioners.  

The ensuing process must allow Ratepayers to get a thorough understanding of the Water System and its rate structure, including, but not limited to, the impact of increased regulatory requirements related to water quality, safety and security; the need to maintain the infrastructure; the cost for conservation, recycled water, and storm water capture; the development of local supplies through remediation efforts for the San Fernando Basin; the cost of City Hall’s “pet projects;” and its $2.7 billion in debt and its endangered credit rating.

There will also be other water related issues that need to be explored such as the hijacking of the $63.4 million Water Transfer Reserve by DWP without any consultation with Ratepayers.  There are also questions about the approval process related to increased development and densification and the impact on the supply and cost of water.

As for the “drought” conditions, the DWP will argue that the current system and its price signals have resulted in significant savings in water usage, especially by single family residences. Over the last several years, consumption has dipped about 15% and even more for single family residences.  

Nevertheless, DWP should consider a relaxation of the current Phase 3 drought condition, the elimination of the 15% reduction in the Tier 1 allocation, and a lowering of the Tier 2 premium given the recent increase in supplies, especially since Ratepayers are going to be smacked by a Triple Whammy of significant, multiyear increases in their water, power, and sewer rates.  

(Jack Humphreville writes LA Watchdog for CityWatch He is the President of the DWP Advocacy Committee and the Ratepayer Advocate for the Greater Wilshire Neighborhood Council. Humphreville is the publisher of the Recycler -- He can be reached at: ) –cw

Vol 9 Issue 42
Pub: May 27, 2011