Mr. Beutner will present the Strategic Plan to the Board of Water and Power Commissioners at 12:30 p.m. Tuesday, followed by a presentation to the city’s business community and environmental leaders the same afternoon.  Mr. Beutner and LADWP officials also are planning presentations to the City Council Energy & Environment Committee, the full City Council, neighborhood councils and other stakeholders throughout the week.

“This Strategic Plan offers a very clear picture of what needs to happen for the Department to keep the lights on and water flowing for Los Angeles, to meet regulations and environmental commitments, to revamp outdated financing strategies and to find new internal funding sources so that ratepayers are not asked to pay for big increases, especially during this difficult economy,” Mr. Beutner said.

LADWP is at a critical juncture in its 100-year plus history. Among the many challenges are to replace or upgrade aging water and power infrastructure to maintain reliability; comply with stringent and costly water quality requirements such as covering open-air reservoirs; and meet legislation and policy goals to reduce greenhouse gas emissions and increase renewable energy resources. At the same time, LADWP’s internal and customer-focused information systems and other business processes are in dire need of modernization.

To meet these challenges, the plan lays out LADWP’s goals for power, water and customer resources, sets forth a detailed engineering and financial plan to achieve these goals and identifies financial resources other than rate increases to pay for them.  To improve transparency and accountability, the plan offers a framework for simplified rate structures that will be implemented by year end. The plan also calls for establishing a ratepayer advocate position. As the process unfolds, the Department will engage city leaders, ratepayers and other constituents in dialogue regarding the elements of the plan.

Strategic Plan Highlights

Power System
Goals: LADWP’s Power System long-term goals are to:

• Invest in infrastructure reliability on a consistent basis;
• Maintain regulatory compliance;
• Reduce carbon emissions by 50%;
• Invest in renewable energy on a consistent and sustainable basis; and
• Maintain lower rates for customers than other utilities in the Los Angeles area.

Financing Strategies: The Power Plan outlines new financing strategies to begin work on power resource goals and necessary capital investments without increasing base rates during fiscal year 2010/11. Strategies to generate up to $1 billion involve better utilizing such assets as real estate, natural gas reserves, excess working capital, and the Navajo Generating Station, a coal-fired power plant in Arizona.

Regulatory Compliance: The Power System must reduce emissions of in-basin natural gas plants to meet air quality requirements (costing $1.1 billion over the next 10 years); and eliminate ocean-water cooling of its coastal power plants (costing $2.2 billion over next 10 years). It must also undertake a much larger effort to reduce greenhouse gas emissions.

Energy Resources: To meet long-term energy resource goals, LADWP must invest in strategies to reduce dependence on carbon-based generation. The strategies will involve consistent, sustained investments in renewable energy procurement and selling Navajo Generating Station and studying options to reduce emissions from Intermountain Power Project in Utah.  Under the current SB 1368 provisions of the state’s greenhouse gas emissions limits, LADWP will not be allowed to renew its contracts with these plants when they expire in 2019 and 2027, respectively.

Continuing its commitment to environmental responsibility, the Department will continue its role as a leader in this area.  LADWP will increase its spending of efficiency programs and renewable energy from the prior year.  The Department will also continue its in-basin solar program and develop and implement a feed-in tariff program, while also evaluating the potential of large-scale solar development in the Owens Valley.

Rates: Power rates will be reduced by 1 percent from announced levels for the year.  The forecast for next year is an increase of approximately 5 percent, far below other utilities.

Water System
Goals: LADWP’s Water System goals are to:

• Replace and upgrade infrastructure;
• Maintain regulatory compliance;
• Increase supply of local water; and
• Maintain rates below comparable utilities.

Infrastructure/Reliability: The Water Plan will ensure reliability, as mains and trunk lines, pumping stations, treatment plants and other infrastructure near the end of their lifecycles. LADWP proposes to spend $250 million in 2010/11 and these projects will also utilize capital investments of approximately $256 million in 2010/11 and $3.15 billion in the next 10 years.

Regulatory Compliance: The Water Plan projects that major capital investments of up to $2.6 billion will be needed to achieve regulatory compliance in over the next 10 years. The primary costs are to meet federal and state water quality requirements for covering the city’s remaining open reservoirs, and rebuilding or expanding trunk lines to bypass those reservoirs, and converting the citywide disinfectant from chlorine to chloramines.

Water Supply: Pressures on the city’s water supply are expected to continue with limited pumping allowed in the Sacramento Delta region, and traditional levels of water supply from the Eastern Sierra reallocated for environmental uses in the Owens Valley. LADWP must continue investing in water conservation and alternative, locally sustainable water supplies.

Water Supply Strategies         2010/11                       Next 10 Years

Increase recycled water:        $54 million                   $620 million

Increase conservation:           $29 million                   $320 million

Groundwater cleanup:            $14 million                   $940 million

Stormwater capture:               $6 million                     $110 million

Groundwater storage:             $1 million                     $2 million

Rates: Water rates will be reduced by 1 percent from announced levels for the year. The forecast for next year is an increase of 7.3 percent, far below those already announced by other utilities.

Customers

The strategic plan also includes an overhaul of the LADWP’s rate structures for both water and power.  Currently, a dozen billing factors are used to determine a single customer’s water and power bill.  Under the plan set forth in the strategic plan, Power Rates will include two components, a base rate and a fuel pass-through charge, while water rates will be comprised of a base rate and a purchased water pass-through charge.  This effort will make bills simpler to understand and the LADWP’s costs and corresponding charges more transparent. A much greater portion of the rates will be with the base rate, so the Board and Council can closely monitor planned spending.

Support Systems: The Strategic Plan includes goals for improving customer support to increase operational efficiencies. These goals will also serve to help customers reduce their bills by better managing how much water and power they are using.

Going forward, LADWP plans to invest close to $30 million in 2010/11 and $120 million in the next 10 years on customer information and billing solutions; tailoring programs, products and services to meet individual customer needs; and integrating smart meters and smart grid technology with customer services operations so that customers can know in real time how much energy or water they are using.

Ratepayer Advocate: LADWP plans to create and fund two full-time positions in the City of Los Angeles to become the Ratepayer Advocate. LADWP has also committed to provide timely and accurate information to the Ratepayer Advocate to help better inform customers and other constituencies.

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