By Christina VillacorteCity News Service
The Los Angeles City Council voted unanimously Tuesday to assert jurisdiction over a proposed rate hike approved by the Department of Water and Power board and slated to kick in April 1.
The move gives the council authority to review the plan and either affirm it or reject it and send it back to the DWP with recommendations.
"I think the residents of Los Angeles, the ratepayers and businesses, as well as our environmental community, deserve a more transparent process,'' City Council President Eric Garcetti said. "We need to take incremental steps instead of -- in the midst of a recession -- putting a gun to people's heads and saying `pass this increase.'''
The council's action came amid a warning from Mayor Antonio Villaraigosa's office, which contends that rejection of the proposed increase "would be the most immediate and direct route the bankruptcy the city could pursue.''
In a briefing paper distributed to council members on Monday night, the mayor's office asserted the DWP needed the rate hike or it would not be able to transfer $73 million into the city's depleted general fund.
The city -- which has a projected deficit of $685 million over the next 14 months -- had been promised that share of the DWP's surplus revenue months ago, and had already programmed it into the budget to pay for various expenses.
"If the city does not receive the additional $73 million transfer, it will run out of cash before the end of the fiscal year,'' the briefing paper reads. "Failure to meet basic obligations would send the city into a financial tailspin, leading to further downgrades and an inability to borrow to meet future financial obligations.''
Councilwoman Jan Perry said: "I think the DWP has put themselves in this situation in terms of the timing and putting themselves up against the wall.
"But I think we still have a responsibility to vet this on the public record, to be fully transparent, not reactionary, allow the ratepayers a chance to have input and to understand the full implications of this proposal,'' she said. "Anything short of that would be dereliction of our responsibilities as elected officials.''
Councilman Dennis Zine described the warning as an attempt "to hold us hostage.''
"This is a scare tactic, and I hope the people of Los Angeles don't fall for it,'' he said.
City Administrative Officer Miguel Santana addressed the council after personally speaking with the mayor, saying, "Let me be clear: the city of Los Angeles is not going bankrupt.''
"If we were not to receive that ($73 million) transfer, we would have to move quickly to figure out what services we would need to focus on, sit down with the controller and determine when would the city literally run out of cash,'' Santana said.
"That does not equal bankruptcy,'' he said. "Bankruptcy is an action that you do when you have no other options. The city will continue to have options -- very difficult options -- before us.''
At present, the DWP tacks on an Energy Cost Adjustment Factor surcharge of 5.09 cents per kilowatt-hour to customers' bills every month.
The utility has proposed increasing that surcharge by 2.7 cents per kWh over a year, starting April 1, to generate $648 million in annual revenue.
About 75 percent of that money would be used to address DWP's failure in previous years to collect a large enough ECAF to offset fluctuations in the price of oil and natural gas and pay for existing renewable energy sources.
The other 25 percent -- called the carbon reduction surcharge -- would be used to pay for programs aimed at encouraging energy efficiency and developing new renewable energy sources.
Former Vice President Al Gore called it "one of the most forward- thinking clean energy plans I have ever seen.''
In a statement released today, Gore urged the council to support the proposed rate hike, saying it would "provide a dedicated revenue stream for investing in renewable energy production'' while "enabling the city of Los Angeles to invest locally on its own green economy and stimulating job growth.''
Under the plan, the 2.7 cents per kWh increase in the ECAF would be implemented incrementally, DWP spokesman Joe Ramallo said.
DWP customers' bills would go up 0.8 cents per kWH in April, July and October, and by .3 cents per kWh in January -- until the ECAF reaches 7.79 cents per kWh.
Once all the increases have kicked in, Tier 1 customers -- who make up 55-60 percent of all the DWP's customers -- would be charged an extra $2.40- $3.40 a month, according to the briefing paper. That represents an increase of 8 percent.
Tier 2 customers would see their monthly bills go up $11-$16. Tier 3 customers -- who make up less than 7 percent of the highest-end ratepayers -- could expect an increase of up to 28 percent in their bills, equivalent to $52- $65, according to the briefing paper.
The mayor's press deputy, Sarah Hamilton, said businesses would face a significant hike of 21-26 percent in their monthly bills unless they take steps to become more energy-efficient.
The plan drew protests from Carol Schatz, president and chief executive officerof the Central City Association and the Downtown Center Business Improvement District.
"The increase is huge,'' she said. "On a large high-rise in downtown, we're talking about $1 million more a year in power rates, and that can't be borne entirely by the landlord. It's going to be passed onto the tenants. The tenants can't necessarily pass it along to their customers.
"It is huge and they have no way to budget for it,'' Schatz said. "It was sprung on them with less than 30 days notice.''
Kent Smith, executive director of the L.A. Fashion District business improvement district, urged the DWP to consider tightening its belt before moving swiftly to hike rates.
"The challenge is (that) with this economy -- which is an enormously difficult economy -- the only place you can cut is your workforce,'' Smith said. "We're responsible for 64,000 jobs, and we do not want to see any one of those jobs disappear.''
Villaraigosa has set a goal of having renewable energy make up 20 percent of the DWP portfolio by the end of this year, and 40 percent by 2020. He also wants the city to be coal-free by 2020.