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Come clean, DWP

Rate hikes for clean energy are one thing. But demanding approval of a rushed proposal is something else.

March 29, 2010

The most irritating thing about Mayor Antonio Villaraigosa's carbon surcharge proposal is not the increase in electricity rates it would impose on Los Angeles residents and businesses. Higher rates will no doubt hit ratepayers harder because of the struggling economy, but increases are coming one way or the other, and the mayor is right when he says it's better to raise rates now to invest in renewable power generation and similar clean-energy programs than to raise them a year or two later to cover the increasing costs of dirty coal and to pay the looming penalties for spewing pollutants and carbon into the atmosphere.

No, the most exasperating aspect of the mayor's plan is that, with a little more care in preparation and a lot more openness, it could have been easy to support. But it was thought through and presented so poorly that many who would back it with enthusiasm, including The Times' editorial page, have little choice but to call for its rejection. The City Council, which on Friday said no to the plan, should on Tuesday send it back to the Board of Water and Power Commissioners that hastily adopted it on March 18, and call for the board to instead adopt a more careful plan with the following elements:

* A far more modest rate hike of 0.8 cents per kilowatt hour (roughly 6%) for the fiscal quarter beginning April 1 -- Thursday -- in order to shore up the Department of Water and Power's finances to ready it for a sale of bonds for major capital projects later this spring. The higher rates should not, at this time, be used to begin funding the mayor's proposed renewable energy and efficiency trust fund. It's not entirely clear that an increase of even this size is needed to preserve the department's bond rating, but without it, it's likely that higher increases will be needed down the road. The board should not complain that it has only a few days before Thursday. It acted on 24 hours' notice earlier this month to push through the mayor's much more complicated plan.

* A commitment to complete and present, by May 30, an integrated resource plan that demonstrates where the DWP will get its energy -- both traditional and renewable -- in what mix over at least the coming decade (to be updated annually) and with what rate impacts. If the plan cannot be completed until September, as department officials suggest, they should likewise not expect additional rate hikes before the second quarter of the next fiscal year.

* A direction to the DWP to restructure its rates, separating the base rate (which can be increased only with the approval of the City Council, and which is meant to cover costs within the department's control, such as capital investments and labor) from both the energy cost adjustment factor (which can rise without council vote, and which is meant to cover short-term market-driven costs beyond the department's control, such as increasing costs of fossil fuels) and the amount that would go into the clean-energy trust fund. The DWP should be further instructed to demonstrate why rate increases dedicated to the fund ought to be considered costs beyond, rather than under, the department's control.

* An instruction to report on why the department wants to use new renewable energy to replace natural gas before coal, and how much it would cost to instead target coal first.

* Identification of a reliable funding source to pay for the city controller to conduct audits of the trust fund and of electric revenue expenditures.

The council, despite its indignation at the prospect of hikes, has been a party to the political gamesmanship and must not now allow the debate to become an endless loop, repeated every three or six months without resolution. The council should immediately schedule a session for mid-June, after it has had the opportunity to review the DWP's integrated resource plan, and -- assuming the plan is reasonable and assuming that the other parts of the program are in place -- approve a comprehensive rate plan that includes a renewable energy and efficiency trust fund, a strategic plan for weaning the city's power system off coal and other non-renewable fuels, and a strategy for assisting businesses and residents hard hit by rate increases.

Los Angeles could and should be further along in making the transition from cheap but hazardous coal to renewable solar and other clean-energy production. But the DWP and the mayor have been their own worst enemies, first disguising a rate hike as a plan to get the city out of coal (there is not yet any such plan), then arguing that without the hike the department would be crippled, then claiming that without it the city would be pushed toward bankruptcy.

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