Los Angeles is embroiled in a clash over energy costs, its long-term power portfolio, and management of the Department of Water and Power (DWP). LA recently levied drastic cuts to renewables, energy efficiency, demand-side management and other public-benefit programs. LA’s draconian cuts endanger the future of these invaluable programs, and put California’s largest city at odds with the state’s long-term clean power plan.
A recent rate-increase request sparked a heated debate among officials and the public on the viability of DWP’s energy investment strategy, with business interests and some vocal residents labeling spending on renewables and efficiency “discretionary,” and demanding that it be cut. The mayor’s goals for divesting from coal and increasing funding for renewables and DSM have been bound up in still-unresolved disputes about DWP procurement strategies and the need for higher rates.
The DWP Board of Commissioners originally sought a 2.7¢/KWh rate hike, but on April 15 they finally accepted an increase of .6¢/KWh that the City Council offered. One-sixth of the revenue from this increase will be deposited in the Renewable Energy Trust Fund, a new, discrete account for renewables procurement and energy efficiency programs, with funds directed to demand-side management first. The rate increase started July 1, and lasts three months. It should accrue an estimated $6 million during that time.
The rate modification lifted a cap on the Energy Cost Adjustment Factor (ECAF), a pass-through tariff established to cover the fluctuating costs of coal, gas and nuclear fuels. In recent years, renewables and efficiency have been added to the ECAF. These public-benefit programs, along with other DWP financial obligations (e.g., a transfer of $73.5 million to the city treasury, increased wage costs for utility employees, and settlement costs for a coal mine collapse in Utah two years ago) caused a months-long brawl between DWP, the City Council, and the mayor on the size of the rate adjustment and the need for certain expenses, notably renewables and DSM, that were part of the investment plan for the new funds.
DWP maintains it needs $550 million in new monies to cover this and next fiscal year’s costs, and projects it will also need a base rate increase by July 1, 2012. DWP must submit an integrated resources plan (IRP) by October 1 for other rate actions to have any possibility of winning City Council support.
DWP has largely relied on short-term renewables contracts to meet its goals of 20% renewables by 2010. It has under-procured large-scale renewables and DSM, particularly baseload renewables and utility-scale solar in the desert. The utility has not participated in any of the large Southern California projects now in the permitting process. The Clean Power Campaign needs to increase its outreach and advocacy efforts to turn around DWP’s lack of a coherent strategy or involvement in the state’s most promising resources and projects.
We need to help establish an annual Integrated Resource Planning process. The city must establish an enforceable oversight and public-intervention process to govern annual DWP planning and reporting. CPC and its allies are working on this process to ensure the IRP is strong, covers 2010 – 2020, and includes appropriate public participation measures. Elements should include annual planning; short-, mid-, and long-term clean-energy and pollution-reduction goals; criteria to measure progress; quarterly updates; and a course-correction process if plans veer off track.
The city needs to divest from coal, increase the RPS, and reduce power-plant CO2 levels. The public and decision-makers agree that LA is financially exposed due to its reliance on coal. The Mayor has called for DPW to divest from coal by 2020, meet a 35% RPS by 2017, and reduce GHG emissions 40% by 2020. Observers doubt DPW’s ability to achieve these goals, based on its current fossil, renewable and efficiency procurements and the absence of a coherent plan. Policies mandating these goals must be put in place and become an integral part of the utility’s short- and long-term investment strategies.
Achieving these goals will require broadening stakeholder coalitions, improving our messaging, expanding our outreach to decision-makers and the media, and bringing in expert analyses and testimony when needed. We must continue to educate officials, stakeholders, the business community and the media on the need for a sustainable energy investment plan that weans LA off coal and creates new thinking about the types and scale of renewables and DSM that the city must move toward. We need to increase public understanding that conservation and renewables can mitigate the impact of rate increases on DWP customers and create both private- and public-sector jobs.