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Tue, May

Does DWP Deserve a 30% Rate Increase?

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LA WATCHDOG-Our Department of Water and Power is proposing a 25% to 30% increase in our utility rates over the next five years.  This $1.2 to $1.4 billion in new revenues will be used to replace aging infrastructure, improve the reliability of service, expand our local water supply, transform our sources of power, improve customer service, and support the Department’s $13 billion, five year capital expenditure program.  

This hefty rate hike of 5% a year over five years does not appear to be unreasonable based on presentations by DWP’s senior management.  This is also an improvement over the 8% annual increase that was floated several months ago that would have cost Ratepayers over $2 billion a year. 

Over the next four months, DWP management will put on a full court press to sell this substantial rate increase to Ratepayers who have serious doubts about the Department and its domineering union.  But even more so, we have a hard time trusting the Herb Wesson, the City Council, and Mayor Eric Garcetti when it comes to our hard earned cash.

One area of concern is DWP’s Stormwater Capture Master Plan which appears to be an attempt by the Bureau of Sanitation and City Hall to dump a significant chunk of the $8 billion urban runoff program onto the Ratepayers.  

Last month, the DWP Board of Commissioners approved a $15 million stormwater plan that will cost Ratepayers an estimated $3,000 an acre foot, a significant premium to the $600 that the Metropolitan Water Department charges for untreated water.  At the same time, Sanitation, which has the primary responsibility for stormwater, is not putting any upfront money into the deal. 

The Department must also justify selected pet projects, including the $20 million Griffith Park South Water Recycling Project that will end up costing Ratepayers close to $4,000 an acre foot.  Once again, DWP is financing a project that is the responsibility of another City department, in this case, Recreation and Parks. 

There are numerous other pet projects, including, but not limited to, the Los Angeles River, the Arts District Clean Tech campus, fire hydrants, below market leases, and the Silver Lake Reservoir.  

There are also questions regarding the local solar programs involving the efficiency of the Feed-in-Tariff program, net metering, and utility built solar.  According to the Ratepayers Advocate, the Feed-in-Tariff program is expected to ding Ratepayers more than $250 million extra over the next twenty years compared to other solar alternatives.  And the DWP built solar facility at the Port of Los Angeles is expected to cost 60 cents per kilowatt hour, four times the retail price of electricity. 

This raises serious concerns about the efficacy of Garcetti’s $2.5 to $3 billion proposal to construct over 600 megawatts of DWP built solar power within the City of Los Angeles. 

This rate review is also an opportunity to address DWP’s major problem: City Hall and the way it treats the Department as an ATM and a favor bank. 

As a result of this interference, the LA 2020 Commission recommended the establishment of The Los Angeles Utility Rate Commission that would have direct authority to determine DWP policy, appoint the General Manager, set rates, and work with the GM and her staff to oversee the operations of the Department.  While this recommendation has yet to see the light of day thanks to City Council President Herb Wesson, we need to have a serious conversation about the governance of this City enterprise that is vital to our local economy. 

The Ratepayers will also be hit up for about $200 million in taxes on Power System revenues as a result of the 8% Transfer Fee and the 10% to 12% City Utility Tax.  But rather than pocketing this back door tax increase, the City Council and Mayor Garcetti should reinvest this windfall in the power system’s infrastructure since they are in large part responsible for the deteriorating infrastructure because of their unwillingness to make the tough decision to raise rates.  

The economics of the proposed 25% to 30% rate increase do not appear to be unreasonable based on management’s presentations.  Whether DWP is deserving of this $1.2 to $1.4 billion revenue hike depends on the willingness of DWP and City Hall to address the Ratepayers’ concerns, protect our wallets, and reform the governance of our Department of Water and Power. 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and a member of the Greater Wilshire Neighborhood Council.  Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  [email protected]
-cw

 

 

 

CityWatch

Vol 13 Issue 56

Pub: Jul 10, 2015

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