There will be no suspense in the air Tuesday as the Los Angeles City Council prepares to vote a second and final time on two years of electricity rate hikes, just as there was no question a week ago that the council would approve the increase. Unlike other increases requested in recent years by the Department of Water and Power, there is virtually no play in these hikes. They are necessary. The council will adopt them, as it must.
In recent years, higher rates were supposed to pay for a smart, environmentally crucial but voluntary move away from the coal-fired plants that provided decades of electricity on the cheap. Cheap, that is, for ratepayers. The cost has been especially heavy for the environment of the Rocky Mountains, where the plants continue to pump out their noxious dust and atmospheric carbon. To be environmentally responsible, to set an example for other cities and states and to reclaim some moral high ground, Los Angeles had to get out of coal. But the true costs were hazy, and factions sparred over timelines, promises, exceptions and contracts.
The move away from coal is no longer voluntary. As city leaders dithered, state law zoomed ahead and now compels Los Angeles to get its power from cleaner sources. Distant solar and wind farms may be part of the eventual solution, and so may local electricity generation from rooftops and parking lots, but winds sometimes die down and the sun never shines at night; the need for power is constant. Los Angeles must build and operate new natural gas-burning plants and then buy the fuel to keep them running. They pollute, but far less than coal. The switch won’t be cheap. Expect more rate increases, in fairly rapid succession, as the DWP replaces aging equipment and, to be frank, an aging workforce.
Even before the council asked voters in 2011 to create the new position of ratepayer advocate — to provide independent analysis of the utility’s actions and how they affected rates — members already had commissioned and reviewed an independent analysis of the DWP by an outside consulting firm. They already knew that rates would have to increase, even if they didn’t yet know by how much.
But the advocate, Frederick H. Pickel, has so far provided at least two great benefits to the city. He has affirmed the reliability of the consultant’s reports, and although that additional layer of review may seem superfluous, it’s no small matter given the depth of mistrust between the city’s utility and its residents. And, in his first weeks on the job, he said no to the DWP’s request for five straight years of rate hikes. Those future increases will probably come, but not before Pickel, together with elected officials and neighborhood advocates, has had a chance to monitor implementation of the coming two years’ worth of higher rates, 4.9% almost immediately and 6% next year.
Constant monitoring and stocktaking are indispensable because of the suspicion, and often the undisputed fact, that increases are paying for things other than the cost of generating and delivering electric power. As Times staff writer David Zahniser reported on Sept. 25, DWP salaries are “significantly” higher than those paid by other utilities. Other city workers have long pointed out that DWP workers are paid more than their counterparts in other city departments. Some ratepayers are rankled that supposedly surplus money is transferred each year from the electricity side of the operation to the city’s treasury. How can there be a surplus when rates are going up? Meanwhile, advocates for job growth and living wages are pressing for new training and hiring programs. They won’t be free.
What’s the purpose of a municipally owned utility, anyway? Is it to make money for the city, to keep engineer salaries high, to create job training programs, to protect the environment? There are factions that will argue for each of those purposes, some with more evidence on their side than others.
But for the record, public power emerged around the United States about a century ago to protect residents from exploitation in the form of high rates, dangerous conditions and spotty service then being supplied by fly-by-night operators. In Los Angeles, electricity was at first a byproduct of publicly owned and supplied water, which also was the preferred alternative to the polluted and unreliable product offered by private utilities. Electricity supplied reliably and safely at low rates: that’s the utility’s reason for being. That’s the basis on which residents and ratepayers should, and undoubtedly will, judge whether it’s still worthwhile to own their own utility.
But they must understand that tomorrow’s version of low rates may be quite different from yesterday’s. Coal kept rates artificially low. Deferred maintenance, too, masked the need for increases.
And what about salaries? They represent a mere sliver of rate increases and are dwarfed by other costs — but they are real, and they add up, especially when combined with outdated or inefficient management practices. Salaries grew in part because the union gave money to mayors, council members and other elected officials who then negotiated or rubber-stamped labor contracts.
Angelenos have reaped other benefits from owning their own utility, but ratepayers will stand for them — they should stand for them — only if they can be shown that the utility is reliable and that rates are low compared with other electricity providers. The DWP used to have the lowest electric rates in the state, but it has been passed by another municipal utility — and is projected to be passed by many others. That’s a concern.
There are promising signs in the relationship between the DWP and the people it serves, but there is a long way to go. Ratepayers will always want to pay less, and they won’t always get what they want. But they are entitled to a utility that runs efficiently and provides power at rates that are at least as low as residents could get from a private utility.