By Jack Humphreville
 On June 5, 2007, in conjunction with the adoption of the
budget, DWP proposed the following rate actions for POWER and WATER.
POWER RATE ACTIONS
The POWER Rate Action anticipates additional revenues of $33,000,000 beginning January 1, 2008 ($66,000,0000 on an annualized basis) and an additional $75,000,000 for each of the fiscal years beginning on July 1, 2008 and July 1, 2009. Approximately 70% of the increase is associated with an increase in the Base Rates while 30% is associated with the UNCAPPED Power Reliability Surcharge.
These increases are characterized as a 2.9% annualized increase on January 1, 2008, 2.9% on July 1, 2008 and 2.7% for 2009.
However, this characterization does not represent the extent of the rate increases.
For the fiscal year beginning July 1, 2009, rate increases associated with the Base Rate and Power Reliability Surcharge are expected to total about $216,000,000, an increase of about 14% over an 18 month period. These increases are also subject to the 10% Municipal Tax, another $21,600,000, pushing the increase to over 15%.
Furthermore, the Rate Action does not take into consideration the increased rates associated with the Energy Cost Adjustment (“ECA”) since these expenses are a “pass through component.” For the three years beginning July 1, 2007, ECA revenues increase from $725,000,000 to $1,104,000,000, an increase of $379,000,000, or 52%, or about 15% per year. This increase is also subject to the 10% municipal tax, another $37,900,000.
WATER RATE ACTION
The WATER Rate Action anticipates increases in the Base Rate of $23,000,000 and $24,600,000 for the two fiscal years beginning July 1, 2008. This has been characterized as an increase of 3.1% on July 1, 2008 and 3.1% on July 1, 2009.
However, since Base Rate Revenues represent about 63% of revenues (excluding purchased water), the proposed rate increases are 6.7% and 6.6% a year, which amount to almost 14% when compounded over the two year period.
The “Pass Through Components” for Demand Side Management, Water Reclamation, Water Quality, and Water Security (and to a lesser extent, Owens Valley, Water Rights, and Low Income Subsidy) total about $215,000,000 for the two years, adding about 55% to the Base Rate.
APPROVAL PROCESS
The Rate Actions will be considered by the Board of Water and Power Commissioners in early October. If approved by the Board, the proposals would require the review and approval by Council Committee on Energy and the Environment (Perry, Garcetti, Greuel, LaBonge, Cardenas), then the full City Council, and is subject to the veto by the Mayor.
The OSC is preparing its recommendations regarding not only the Rate Action, but other matters regarding DWP, including labor issues (outsourcing and relative compensation levels v other city workers and other utilities), the transfer to the City’s General Fund of $216,000,000, deferred maintenance, and the implementation of 2005 recommendations by Huron Consulting.
Unfortunately, the OSC has not received important information on a timely basis, including Huron’s Revenue Requirements Study which was received in mid August, not June 5 when the Rate Action was proposed. The Neighborhood Councils will need to put the Rate Action on its September agenda. (Jack Humphreville serves on the NC/DWP MOU Oversight Committee.)
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