By David Nahai
No new chief of a utility-public or private-wants to advocate for a rate increase at the outset of their administration. So why am I, as the new General Manager of the DWP making such a case?
The reason is that I am convinced that our customers deserve the most reliable, high-quality electric and water service at the very lowest possible cost. And to do that we must invest in our city’s infrastructure today to continue providing reliable water and power tomorrow.
Much has been reported in the media about our modest request for rate increases. However, many of the facts have simply been ignored or left by the wayside.
First, it is indisputable that our infrastructure is deteriorating and must be renovated. Most of the nation’s cities face similar challenges. Our infrastructure has served us well, but is now creaking like a tired workhorse under the weight of generations of heavy use. Much of our system of power poles and transformers, power lines and water mains is between 40 and 70 years old. It has been maintained and repaired, but now needs a major overhaul to meet the needs of the City and its residents. This fact is well documented by study after study that our assets are old and our outages are becoming more frequent. We don’t need another study. We need to act.
During the past two summers, we battled heat storms that caused 80,000 of our 1.4 million customers to lose power in 2006 and 75,000 in 2007 as our infrastructure struggled under the strain of load growth and climate change. The cost of those outages in human misery, economic losses and healthcare costs far exceeds the rate increase we are seeking.
In fact, customers of other utilities in the state (with far higher rates) fared much worse during the past two summers, just as they did in 2000 and 2001 when they were hit with rolling blackouts. DWP kept the lights on, and Angelenos were spared from rolling blackouts because of wise decisions and investments made by City leaders and the DWP over past generations.
Just as the challenge of aging infrastructure is not unique to Los Angeles, neither is the practice of making a transfer payment from the DWP to the City’s general fund. You wouldn’t know it from reading or watching the news, but every major utility-whether owned by investors or the public-makes a payment to its host city. In fact, the “transfer” made by DWP is about average with payments made by other municipal utilities in the nation. This inconvenient fact is ignored by those who criticize this sound tradition.
Now consider the rate increases we are seeking, and how our rates compare to other utilities. In total, all of the proposed rate increases will cost the typical residential customer about $5.25 a month for the power bill, and less than $2 per month more for water. At the same time, Southern California Edison recently announced a 12 percent increase for its customers. It is a fact that DWP customers in Studio City and Sylmar pay much less than their neighbors in Stevenson Ranch or Santa Clarita. In many cases our customers pay as much as 30-50% less.
Of course, we will continue to apply the same vigilance that has been applied since I served on the DWP Board prior to becoming General Manager. I can assure you we left no stone unturned scrutinizing the DWP budget over the past two years. We spent an unprecedented number of hours combing through the stacks of documents to eliminate waste and inefficiency and we will continue to do so, as any good public agency should do. But the need for our rate action still remains.
On the power side, we are seeking the first base rate increase in 15 years. We did not make this decision lightly, or by acting in a vacuum. We engaged in an unprecedented public outreach effort. We conducted more than 30 public meetings with neighborhood councils, community groups and customers. What I heard from our customers at these meetings was not that our rates were too high or that this increase was too much, but rather concerns about the unplanned disruption to their lives when their power fails. They wanted assurance that their water and power service is reliable.
We have had our rate request validated by three independent third parties. We fully support the formation of an oversight committee to monitor the progress of our improvement program. We now need the support of the City Council to move forward with this much needed investment.
This great utility belongs to the people of Los Angeles. It is a vital asset providing essential services that keep our city running and thriving. Our goal is to continue this tradition of excellence in providing reliable, high-quality water and power at the lowest possible costs. The citizens of Los Angeles deserve no less.
David Nahai is the CEO and General Manager of the Los Angeles Department of Water and Power.
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