Water and Power Rate Actions Approved by City Council and Mayor
Investments Will Support Replacing Aging Infrastructure, Protecting Water Supply from Drought, Meeting Mandates for Clean Energy and Climate Change, and Improving Customer Service
|LOS ANGELES — The Los Angeles City Council today approved a five-year water and power rate action that will provide the Los Angeles Department of Water and Power (LADWP) with much needed funding to accelerate the replacement of aging infrastructure, protect against drought conditions, transform water and energy supplies while meeting mandates, and improve customer service, while keeping LADWP’s rates competitive with nearby utilities. Following approval by the City Council, Mayor Eric Garcetti signed the Ordinances, which are scheduled to take effect April 15, 2016.
“Angelenos deserve a public utility that works for them. This critical investment will ensure that the Department of Water and Power continues providing the most reliable and affordable water and power in the region. Now we can get to the business of upgrading our pipes, greening our infrastructure, modernizing governance and improving customer service at the DWP,” Mayor Eric Garcetti said.
“The risks of inaction are substantially greater than the risks of passing this rate adjustment. We must move forward in order to protect customers from more costly repairs to infrastructure and higher costs of borrowing if LADWP’s bond ratings are downgraded,” Mel Levine, President of the Board of Water and Power Commissioners said.
“I want to thank the Mayor and City Council for supporting these much needed investments in the City’s water and power infrastructure. The rate adjustments provide LADWP with the predictability we need to ramp up the replacement of aging infrastructure, and provide the funding necessary to comply with legal mandates to continue transforming our power supply, expand local water supplies to protect against drought, and protect water quality, among other key priorities,” LADWP General Manager Marcie Edwards said. “They will also allow us to significantly expand energy efficiency and water conservation programs that will help our customers save on their water and power bill.”
The water and power rate ordinances will provide a combined 3 percent average increase each year for five years, about $4.20 more per month per year, for residential customers using a typical amount of energy and water. A typical electric residential customer, using 500 kilowatt-hours (kWh) per month, will see an increase on their monthly bill of about $5.85 at the end of five years. A typical water customer, using 12 hundred cubic feet (HCF) of water per month, will pay $15.10 more on their monthly bill at the end of five years.
For all customer sectors, including residential, commercial and industrial customers, the average annual rate increases are 3.86 percent for power and 5.26 percent for water over five years.
The water rate ordinance adjustments will provide $330 million in additional revenue at the end of five years. The majority of new revenues will enable LADWP to increase the pace of replacing aging water infrastructure for reliability as well as to meet water quality regulations. Additional revenues will also protect the city from prolonged drought conditions in the future by expanding local water resources and reducing dependence on more expensive, imported purchased water.
The new water rates are designed to recover costs associated with water supply development to meet demand by high water users and will also encourage water conservation by expanding from two to four price tiers based on a customers’ water use. The expanded tiers reflect the increasing cost of water supply at higher usage levels, allowing LADWP to recover the costs of providing water to high users while further encouraging conservation. At the same time, LADWP’s water rates will remain competitive with those of neighboring water utilities, many of which have announced similar or larger rate increases.
On the power side, the new rates will provide about $720 million in new revenue at the end of five years. The majority—about 80 percent—are necessary to meet clean energy and climate change goals, and regulatory requirements. Over the next years, LADWP will eliminate the use of coal power to reduce greenhouse gas emissions, expand renewable energy to 33 percent of power sales by 2020 and 50 percent by 2030, and increase energy efficiency to reduce electricity use by 15 percent by 2020. LADWP must also modernize its coastal power generating stations to eliminate the use of ocean water for cooling while improving their fuel efficiency and flexibility to back up the increase of renewable energy that will be brought into the City’s power grid.
Along with major capital projects that are mandated, additional revenues are necessary to upgrade and replace aging electrical infrastructure, much of which was installed between the 1920s and 1970s. Nearly half of LADWP’s 320,000 power poles are at least 60 years old, which is the average design life of a pole. As an example, with the new rates in place, LADWP expects to replace 6,000 power poles a year, compared to 1,560 poles currently, by 2020.
LADWP received strong support for the proposed rates from the business community, environmental groups, and neighborhood council stakeholders following nearly eight months of citywide public outreach involving over 80 meetings and presentations on the rates proposal across Los Angeles. In December 2015, LADWP adjusted the proposed rate increases after incorporating input from the public and the independent Office of Public Accountability/Ratepayer Advocate (OPA/RPA). In addition, LADWP incorporated accountability measures and a “check-in” period in the third year to demonstrate progress toward meeting performance goals, as recommended by the OPA/RPA. The OPA/RPA has stated the rate actions are “just and reasonable.”
During the City Council rate hearings, organizations that supported the rate adjustments included the Central City Association, the Greater Los Angeles Chamber of Commerce, the Los Angeles Business Council, and the Valley Industry and Commerce Association. Environmental organizations including the Sierra Club, Natural Resources Defense Council and the Environmental Defense Fund have also provided statements of support for the proposed power rate increase.
For more information on the approved rates, please visit www.MyLADWP.com