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True DWP hikes a shock

Lost in the current rate debate is the added cost of surcharges already approved.

April 09, 2008|David Zahniser | Times Staff Writer

When the Los Angeles City Council gave preliminary approval to electrical and water rate hikes last week, the debate focused almost exclusively on a series of modest, single-digit increases planned between now and summer 2009.

In reality, electricity bills will go up at least 23% over a four-year period, thanks to the Department of Water and Power's decision to ask ratepayers to absorb the higher cost of natural gas and the switch to other environmentally friendly forms of energy.

Mayor Antonio Villaraigosa's appointees on the DWP board have been quietly adding a 1% surcharge on electrical bills every three months since September 2006, decisions that do not need council approval.

By summer 2010, 15 of those surcharges will have been imposed to pay for the rising cost of natural gas and for renewable fuel sources including wind, DWP officials said.

The increases are on top of the council's three planned electrical rate hikes, which come up for a final vote today and will total nearly 9% when all are in effect.

Soledad Garcia, who heads a group of neighborhood council members that opposes the rate hikes, said Tuesday that the DWP broached the subject of the surcharges months ago. But she said the utility has avoided showing the long-term effect on customers.

"Has it been straightforward? No," Garcia said. "When they talk about the rate increases, [the surcharge] is never included."

Utility officials say they regularly discussed the surcharges during information sessions with homeowner groups and neighborhood councils. And DWP General Manager H. David Nahai said the council gave his utility the authority to pass the rising cost of power on to customers in 2006, as part of an effort to help the utility deal with fluctuating natural gas prices.

The increases were limited to no more than 4% a year. Because that decision was made two years ago, no one thought to reopen it during the current rate hike debate, he said.

"It's been going on for a year and a half now, and there has been no complaint about it because it's capped," he said.

The average monthly household electricity bill was $52.79 in fall 2006, according to DWP spokesman Joe Ramallo. By summer 2010, the various rate hikes and surcharges will bring the bill to $65.04, he said.

Still, DWP officials argue that even after all the increases and surcharges have been imposed, power rates will remain lower than those of other utilities, from investor-owned Southern California Edison to municipal systems in Pasadena and San Francisco. The DWP is the nation's largest publicly owned utility.

Meanwhile, a similar scenario is playing out in the DWP's water operations. Although the council gave tentative approval to two 3.1% water rate hikes last week, the DWP also must impose a separate 4.3% increase on water -- the result of a rate hike imposed by the Metropolitan Water District, a bulk supplier to the DWP.

Once all hikes are in effect, the total increase absorbed by water consumers will exceed 10%, DWP officials said.

Utility officials refer to the city's electrical surcharge as an "Energy Cost Adjustment Factor" -- a calculation that deals with the surge in natural gas prices in recent years. The surcharges also will be used to pay for the cost of renewable energy, such as the construction of a $425-million wind-powered generating facility.

That facility is part of the "green" agenda embraced by Villaraigosa, who is pushing for the DWP to obtain 20% of its power from renewable sources by 2010. By turning to such sources as wind, solar and geothermal energy, the DWP hopes to reduce its reliance on dirtier coal-burning generators outside Southern California.

The 1% increases also will help pay for the city's energy-saving programs, including the distribution of compact fluorescent light bulbs and new refrigerators that use less power.

By November, the DWP had given away 16,307 energy-efficient refrigerators to low-income households. Ramallo said low-income households would save more than $13 a month if they took advantage of both programs.

Some of the confusion over the effect of increases on DWP customers has been caused by Villaraigosa in recent weeks. In a March 4 letter to the council, the mayor urged members to impose three electrical rate hikes and two water rate increases, saying the money would safeguard water quality and repair aging infrastructure.

"These modest increases will add about $1.60 per month to the electric bill and $0.92 to the water bill for the average residential customer," the mayor wrote.

In fact, the average customer will pay an extra $7.25 per month by summer 2009, not counting the various surcharges or the MWD rate increase. Villaraigosa spokeswoman Janelle Erickson defended the letter, saying the mayor only meant to refer to the first set of increases.

"We made clear what the full cost of the rates would be during the full City Council debate," she said.


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