DWP’s Rate Approval Timelines too Ambitious … Billions and Billions Involved
LA WATCHDOG - The Department of Water and Power is proposing that the increases of 22% and 25% in our water and power rates be effective on November 1, 2011. This will require that the City Council approve these rate increases by October 1, less than 90 days from Independence Day.
- 05 Jul 2011
- Written by Jack Humphreville
But these rate increases involve massive amounts of money.
Over the next three years, DWP is projecting that the combined revenues of the Water and Power Systems will increase by over $1 billion (not including $150 million of fees and taxes related to the Power System).
Capital expenditures are projected to be over $8 billion, financed in part by the incurrence of about $5 billion in new debt.
Over the next five years, combined system revenues are projected to increase by $2 billion (not including $300 million of fees and taxes related to the Power System) with capital expenditures approaching $13 billion, financed in part with $8 billion in new debt.
Needless to say, residential and commercial Ratepayers, the City Council, and the Board of Water and Power Commissioners need to have a thorough understanding of DWP’s plans. But this will be very difficult in the designated time frame, especially since a Ratepayers Advocate has not even been appointed.
As a result, the Los Angeles Neighborhood Council Coalition unanimously approved the following resolution on Saturday, July 2.
“The Los Angeles Neighborhood Council Coalition strongly urges that the Board of Water and Power Commissioners and the City Council not consider or act upon the proposed water and power rate increases until the Ratepayers Advocate is established and has thoroughly reviewed and analyzed the proposed rate increases and presented such review and analysis to the Ratepayers and the public for their careful consideration.
LANCC cannot support any rate increases until the Ratepayers Advocate has reviewed and analyzed these rate increases and discussed the review and analysis with the Ratepayers and the public.”
Despite the fact that the City Council placed Measure I (Office of Public Accountability / Ratepayers Advocate) on the ballot in November and that this measure was approved by almost 80% of the voters on March 8, the City Council has not even selected the members of the Citizens Committee responsible for recruiting the Executive Director of the Office of Public Accountability. Nor has the City Council drafted the necessary ordinances to define the role of the Executive Director and the Ratepayers Advocate.
As a result, the Ratepayers Advocate will be very lucky to have a preliminary review and analysis completed by December 31.
As part of the rate increase process, the City Council will make public the analysis and findings of PA Consulting during the week of July 25. PA Consulting is the expert firm retained by the Energy and Environment Committee and the City Council to assist the Council Members in understanding the proposed rate increases and their impact on DWP and Ratepayers.
There are also numerous other issues that need to be considered in a careful and deliberate manner which will be very difficult if not impossible within the proposed timeframe.
These issues include the financial implications of the state regulations involving Once Thorough Cooling (Council File 11-1102); the status, likelihood, and extent of any cap and trade payments that may be required by the State; the early phase out of the Navajo Generation Station; and the cost of the individual environmental mandates.
They also include the impact of Proposition 26 (the Supermajority Vote to Pass New Taxes and Fees Act) on the rate increases and the 8% Power System Transfer Fee; the very complicated Rate Restructuring Plan and its impact on single family residences; the implementation of the recommendations of the charter mandated Industrial, Economic, and Administrative Survey that was completed in February 2009; the status of the underfunded DWP pension plan; and how the City intends to finance its equity contribution to DWP.
There are suggestions by Ratepayers that need to be considered. For example, Patricia Bell Hearst recommended that DWP require that new buildings and developments meet selected conservation standards. Gerry Silver of Encino believes that new developments should pay the higher incremental rates that DWP pays for additional water and power. And Jeff Bruce wrote that the increases in revenues associated with conservation, sustainability, or infrastructure replacement not be subject to the Transfer Fee and the City Utility Tax.
Rather than a rush to judgment, especially since the proposed rate increases involves billions of Ratepayer dollars, the Energy and Environmental Committee should recommend that DWP consider a one year increase that would cover the Department’s Basic Needs and Strategic Investments.
At the same time, the City Council needs to pass the necessary ordinances that will establish a “well funded, empowered, and truly independent Ratepayers Advocate to oversee the operations, finances, and management of the DWP on a timely and continuous basis” as outlined in the Ratepayers Advocate Term Sheet that served as the basis of discussion during the six DWP Reform Hearings sponsored by the City Council last fall.
Tags: DWP, rate increases, Ratepayers Advocate, City Council, Energy and Environment Committee, PA Consulting, LA Neighborhood Council Coalition
Vol 9 Issue 53
Pub: July 5, 2011