March 02--After eight months of discussions, meetings and revisions, the Los Angeles City Council on Wednesday gave preliminary approval to the first increase in water and power base rates in years.
With a 12-2 vote, the council gave its go-ahead to the Department of Water and Power's proposal to boost water rates 4.7% and power rates 3.86% each year for five years.
The DWP estimates that customers who use "typical" amounts of water and electricity will see a more modest 3% average annual increase to their monthly bills. At the end of five years, those customers would pay about $21 more per month than they do now, the utility says.
Utility officials have said they hope to implement the increase by April 1.
"This rate case ... gets the department what it needs until we make a decision about what it is that we want," said Councilman Felipe Fuentes, who chairs the council's Energy and Environment committee. "We have to limp along.... We have to make sure that the department has the ability to function."
Because the vote was not unanimous, the proposal must return to the council in the coming weeks for a procedural second reading.
Council President Pro Tempore Mitch Englander and Councilman Gil Cedillo cast the dissenting votes.
"I cannot support a rate increase that essentially allows the city to delay governance, transparency and customer service reform," Englander, who is running for a seat on the County Board of Supervisors, said in a statement.
DWP officials have been campaigning for the $330-million water rate hike and a $720-million power rate increase for the last several months, even as they been in discussion about governance reform following a series of scandals.
They say the revenue is necessary to replace aging water mains and develop more local water supplies. On the power side, officials estimate that about 80% of new revenue would go toward meeting clean energy and climate change mandates.
It was the first increase to base rates since a power hike in 2012, the DWP said; a water proposal was withdrawn at the time, though the council approved a hike to the "water quality adjustment." There have been no base rate increases to water since 2009 even as California has suffered through a prolonged drought.
In 2014, a massive pipe rupture near UCLA flooded the campus and surrounding streets, underscoring the need to replace aging water lines. Meanwhile, the city faces mandates related to renewable energy, "once-through" ocean water cooling and coal-fired power.
DWP officials warned Tuesday at an Energy and Environment committee meeting that failing to meet those requirements could result in massive fines and a downgraded credit rating, which in turn could force the agency to demand a larger rate increase down the road and lay off recently hired customer service representatives.
Councilman Bob Blumenfield, who is also on the Energy and Environment committee, told his council colleagues Wednesday, "If you vote 'no,' you're going to cost us."
Fuentes agreed that "the consequences of not doing something really outweigh" the impacts of passing a hike. He said the proposal took into account how much work the DWP can realistically accomplish and how much money the utility can spend.
DWP General Manager Marcie Edwards said some had urged her to push for higher hikes. But she largely agreed with Fuentes' assessment, acknowledging that her utility has become "massively bureaucratized."
"This is always going to be a balancing act," Edwards said Tuesday in a presentation to Fuentes' committee. "We did our best work in trying to find the sweet spot."
For the most part, DWP watchdogs, environmental advocacy groups and business owners have supported the water rate increase. A years-long drought has put a fine point on the need for urban areas to diversify their water supply.
The rate proposals have not been without criticism, however.
Critics have raised concerns about the power rate increase, questioning the annual transfer of 8% of power revenue to L.A.'s general fund.
Ratepayers have filed lawsuits arguing that the transfer payments to City Hall violate Proposition 26, a 2010 state ballot measure that prohibits government agencies from charging more for certain services than they cost to provide.
The DWP also collects a controversial "utility users tax" of between 10% and 12.5% on behalf of the city. That tax also goes into the city's general fund, but it is not factored into the department's rate calculation and is not part of the proposal, a DWP spokesman said.
On Wednesday, an attorney involved in a class-action lawsuit related to the transfer and about a half dozen residents spoke out against the rate increase.
"Strip out the transfer and follow the law," said the attorney, Walt McNeill.
But as has happened in previous hearings, several representatives of the business and environmental communities spoke in favor of the hikes.
Ratepayer advocate Fred Pickel said the water and power plans are "reasonable." The utility's Board of Commissioners approved the water rate increase in December and the power rate hike the next month. Mayor Eric Garcetti has already issued statements relaying his support for the proposals.
On Wednesday, various members of the council raised questions about issues specific to their districts, such as how the rate increases would affect low-income residents and customers in hot areas of the city.
Several spoke about the need for DWP governance reform in order to rebuild customer trust after a customer billing scandal and an audit that found cavalier spending of more than $40 million of ratepayer money.
They mostly agreed to separate the rate discussion from talks about governance, though Englander could not be swayed.
"Transparency and customer service are ... essential cornerstones for a modern municipal utility," he said in a statement. "Unfortunately, the DWP doesn't have a great track record with either of these."
Cedillo said in a statement that Angelenos are already "burdened enough" by high housing costs.
"It is important we have infrastructure replacements and energy efficiency goals, but as the councilman who represents some of the poorest areas of the city, I could not vote for another increase while in the midst of an affordable-housing crisis," Cedillo said.
Councilman Paul Krekorian brandished an aged piece of pipe from the dais Wednesday that he said gave way seven years ago in a water main explosion at the corner of Coldwater Canyon and Ventura boulevards in Studio City.
"That's the pipe that destroyed our constituents' homes and businesses," Krekorian said. "Anybody who thinks that this utility will continue to function ... without investing heavily in its power and water infrastructure, right now, is living in a fantasy world."
"This may be the beginning of a new day for DWP," he added.
For more on the California drought and water, follow me on Twitter @ByMattStevens.
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