Yes on solar, no on this solar program

Posted February 16, 2009

Jack Humphreville: I'll start off very quickly. I sort of call this "greenwashing." I picked it up from a term that was used in your Real Estate section several weeks ago when they talked about people selling homes that they said would be environmentally correct and they would go out there and sell them a bag, a bill of goods. To a certain extent I think this is what we're getting here.

We all agree that solar power is good for L.A. The issue that we have is Measure B. And very quickly there is a very good alternative to Measure B, and that's just a City Council ordinance, like they should have done in the beginning: Hearings, get some [Los Angeles Department of Water and Power] input, public input and just pass an ordinance.

We have four issues. One's the charter; two is what I call clean government; three is the impact on ratepayers; and fourth is jobs.

On the charter, this was not discussed or analyzed at . . . the City Council level or at any subsequent times that I know of. It basically eliminates competitive bidding, it eliminates third-party contractors, it allows the DWP to be micro-managed by the City Council, and who the hell else knows with some of the changes in there. It's very obtuse….

In terms of the clean government, you guys have already written a few articles and editorials. My biggest thing is that that City Council and the mayor have turned DWP into a political football. It's never been a political football as such before.

There are a couple new things that sort of come to light for me. One is the [Industrial, Economic and Administrative] Survey. The IEA Survey is required by the charter every five years to analyze basically the operations, finances, management of DWP. It was due in October of 2007; it's 15 months late already. It is done; they mentioned it the other day at the DWP Board committee. It hasn't been released; it's been around for a while. [City Controller] Laura Chick told us it was probably going to be done in December, so I imagine it's been sort of floating around the City Hall, City Council, the mayor's office and the controller's office for quite some time.

Another issue that we have is DWP neutrality. DWP, not being elected officials, aren't supposed to take positions on these types of issues. Yet when we've been out, they have various of their people, non-utility types, people who worked for the City Council before, going out there and talking to neighborhood councils. They talk about their union brothers. They talk about what a great deal this is. They do not address charter change, nor do they address the political logrolling. So I have real questions whether DWP is being neutral.

We have the issue of campaign contributions. [Times reporter David Zahniser] hit on it a couple weeks ago, or whenever it was, but basically 80% of the money, 81% of the money is coming from either the [International Brotherhood of Electrical Workers] or political people like [Assemblyman Felipe Fuentes], [Assemblyman John Perez], and I forget who the third is -- the state [controller], John Chiang.

One of the other things that we have going on here is what one person who does not want to be named calls "gangster politics." Basically, as opposed to pay-to-play, it's fear of retribution. People will not come out against Measure B because they are concerned that they might not get some other goodies or that there's going to be political repercussions. So you have that issue.

In terms of the cost, solar energy is going to be expensive no matter how you cut it. It's simple as that. Now, the DWP has made a number of assumptions; I think the major one of which is they're going to get all sorts of tax credits and tax subsidies. I don't know whether those are permissible under the tax code at this point in time. They've also made some other huge assumptions, which get them into the range of 17 to 30 cents as opposed to 70 cents. So that is in addition to the tax subsidies and benefits for accelerated depreciation. They're talking about technological breakthroughs, economies of scale, volume discounts, optimal sighting, none of which has been really vetted or talked through.

The real issue is going to be in terms of comparing Measure B with, let's say, a city ordinance is what is going to be the incremental cost associated with Measure B. From my perspective, I think you have two or three areas that are important. One is going to rely on DWP work crews, solely on DWP work crews; no outsourcing. And DWP work crews are notoriously, especially construction work crews as opposed to the normal maintenance and service people, have not demonstrated a record of being cost efficient or timely. We had an issue out in the Valley about a year and a half ago where the trunk lines that we being done by the DWP workers were twice as expensive and took twice as long as private contractors.

DWP also has a record of having very high costs relative to other regional utilities, other private-party contractors, union labor and city workers. People talk about a 25% wage differential; there's also a differential because of the work rules. Work rules may add another 25% to it, so when you put down to two labor rates, the labor rates may be 50% higher.

Again, I want to stress that we don't have detailed numbers, we have no benchmarking numbers, we have nothing from DWP to back this up. I must admit we've asked a number of times, and quite frankly this is one of the reasons we want a ratepayer's advocate, somebody that's on our side that can go through the numbers, go through the management and give everybody a better understanding of what's going on.

We also have the issue of what is this going to cost. We're all over the lot. PA Consulting indicated that the ECAF, the pass-through if you will, was going to triple: go up two and a half to three times. The ECAF is already $150 million, so if it goes up three times, that's going to be $450 million, another $300 million on our rates. DWP on the other hand says average rates will go up 2.7 to 4%. Well, that's what they said back when we had the rate increase of 3%; we thought the rate increase was 25%, 24 to 25%.

One of the other issues that you're going to have here in terms of cost is going to be DWP's ability to manage this process. We have probably on a gross cost before any tax subsidies a $3 to $4 billion operation. That's a lot of construction; that's a lot of stuff moving around, whether it's materials or managing the laborers. If this thing isn't managed right we could have some drastic cost overruns. They don't have a trained workforce. They're already short handed to go out and find good, skilled laborers; it's very tough. At the same time, this bill, this measure if you will, will exclude all the skilled trades – no carpenters, no laborers, no pipe fitters, no operating engineers, no roofers, no insulators, no installers – they're no eligible to do this. At the same time, they're certified, they're skilled, and they have experience.

The last issue is jobs. This is claimed to be a great job generator. My question is very simple: Will more jobs be created in an open system, let's say under a city ordinance, versus a closed system with DWP and the IBEW controlling all the jobs? I would say to you that I think an open system is probably not only fairer, but certainly much more effective…. That's my comments.

Robert Greene, Los Angeles Times: Jack, you've mentioned, and several of the other folks against this measure have mentioned, there's a concern with locking out private enterprise. But the Department of Water and Power – we have municipal power in this city; it's a municipal utility, the Department of Water and Power for anything that it operates uses DWP employees. This would basically be the same thing, would it not? Rather than going off in a new direction and locking out private enterprise, we're actually going on the same direction that municipal power's been in for decades.

Humphreville: I would disagree. DWP owns the power. DWP owns transmission lines that come in from Novato or Utah, where the coal plants are. They own the local distribution; they also own pieces of these coal plants. What they haven't done, though, is actually built the coal plants. They haven't built the generators. So actually building and installing is very different than actually constructing them. So they haven't been in the construction side of the business.

The guys at DWP do a great job. You have a fire up in Porter Ranch, and we're online a lot quicker than the guys are from [Southern California Edison]. We're in there three days, they're in at seven. But those are the service and maintenance guys; those aren't the construction guys. That's a very different breed of cat. They're electrical workers; they're not carpenters, they're not plumbers, they're not laborers, they're not pipe fitters. It's not the building trade.

There are 100,000 people in the building trades here in Southern California, and they're cut out. And I can tell you, quite frankly, that they're not overjoyed. As a matter of fact, the carpenters and plumbers signed a letter along with the Los Angeles Chamber of Commerce objecting to Measure B around the middle of October, end of October.

Greene: And the installation of the electrical panels as is contemplated in Measure B calls at least as much for construction work as for electrician work?

Ron Kaye: It's mostly construction work. You have to make sure the roof is not going to cave in; these are extremely dense and heavy objects. So there has to be an engineering study; the roof, it might have to be reinforced. The actual connecting – in fact, I was in a meeting with the DWP, they described it to me – really, it's a fairly simple wiring process, and you need a good electrician to wire it into your power line. But that's all there is; I mean, it's not very sophisticated. Companies are doing it in houses, companies are doing it everywhere – private companies, and arguably at a lower cost. But whether that's true or not, there's nothing inherently DWP-ish about this.

Jim Newton, L.A. Times: Let me ask this, and we have not talked about this as a board so I'm speaking just for myself here. I guess I would be prepared to accept that the process that led up to this was opaque and at times deceptive.

Kaye: That's universally accepted even by DWP.

(laughs)

Newton: And I'd be prepared to accept that this was driven at least in large measure by a union agenda. But if I thought that benefits of it were such that substantively it was a good idea that would generate 400 megawatts of power and it would be a positive in an economic sense as well, I guess I would be prepared to support it despite its history. So I wonder if we can kind of move to the substance of it at least for a bit here and talk about whether it would do what its proponents say.

Kaye: Can I address that in part? My dog Bruno blogged today off of three articles in The Times. One was the city's efforts at Palmdale airport, to turn it into an airport. Another was the trucks at the port, and how it's falling down. And then the MTA tax, that the first transit improvement is to raise fares and cut services. Those are three fundamental failures. If you look at the process, which isn't just a technical process, it's a defeating of the democratic process that could have brought everybody in, which is why I say there was a better way to do it: Have real planning, send it out to the neighborhoods, let people talk about it, bring it to the DWP, papers write about it, everybody analyzes it, and we're all aboard.

We all know that the energy generated by the 400 megawatts will only light the billboards and all the development going in. It's not replacing – they claim it's for clean air – but it's not replacing any fossil fuel plants; it's only meeting needs that we expect over five years.

But then you go back to the DWP. For 10 years, they've had a solar energy plan. David Freeman, who is their principle spokesman in many ways, started it under [former L.A. Mayor Richard Riordan]. And they promised 100 megawatts by 2010; they're at 12 or 13. And he also cut contracts with discounts with LAUSD and other large users to give them 5% discounts for not going to SCE or installing solar energy. In 2003, it was the DWP-IBEW that [City Council President Eric Garcetti] says blocked his solar energy initiative from taking effect. At every juncture, they have resisted this for the demand of ownership of every element of this and all the jobs. But on the track record of their achievement, they aren't qualified, or of City Hall's achievement.

And I think this is really the big issue: Is City Hall, under the control of the City Council, which is what the charter reform allows them to change this in any way they want at any time, really the ones to be organizing, leading and guiding this after an election based on no information, no public discussion, no analysis? You're writing a blank check to people who have failed you in so many ways, and that's what I think is the core issue for me.

Soledad Garcia: When you asked what would happen and why you would certainly support solar in spite of all of the lack of processing and the lack of community participation and the amending of the charter and changing the charter and changing the voting from two-thirds to one-half, to just a simple majority for the voters so that they will ensure that it will pass – everyone is in favor of solar. And I have spoken to Jim Stewart from the Sierra Club, and he's all for it no matter at what cost, basically saying what you're saying.

However, what I heard from them was that if they felt that if this didn't go through, then that would be the end of solar because they had been told that if the voters said no to this, that would mean that we didn't want any solar. And that's not true. If this doesn't go through, it will still continue because there is a larger program. Part of it has already been in existence, and then the larger program is the comprehensive solar program, and you know of that, of course….

If this doesn't pass, it will still be there. We will have solar because it's already in the paperwork. No matter what happens, it will continue. They don't have to have this measure; it can happen by simply going through DWP this time. It can happen and I'm sure that it will.

Greene: On that point, if that's the case – if the City Council could just adopt this today, and it's my understanding that you believe that they can – what's the harm in having the people vote on this? What's the big deal?

Kaye: They would need to go back and give a study, provide financial analysis, make it public in a discussion.

Leonard Shaffer: Forget the process. Forget what's passed. Look at what it does in the future. One, it changed the relationship between the commission and the City Council.

Greene: On this one issue.

Shaffer: On this one issue, on this one issue – yes. The City Council now has the right to tell the DWP how they're going to run. That's number one. Number two, it changes the relationship – I don't know if you're familiar with Section 245 of the charter. 245 says that if the commission makes a decision and the City Council isn't happy with it, it has to go to a vote of the City Council, one, to accept it … and then you have to have your vote in public. Three, you've got to have a supermajority vote to overturn the commission.

Here, that goes away; 245 doesn't apply, because when the plan is being developed, it automatically comes to the City Council, period. The City Council can accept it, they can reject it, or they could sit back and just let it take effect. This is a ping pong that can go back and forth for a long time.

Newton: Although that's sort of the case under 245 too.

Shaffer: No.

Newton: Really, the commission acts, the council can elect to take it up or not to take it up. So in the end the council still has the authority to make that decision.

Shaffer: No. It automatically goes to the council; it must go to the council. It's not a question of does the council vote to pick it up; it must go there – that's number one. Then let's ask ourselves one of the things that I call backward about this. The plan is developed to buy the commission. It's approved by the City Council. Then according to the ordinance, 90 days after that approval, that's when the DWP is to come in and tell everybody, one, how much it's going to cost, where you're going to get the money, what resources you can use, and if you need a rate increase. So the plan is essentially passed without any regard to that. We have no idea what it's going to cost; DWP comes in and has 90 days to make that determination.

Now what happens if somebody doesn't like what's going on with this particular program while it's happening? Under the charter, any referendary ordinance must go back to the people to be amended, done away with, changed or anything. The charter change here says the method of amendment is governed by the ordinance itself. And one of the things the ordinance says that if the City Council by a two-thirds vote -- 10 votes -- wants to amend it, they can do so.

Unidentifiable: They reduced that to eight too.

Shaffer: They can extend it, they can do away with it, they can change ownership of it, they can do all kinds of things because amend means you can do anything you bloody well please. Now the Yes on B were saying, "Well, we just want to tweak it; why bother to take it back to the public just to tweak it?" That's not the case; they can change it.

So one of the major problems with this, as you change the relationship here and what the council can do, is you watch yourself – and I consider it pig in a poke – you don't know what's going to happen tomorrow. You don't know if they're going to build 400 megawatts, because they don't have to. If sometime along here it appears that they aren't going to make it, the City Council has the right by two-thirds vote to turn around and say, "OK, quit guys, you've done your best. No more." That may be at the end of 100 megawatts; we don't know.

Another question: They own the generating facilities, that is, the photovoltaic plates, et cetera. They don't own the rooftops, and this is a voluntary provision. Now, one thing they've done is they've changed the length of time that they can contract for some of these things from 30 years to 50 years. That's part of the ordinance, and it's because of a charter change. Does that mean they expect to keep them for 50 years? What happens if a building owner determines they no longer want it there? Who takes it down? And as was pointed out, this is the only time I've ever seen where the DWP gets to build the generating plant, and that's one of the differences.

Here's another thing: How long will that take? Under the ordinance, they're to develop a plan in conjunction with their employees' representative – and it says that here; it doesn't say the union, it doesn't say IBEW, it says the employees' representative, which is obviously the IBEW – and they're supposed to train people. How long does it take to train someone to build one of these solar installations? How long is it going to take them to get up and running? Is it going to be a year? Is it going to be two years? We don't know. If it's two years, how do they get to Phase 5 in time? They'll never get there that fast. If they want to, they could contract out, but it doesn't appear that they're going to.

According to [DWP Senior Assistant General Manager for Power Aram Benyamin], they could bring people in from other locations, bring them on as employees, have them work, and when everything's done, get rid of them because they have no protection. What does that do for the growth of business here in Los Angeles and L.A. County? It doesn't do anything. It doesn't stimulate those companies that already know how to do this, and that's the major problem. Forget about what went before, forget about the process that brought us here, and take a look at what could happen that we have no idea what could happen.

If instead of this thing with all its charter changes, with all its implications, went as an ordinance where we had public input, where the people from the solar industry could come before the requisite committees and talk to them and say, "Here's what it's going to cost you. This is what can be done. This is what we're expecting tomorrow. Maybe this isn't the best time to do this. Maybe it shouldn't be done for a year until we've developed such and such. These would be out charges." Then the City Council and everybody else has an opportunity to look at what it's going to be, what it's going to cost, how much we should build, how much per year, what the ultimate goal is. Maybe we'll decide the ultimate goal isn't 400 megawatts. Eighty-some percent of the U.S. output is in photovoltaic. Maybe we'll decide that it's only 100 megawatts. That's the problem, that's the things that we don't know, which will occur after [Measure B] is passed.

Greene: But don't the two sides of your argument negate each other? On the one hand you say the City Council still has the flexibility to go in here and change it; this is just basically a grant of authority to the City Council. It's a charter change; it changes the relationship with the DWP. But that gives the City Council the authority to go in and say, "Yeah, you're right – 400 megawatts isn't right. Maybe 80."

Shaffer: But there's nothing that says that this is going to be that kind of process, OK? Based upon what's happened already, what is the process going to look like in the future, OK? How do we turn around and say, "I'm going to trust you with that power. We're going to pass it, and them I'm going to trust you with the power to change it based on the way you already did it."

You also asked, Is this a good thing? Solar's a great thing. But if we had a different process, if we had a different way to go, is photovoltaic the best way? Is thermal better? Solar thermal, generating power through the sun, heating various substances and such – is that a better way to go? Maybe; it's cheaper. Wouldn't that give us the same kind of thing? It's the unknowns that are going to occur after [Measure B] passes that frightens me and that I think should frighten everybody, because we're not going to have any control.

Jon Healey, L.A. Times: If we went, as you suggest, just with an ordinance, how would you end up with a better approach to providing cheap power to the residents of Los Angeles?

Shaffer: OK. I think you would have a greater in put from those who know the industry. You would have a greater input from people who have done this in the past. You'd be able to go and look at the solar that's being installed by the investor-owned utiliaties and say, "Is that a good way? Should we do it a different way?" We would have all these processes that we don't have now and we may never have. That's the difference.

Eddy Hartenstein, L.A. Times: Where does the solar industry come down on this? Have you talked to any of them?

Kaye: I've talked to the California Solar Energy Industry Assn., which like the Sierra Club has adopted a blanket policy of, "We fully support solar energy," and ducked the issue. They've ducked the issue, according to several of the officials who run private companies, because they don't want to get punished as the private sector comes into this. And if they take a stand, all these cells at this point would have to be imported from China. That's where the manufacturing capacity is at. It takes four to six years to build one of these plants. With [California Environmental Quality Act], if they announced it tomorrow, you would have a year or two of planning, need a billion to $2 billion, you've got to go through a CEQA process, so it's four to six years. This is a five year plan, so it doesn't do anything for this. No one would invest billions of dollars without any kind of analysis of what you're doing and doing the analysis after you've said, "Let's vote on it or even after we've voted"….

Healey: If we say solar is a good thing and 400 megawatts is a bold goal, the public tends to go for that. What is it about this that gets you to that place in a way that is too costly or inappropriate or it won't work? Because when I look at the landscape now, I see all sorts of buildings that could be doing this voluntarily but they're not; the owners are not making the investment. That makes me wonder, well, if the building owners aren't going to make the investment, what's wrong with having the DWP –

Kaye: The only reason that we have 12 or 13 megawatts is because of City Hall and DWP. They're the ones who fought it, failed to carry out policy: Three mayors, City Council after City Council never demanded that it be done, and now they're saying that we should give them carte blanche to spend unlimited amounts of money into totally vague areas without any study, analysis or planning. And the reason why they've taken power over this whole process is what they did with gang money: They split it up 15 ways, they channeled it to friends.

Anybody who doesn't see the pay-to-play history -- this whole scandal of the Fleishman-Hillard pay-to-play thing started with David Freeman and green energy; they spent millions of dollars, threw it all over town. And they achieved nothing. There is nothing in their record that says they should have their hands on billions of dollars without any controls. And there are no controls; there are no safeguards. There's nothing to bring this back, and you have a government that increasingly operates in closed processes. It increasingly operates in the dark in back rooms more than any time in my 30 years in this town. They've refined the art of it.

And I can't argue against baby seals dying in the Arctic Ocean, which is their argument. But I'm saving the planet, is what David Freeman and them are arguing. I can't argue against that when they have put nothing on the table to say that this is what it's going to cost. We have our sets of figures; we say as much as a 50% or 100% rate increase over the next five years. They've already built in a 33% increase. It's going to raise higher rates. We have our reductionist card, but it doesn't answer the question of this isn't the way to do business. There's a better way. You wouldn't invest billions of dollars without any knowledge of what you were doing. You would want to know what the facts are as well as you could, test them against everybody in your organization and experts, then come to a conclusion on whether this is the way to go. And that's all we're saying – there's a better way to do this….

Shaffer: One [question] we were asked: Why don't we turn this over to an economist to come up with some punchy answers. One reason is we have absolutely no idea what the figures are. There's no way to get the figures, and you can't get the figures until after they tell you what they want to do. That's one of the major problems.

The other thing is, why would the city want to do this; what's their motivation behind this. One is a simple payback. It's a payback and a pay-forward. It's a payback to what they've gotten from the unions, and it's a pay-forward for what they're going to get. The other thing is, it's a pay-forward as to what they're going to get by way of revenue. Remember, if they must increase rates, based on this, the city gets 10% in a utility tax. That's money that goes into them. They also get the 7% transfer based upon the so-call excess of profits or whatever they want to call it. So as DWP's income goes up, and as the ratepayers' rates go up, they city gets more money. It makes everybody happy. The union is happy because they've got more power and more jobs. The City Council members and future members are happy because they get better … campaign contributions, and the city makes more money all in all.

If it's a failed project, they still get all of this because these things are in place, everybody's rates have gone up, and they're getting that. So that's one of the major things we're looking at.

Kaye: To my mind, this is a turning point in L.A. A four or $500 million shortfall after 33% increase in revenue in three years; problems that are mounting; almost nothing is being solved by the city. And they got Measure R through on a logrolling by wrapping various meaningless lobbyist reform – the lobbyists' wives are now raising the money for [City Councilwoman Wendy Greuel] and [City Councilman Jack Weiss]. I don't see what changed to get a third term. This is a logroll. They're sugarcoating solar energy around taking power to themselves. It's unnecessary.

If it passes, we're into an unknown world that's under their control, and they know they can get away with anything then. If this fails, we're not going to lose solar energy; they've committed to solar energy. We're all for solar. They're starting with 100% vote. If the vote was, "Do you want solar energy in L.A.," I guarantee you, it's very close to 100%. I've talked to more than 1,000 people, and nobody's ever [said], "I'm against solar energy." And if it fails, though, it's back to the drawing boards, where the stump didn't work, the game didn't work. And we have to have a conversation, a process, a leadership that functions differently and is served notice.

There's no institution in this town more powerful, more influential, that has a greater reach than the L.A. Times. I've fought against you for 30 years from failing to read newspapers, so you can put that out, and it's out of profound respect. (laughs) The Times has a chance to take leadership on -- support Measure B, but demand an accountability, demand democracy, involvement, whatever you all believe in institutionally. But I think this is your opportunity, that the stage is set for the L.A. Times to provide what I have criticized it for, of not providing a mission statement for the greater good of Los Angeles. And I think the time is perfectly set in all ways from my point of view that no institution has the ability to turn L.A. around as much as the L.A. Times.