LADWP Commissioners Approve 2007-08 Budget

NEWS RELEASE
June 5, 2007

LADWP Commissioners Approve 2007-08 Budget

LOS ANGELES — Following a month of intensive scrutiny and public workshops, the LADWP Board of Water and Power Commissioners approved the fiscal year 2007-08 budget, calling for significant investments in power reliability, renewable energy, energy conservation, water quality, and other strategic initiatives.

“This budget reflects the LADWP Board’s commitment to strengthening the City’s power system infrastructure and to reducing the level of greenhouse gases through renewable energy projects, energy efficiency, Port electrification and other measures,” Board President H. David Nahai said. “On the water side, the budget provides continued support for needed water system capital upgrades and water quality improvements, including $3 million and dedicated staff to address groundwater contamination in the San Fernando Valley. In addition, we have built in quality and cost controls to ensure we can provide reliable water and electrical services at the lowest possible costs to ratepayers.”

While LADWP’s power system reliability remains exceptionally strong when compared with other major California utilities as ranked by national benchmarks for the frequency and duration of outages, recent independent studies have recommended a major power reliability program to ensure the robustness of the system for the next 50 years. “The old infrastructure needs to be replaced and upgraded for our customers to continue to experience superior reliability,” LADWP General Manager Ronald F. Deaton said.

During a presentation to the Board, LADWP officials proposed a series of rate actions designed to address the long-term power reliability issues as well as fund ongoing water quality improvements required to meet federal and state regulations. The proposed rate changes will be considered by the Board in the Fall following a 120-day period of public review and comment and will also be subject to an independent review administered by the City’s Chief Administrative Office and Chief Legislative Analyst’s Office.

LADWP officials proposed funding a multi-year Power Reliability Program through a new power reliability surcharge as well as a base rate increase – the first base rate increase since 1992. The average residential customer using 500 kilowatt-hours (kWh) per month will see an increase in their bill of $1.75 per month effective Jan. 1, 2008 under the proposal and additional increases of approximately $1.75 per month effective July 1, 2008 and July 1, 2009. Altogether, power rates would increase 9 percent over 3 years.

“Even with these increases, LADWP electrical rates will remain extremely low—in some cases more than 50 percent less than the average monthly rates of the state’s investor-owned utilities including PG&E, SCE, and SDG&E,” Deaton said. For instance, after the first 3 percent increase in January 2008, LADWP customers using 500 kWh would pay 11.39 cents per kWh, while customers of the state’s three major IOUs average monthly bills of 14.12 cents per kWh. Customers using 2,000 kWh will be paying 11.54 cents per kWh, while the rates of the three major investor-owned utilities average 23.84 cents per kWh. LADWP also ranks second lowest when compared to five other municipally owned utilities (Glendale, Burbank, Sacramento and Anaheim), which average 13.39 cents per kWh.

The additional revenues will cover the cost of replacing, upgrading and repairing critical electric infrastructure that is now 40 to 70 years old. The program calls for spending $110 million in FY 07-08, and steadily increase that amount over subsequent years to accelerate the replacement of aging infrastructure, such as power poles, underground cables, distribution transformers, and high-voltage station transformers. The program also will increase investment in training, recruitment and staffing to fill vacancies to boost the number of electrical personnel to expedite new installations, repairs, and upgrades.

In addition, LADWP officials proposed a power rate restructuring plan designed to recover costs based on customers’ use of the electric system, and encourage energy conservation and alternative energy sources such as solar photovoltaic panels. The proposed rate structure establishes price signals, such as tiered, seasonal, and time-of-use pricing.

The restructuring plan also could encourage more use of residential solar photovoltaic panels. Customers currently receive credit when their solar panels generate excess electricity during peak periods, but they can only use those credits when they draw energy from the grid during those same periods. Under the new structure, their account would be credited for excess electricity generated regardless of when they use power.

LADWP’s water system budget provides for further investment in water quality improvements primarily to meet state and federal requirements that pertain to storing water in open-air reservoirs and other new mandates. The water system budget calls for steadily increasing spending over the next five years to enhance reliability and infrastructure, as well as make required water quality infrastructure investments.

To meet the associated water system revenue needs, LADWP officials proposed raising water rates by 3 percent per year beginning July 1, 2008 and July 1, 2009. Commercial, industrial and governmental customers also would see rate increases of about 3 percent each year depending on the size of their meter.

If approved, LADWP’s water rates will remain very competitive with other city water utilities in California. The average monthly bill will increase by 90 cents per month on July 1 2008 and an additional $1 on July 1, 2009. LADWP rates will remain lower than those paid by residents of San Diego, Oakland, Long Beach, San Francisco, and Glendale, officials said.

The presentation on proposed water and power rate actions begins a 120-day review period that will include extensive public outreach to Neighborhood Councils, community and homeowners groups, commercial, industrial and governmental customers and other ratepayers. LADWP management plans to submit the rate action proposals to the Board of Water and Power Commissioners in October. If approved, the proposals would require review and approval by the Council Committee on Energy and the Environment, then the full City Council, and is subject to veto by the Mayor.

Additional FY 07-08 budget highlights include the following:

Overall, the cash budget of $4.2 billion includes $3.2 billion for power and $1 billion for water. The budget allocates $1.56 billion for power system capital, operations and maintenance, and $675 million for water system capital projects, operations and maintenance. The water system budget also includes an estimated $180.3 million in purchased water.

The 2007-08 budget reflects LADWP’s goal to expand its supply of renewable energy along with other alternative power programs and energy efficiency measures designed to produce clean energy and reduce greenhouse gas emissions that contribute to global warming.

To support the renewable portfolio standard (RPS) goal of 20 percent renewables by 2010, the budget identifies $181 million for 2007-08, and increases to $599 million in 2009-10. The majority is for capital costs associated with building and upgrading transmission systems and development of solar, geothermal, wind and other renewable projects. The budget includes $30 million for LADWP’s solar rebate program—more than double the level funded 2006-07—reflecting a target goal of 280 megawatts of solar installations by 2017 to meet recent state legislation SB1, also known as the Million Solar Roofs Plan.

Along with renewable generation, the LADWP plans to spend $79 million—more than double the current year level—for energy efficiency programs. The measures are estimated to save 275 gigawatt-hours annually, which is greater than LADWP’s projected growth, and eliminate nearly 200,000 tons of CO2, which is the equivalent of removing 40,000 cars from the road.

The Los Angeles Department of Water and Power, the nation’s largest municipal utility, provides reliable, low-cost water and power services to Los Angeles residents and businesses in an environmentally responsible manner. LADWP services about 1.4 million electric customers and 680,000 water customers in Los Angeles. For more information, please visit www.ladwp.com.

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LADWP,

Joe Ramallo, 213-367-1394 (office)

213-792-8555 (cell)