DWP Stuck at an Energy Crossroads

The Los Angeles Department of Water and Power has long provided the city with cheap, reliable electricity, even when other utilities faced scarcity. But the low energy bills have come attached to millions of tons of fossil fuel pollutants, which have swirled in waterways and hovered in skies all over the West.

Now the nation’s largest municipal utility is at a turning point. It is under orders to find environmentally friendly fuel sources -- sun, wind, water or even waste. And it must do so in a hurry: At least a fifth of the power it provides must be “green” by 2010.

So far the transition has been slow, and critics are skeptical that the agency has the will or know-how to make such a significant shift so quickly. The $3.9-billion department -- by far the city’s largest -- is widely seen as insular, if not arrogant, and has at times been hostile to pressure from outsiders.

“The resistance to change is palpable there. I encountered it,” said former DWP General Manager S. David Freeman, one of the nation’s foremost experts on running publicly owned utilities. “Engineers like to do tomorrow what they did yesterday.”

Rather than rising to defend past DWP action, its current management and board insist that the department has now begun to embrace renewable power sources.

“The rap on DWP is that they resisted and were slow and they’re not competent,” said Mary Nichols, a board member and director of UCLA’s Institute for the Environment. “I would say they’re coming up to speed fast.”

The issue is not as simple as an ethical choice to do the right thing for the environment. Tangled in the arguments are discussions about cost, keeping union jobs and ensuring that enough power gets to the lines when DWP’s 3.8 million customers need it, whether or not the sun is shining or the wind is blowing.

Things were simpler in 1905, when the city’s first electricity plant captured energy from the currents in an aqueduct built to import water from the Owens Valley.

As demand and population grew, the city turned to burning smog-producing fuel oil in local plants. In the 1970s, air quality regulators put a stop to that, helped by the rising price of fuel caused by the Arab oil embargo. Since then, the plants -- in Wilmington, Long Beach, Playa del Rey and Sun Valley -- have burned only natural gas.

When DWP needed additional power, it turned primarily to coal, which was mined in the United States, plentiful and cheap. In the ‘70s and ‘80s, the agency began building and buying into enormous plants -- all outside California -- that today are the mainstay of the city’s 7.3-million kilowatt capacity.

The Intermountain Power Plant in Delta, Utah, the Navajo Generating Station near Page, Ariz., and -- until it was recently shut because of pollution concerns -- the Mohave Generating Station in Laughlin, Nev., burned coal around the clock to produce billions of kilowatt-hours of power -- 48% of the city’s annual supply.

Added to that was more than a million kilowatt-hours of nuclear energy produced annually by the Palo Verde Generating Station near Phoenix.

“That energy is very reliable and very inexpensive to produce,” said Henry Martinez, head of the power side of DWP.

But the coal created an even worse source of pollution -- not for Los Angeles but for cities across the Southwest.

“It’s hard to find a utility that had as much coal as L.A.,” Bernadette Del Chairo, an advocate with Environment California. “When we did a study on them in 2004, they were the dirtiest west of the Mississippi.”

Over the last 30 years, the DWP has only dabbled in small renewable-energy projects. One, capturing methane gas produced by decomposing waste, has been on the drawing board since the 1970s. The rest consisted of putting up solar panels on government buildings and providing incentives to customers to put up their own.

Together, these technologies produce at most 45,000 kilowatt-hours of power at a time, a tiny fraction of the agency’s typical peak usage of 5.7 million.

DWP officials didn’t see a need to add much “green” power. They had plenty of energy, generated by lower-cost systems that their unionized technicians knew how to run with their eyes closed. Private power companies such as neighboring Southern California Edison were no more eager for change.

But by 2002, environmentalists had persuaded state legislators to require that California utilities get at least 20% of the power they sell from renewable sources by 2017.

Kept out of the definition of renewable energy were large hydroelectric plants -- such as Hoover Dam, which supplies DWP with some power -- because environmentalists say they harm fish and cause the buildup of silt.

DWP and other municipal utilities successfully lobbied to be exempt from the deadline. Since then, the agency has made new investments in fossil fuels: buying a natural-gas field, spending $1.7 million studying the expansion of a coal plant and spending more than $1 billion updating several natural-gas plants.

Eventually, environmentalists convinced then-Mayor James K. Hahn to order DWP to meet the same deadline as private power companies.

Even then, the agency made little progress and now has an even tougher mandate: After state agencies shortened the deadline for investor-owned utilities to 2010, Mayor Antonio Villaraigosa directed DWP to do the same.

Only last week, Gov. Arnold Schwarzenegger signed Senate Bill 107, placing the 20% standard into a law that empowers regulators to penalize investor-owned utilities that fail to comply by Dec. 31, 2010. If the still-exempt DWP falls short, however, the only consequence would be political: Villaraigosa appoints its five-member board with the consent of the City Council.

Today, the department estimates that about 5% of its power comes from legally defined renewable sources, the majority from electricity that for decades has been captured from the water delivery system.

In other words, DWP needs to come up with more than 3 billion kilowatt-hours a year in new green energy -- enough to power more than half a million homes. That could be particularly tough for an agency that has never built a large renewable-energy project.

There is only one such project in advanced stages of development. The Pine Tree wind farm -- a $162-million plan proposed in 2001 to erect 80 windmill turbines in Tehachapi -- is not expected to supply power until late 2007, two years behind schedule. It was delayed while the DWP dealt with Audubon Society concerns, environmental plans and other bureaucratic steps. The agency had not committed to buy the turbines it needed until this summer. In the meantime, costs skyrocketed.

“The only thing everybody knew is that there was competition for turbines,” said Brian D’Arcy, business director of the International Brotherhood of Electrical Workers, which represents more than 90% of DWP employees. “Either they’re not committed to it, or they’re stupid. You don’t even have to pick one. It’s probably some of each.”

Everyone agrees it’s unlikely DWP will be able to build enough other facilities in 3 1/2 years to reach the goal. Instead it will buy power from private companies that have or will build facilities. Buying power is never a utility’s favorite thing to do, and the head of DWP’s massive union is in a froth about it -- in part because the private plants won’t be run by DWP workers.

“If you’re going to do it, let’s do it. Let’s invest the ratepayers’ money in owner-operated facilities that are efficient and reliable,” D’Arcy said. That, he complained, is not what the city has in mind. “They’re going to buy power they don’t need in order to meet an artificial standard that doesn’t produce any reduction in greenhouse gases” over Los Angeles.

The stage is set for a nasty battle if the push for renewable energy, coupled with new environmental regulations, results in shutting local natural-gas plants that have not yet been upgraded. That would cost union jobs.

Still, whether the agency needs so much power -- green or not -- is open to debate.

With the projected annual growth in power consumption barely topping 1%, it could take 20 years for demand to catch up with the supply DWP would have if it meets the 2010 mandate. So far, the city hasn’t even needed to replace the energy it lost from the now-defunct Mohave coal plant.

On the other hand, there is a distinct possibility that DWP will lose some of the energy it buys from the Utah coal plant because other municipalities are expected to recall some of the excess power they had been selling DWP. Together, the known and feared losses add up to about 10% of the city’s capacity.

Then there’s the issue of this summer’s unexpected spike in demand, which left the agency’s general manager, Ron Deaton, wondering if the city is going to need more power in the coming years than planners have envisioned.

All of this could create an opening for renewable sources. Until now, the DWP’s biggest complaints about renewable power have been cost and reliability. But with improved technology and the rise of natural-gas prices, green power has become competitive.

“A lot of the economics have changed,” said Deaton, whose previous job was to watch the city’s purse strings as chief legislative counsel. “If it’s cost-effective, there’s no reason not to do it.”

The DWP agreed in June to buy 82.2 megawatts from PPM Energy’s Pleasant Valley Wind Energy Center in Wyoming for 6 cents a kilowatt-hour. It is waiting for City Council approval on another contract to buy hydroelectric power out of British Columbia for 8 cents a kilowatt-hour. Coal power costs DWP about 4 cents a kilowatt-hour. Natural gas costs about 7 to 8 cents but can vary wildly as supply and demand fluctuate.

In cases where “green” power is more expensive than “brown” sources, city residents will pay the difference through a surcharge passed this summer by the City Council.

Although the financial barriers are evaporating, managing the power still poses a challenge. Neither wind nor sun can be turned up or down as gas-powered plants can. The agency’s second in command, Martinez, says those differences make him nervous. Until now, the city’s electrical system has been “something we can command. We can do something and make something happen. Wind doesn’t give you that flexibility.”

The agency’s plans are to use wind-generated electricity to pump water from a lower reservoir to a higher one so it can be released during high demand to produce electricity -- in effect, storing the energy.

Perhaps the biggest sign of the agency’s internal struggle to incorporate renewable energy is found in the pages of the public draft of its long-term plan. DWP does not count a single watt of power from the planned 120-megawatt Pine Tree project as dependable capacity.

“The most advanced countries in the world have been using wind and solar and geothermal for a long time, and they don’t have any problems scheduling it,” said Rhonda Mills of the advocacy group Center for Energy Efficiency and Renewable Technologies. “It’s just faulty to say that these resources can’t be managed reliably and put the rest of their portfolio at risk. I fault them for not finding the expertise.”

evelyn.larrubia@latimes.com

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Power sources

DWP and other California utilities have a target of 20% renewable sources* by 2010 for the power they sell. Here’s a look at the state’s potential resources and the most recent power mix.

2006 DWP power mix (projected)

Los Angeles relies primarily on higher-polluting coal.

Coal: 48%

Natural gas: 30%

Nuclear: 10%

Renewable: 6%

Large hydroelectric: 6%

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2004 Calif. power mix

Utilities statewide rely mostly on natural gas.

Natural gas: 45%

Coal: 29%

Large hydroelectric: 20%

Renewable: 4%

Nuclear: 2%

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*Excludes large hydroelectric power plants.

Sources: U.S. Department of Energy’s Energy Information Administration, Los Angeles Department of Water and Power