Los Angeles Mayor Antonio Villaraigosa's appointees at the Department of Water and Power took the first step Thursday toward imposing electric rate increases of up to 28%, despite complaints from neighborhood activists and business groups.
On a 4-0 vote, the board agreed to increase the cost of electricity by 0.8 of a cent per kilowatt hour, the first of four increases planned over the next year to help the nation's largest municipal utility cover its financial commitments and continue Villaraigosa's plan for securing more renewable power.
DWP commission President Lee Kanon Alpert said he feared that inaction would be greeted unfavorably by leaders of Wall Street companies, who could respond to a 'no' vote by reducing the utility's bond rating.
Such a move would add $70 million to $80 million each year to the agency's borrowing costs, DWP officials said.
"What's very striking to me is the risk and potential of harm that will come to this department and our ratepayers if we do not approve this," he said.
The City Council must now decide whether it wants to conduct its own review of the proposal, which would otherwise take effect. Council members Eric Garcetti, Jan Perry and Dennis Zine said they want to do so.
Backers of the plan called it a major step away from coal power, which makes up 44% of the DWP's energy portfolio. Coal has been less expensive but is a huge polluter. Opponents said the increases would hurt businesses and families already hard hit by the recession.
"You will have businesses that will not be able to afford it, and you will have employees that will lose their jobs," Larry Rauch, president of Los Angeles Cold Storage, told the board.
The money generated by the increase would enable Villaraigosa to carry out a longtime political promise: securing 20% of the DWP's power from renewable sources, such as solar and wind energy, by Dec. 31.
The increased revenue also is needed to "maintain the financial integrity" of the DWP and pay for the rising cost of coal, according to a report on the plan submitted to the commission.
DWP Interim General Manager S. David Freeman said that leaving the status quo in place would make it harder for the utility to continue to help balance the city's budget. The DWP's contribution is expected to exceed $220 million this year.
Once all of the increases are in place next year, residential customers would see increases in their bills ranging from 8.8% to 28.4%, depending on where they live and how much power they consume, according to data provided by the mayor's office. Businesses are expected to receive increases of 21% to 22% over the same time period.
Environmental groups, including the Coalition for Clean Air and the Sierra Club, warned that the state would impose financial penalties on the DWP if it doesn't wean itself off coal. They also argued that a refusal to act would exacerbate global warming, leading to more drought and local wildfires.
"This investment in renewables is very, very important to the health of our Earth," said Kathy Seal, a Sierra Club volunteer who co-owns property in West L.A.
A representative of the Los Angeles Unified School District had a less charitable view, warning that the increases would force his district to pay an extra $8.7 million annually.
"This increase could not come at a worse time," said Randy Britt, the district's director of sustainability initiatives.