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Los Angeles Department Water and PowerLegal Mandates and Aging Infrastructure Drive Need for Rate Increase.

LOS ANGELES – September 12, 2012, The Los Angeles Board of Water and Power Commissioners moved forward today with a proposed 2-year electric rate change to pay for investments needed to comply with legal mandates that are driving a complete transformation of LADWP’s power supply, to invest in replacing rapidly aging infrastructure to maintain reliability and expand customer opportunities through additional investment in money-saving energy efficiency programs which also comply with state requirements. The rate action, which requires approval by the Los Angeles City Council, would increase LADWP’s system average rate by 11.1% over two years, or 1.4 cents per kilowatt-hour (KWh).  Typical residential customers who use 500 KWh per month would see an increase half that amount (5.5%) over the two years, and pay $3.65 cents more per month on the current average monthly electric bill of $65.79 in the second year of the rate increase.

“It is never easy to raise our customers’ rates, but the Department has made the case that these investments are needed to comply with legal mandates and to invest in replacing aging infrastructure that is essential to maintaining reliable service to our customers,” said Thomas Sayles, President of the Board of Water & Power Commisioners.

The Board also concurred with a recommendation by General Manager Ronald O. Nichols to defer action on a proposed 5% water rate increase that would have taken effect in July 2013, to allow time for the city’s independent ratepayer advocate, Dr. Fred Pickel, to further analyze proposed changes in the water rate structure and capital program. Nichols said unanticipated financial savings realized this summer will enable LADWP to continue critical capital projects for now while further analysis is completed, but that future water rate increases will eventually be needed.

The proposed two-year electric rate increase approved today by the Board follows over 16 months of community outreach and an independent review by the Ratepayer Advocate. The Ratepayer Advocate’s report confirmed that the proposed rate increases are necessary and warranted to comply with legal mandates and invest in basic reliability.  It also credited the Department with cutting costs and made recommendations to further cut costs beyond the immediate 2-year rate period.
The Ratepayer Advocate has recommended further evaluation of future costs beyond the 2-year rate period to seek reductions in levels of future rate increases.

“This was a rates process like no other in the Department’s history. We achieved a level of transparency that is unprecedented, providing more information on what is driving our costs and about the basis for the needed rate increase to the public and to the ratepayer advocate than ever before,” said LADWP General Manager Ronald O. Nichols. “We listened to what our customers and other stakeholders expected from the Department of Water and Power, and supported their priorities in our recommendations.  As a result, we will more than double last year’s investment in energy efficiency to help our customers save money and launch the full 150MW Feed-in Tariff demonstration program to more aggressively expand solar on LA rooftops and include more of our customers.”

Key drivers of the power rate increase include investments needed to keep LADWP on track to meet 33% renewable energy by 2020; stay on schedule with State of California requirements to eliminate the use of ocean water cooling at its coastal power plants; and, ramping up investments in energy efficiency over the next two years to put the Department on the path to achieving at a minimum, the required 10% reduction in electricity use  by 2020.  These efforts, among others, will position LADWP to transition out of coal generation when current contracts for coal power expire, or sooner.

The rate increases will also provide needed investments in replacing or repairing aging power distribution infrastructure. “We need to aggressively invest in replacing aging poles, transformers, wires, cables, and cross-arms, as well as build new power distributing stations and repair old ones,” said Aram Benyamin, LADWP Senior Assistant General Manager – Power.  This increase will allow us to make a significant investment in reducing our current backlog of repairs to maintain the outstanding power reliability our customers expect and deserve. While additional investment will be needed in the future, this gives us a significant boost toward those efforts.”

Click here to learn more about how the rate increase will affect various types of customers, and here to see how LADWP’s rates compare to other utilities.

For more detailed information and to use the LADWP’s online rates calculator, please visit www.ladwp.com/rates.

Source: The Los Angeles Department of Water and Power
Logo credit to: The Los Angeles Department of Water and Power

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