Turbulent Times at the LADWP

ANGELENO ENERGY PRIORITIES - It’s a turbulent time for the Los Angeles Department of Water and Power, as the cost of fossil fuels continues to rise and utilities replace aging infrastructure. Utilities like LADWP that have long escaped accountability for depending on highly toxic and polluting energy sources like coal are finally being asked by the US Environmental Protection Agency to account for the way their destructive power supply harms people's health and our economy.  

At utilities across the country, rates are going up. Southern California Edison customer rates are going up. They’re going up for Duke Energy customers [link] and for folks in Kansas, [link] Minnesota, [link] Wisconsin, [link] and West Virginia [link], too. So, it’s helpful to understand that while most CityWatch readers are familiar with LADWP’s, um, “unique challenges”, the rising cost of fossil fuels is not unique to LADWP.  

The bottom line is that electric rates are unavoidably going up across the country and LADWP now must consider how to protect consumers in the face of rising costs.  

This past Saturday, hundreds of people turned out to an early morning meeting to hear from LADWP General Manager Ron Nichols about the utility’s plans for the future.  Residents listened as Nichols ran through the litany of challenges in front of the utility: decaying infrastructure, state mandates, and insufficient revenue streams to cover rising costs.

No one should envy the position the Nichols is in. He inherited a utility with mounting debt, a history of deferring investments in infrastructure, and an existing commitment to a bad bet made decades ago on a couple of coal plants that now present a significant financial liability to LADWP and its customers. Now he’s charged with fixing it all. Right now.

After Nichols' presentation on Saturday, scores of residents spoke to LADWP Commissioners in attendance at the meeting to voice support for the public’s priorities for the utility – moving off of coal by 2020, investing in conservation programs, and prioritizing programs like the Los Angeles Business Council’s Clean Solar program – a rooftop solar program that would allow customers to turn their homes into clean power plants and sell solar power back to the LADWP grid.

The priorities of attendees who spoke aligned with two major priorities for all Angelenos – protecting customer bills and protecting the environment. As I mentioned in a previous post, each day we remain invested in coal poses a serious financial threat to LADWP customers, and there are cost-effective ways that we can start breaking our ties with the dirty and expensive fossil fuel right now.

Efficiency programs offer ways for customers to lower their usage, and as a result, their bills. The Clean Solar program has the added benefit of being cost-neutral over time, according to the UCLA Luskin Center’s analysis. If the price of natural gas spikes, that is to say if the price of natural gas behaves like the price of natural gas, the program will go from cost neutral to cost saver.

Unfortunately, while priorities of the attendees at Saturday's were clear, leaving many without a clear sense of how the utility intends to proceed, where its own priorities lie, and whether LADWP’s strategy aligns with that of its own customers (who, since LADWP is a municipal utility, also technically own the Department).

LADWP intends to take feedback from the public through a series of public workshops later this month. Afterwards, we’re to presume, LADWP will be back with a final strategic plan and matching revenue proposal.

As the process unfolds, it is essential that customers have an understanding of what is driving cost at the utility and how decision makers can best insulate Angelenos from the national trend of rising rates. Thankfully, there is a solution that can save money for the homeowners and business that pay LADWP bills each month. We can begin investing now to finally move the nation's largest municipal utility beyond coal.

The Sierra Club (which, along with our allies in the business, environmental and civic-engagement community in Los Angeles, has been organizing an effort to move LA beyond coal), recently contracted Synapse Energy Economics, Inc., a respected third-party energy consulting firm, to analyze the data available in the LADWP’s 2010 Draft Integrated Resource Plan (IRP) and determine which policy decisions available to the LADWP Board and City Council will save LADWP customers the most money while meeting state mandates and protecting the environment.

The report had interesting and important findings, including:

•    Even under the most conservative scenarios, LADWP ratepayers will not be penalized for shedding coal by 2020 (as opposed to 2027, as LADWP’s draft IRP recommends).

•    If LADWP targets efficiency as a serious, preferred resource rather than a short-term requirement, LADWP customers will see a benefit in bills, compared to the recommended plan put forward by the utility.

One key take-away from the report is the immediate need to shift the conversation from how to keep rates low to how to keep bills low. Rates are going up, but what the report makes clear is that the check customers write to LADWP does not have to rise along with rates. By following the progress of other states and utilities that have set aggressive but achievable efficiency standards, the city can move forward on essential goals like ridding the city of its coal habit and protect residents pocketbooks.

LADWP is certainly facing significant challenges as it launches what will be an arduous “revenue requirement” process. As owners of the utility, as customers, as the people who suffer the damage done to our wallets when poor planning is conducted on our behalf, it is essential that we have an honest and fair conversation this summer about how we can protect both our bills and our environment.

We can do both by taking action now to invest in money saving energy efficiency programs and finally move LADWP beyond coal.

See the full Synapse report and find out more about the Sierra Club’s LA Beyond Coal effort at www.labeyondcoal.org.

(Evan Gillespie is Regional Representative for the Sierra Club. Reach him at Twitter: Twitter.com/LABeyondCoal)  -cw

Tags: Sierra Club, LADWP, Department of Water and Power, US Environmental Protection Agency, Ron Nichols, solar, DWP rates, coal



CityWatch
Vol 9 Issue 46
Pub: June 10, 2011