Customers of DWP to Pay More

The Los Angeles City Council unanimously approved electric rate increases Wednesday to help the Department of Water and Power cover the rising cost of natural gas.

The rate hikes are set to begin in October. The average DWP residential customer whose electric bill is now $606 annually could potentially see that rise incrementally to $680 by 2010.

There is a chance that rates could go down over the long term. The council’s action was not a rate hike per se, but allows the DWP to pass along some of the cost of natural gas to customers.

The problem stems from the late 1990s, when the DWP froze such pass-through costs as part of a financial reorganization. At the time, the agency was paying about $2.94 per million British thermal units for natural gas.

By last December the cost of natural gas had reached about $15 per million BTU, but has since fallen to $7, the DWP said.

DWP General Manager Ron Deaton told the council Wednesday that the agency has done a similar pass-through for water rates for 30 years to cover the cost of water that the DWP purchases from the regional water supplier, the Metropolitan Water District.

Deaton also said that the main reason for the change was to allow the DWP board of commissioners to make quarterly adjustments to customers’ bills as natural gas price rates rise or fall.

“For a long period of time natural gas prices were in the category of not fluctuating -- and then it changed,” Deaton said.

Natural gas has become increasingly popular with utilities because it generally burns cleaner than coal and causes less pollution.

The DWP is the nation’s largest municipally owned utility. Its water and power rates are competitive with or cheaper than other large utilities serving cities in the West, the agency says.

About 48% of the DWP’s electricity is produced by coal-burning plants. Natural gas plants account for 30% of the agency’s power and the remaining 22% is mostly from nuclear plants and hydropower.