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Divided council backs electric rate hike, but less than mayor wanted

March 30, 2010 |  5:04 pm

Transmission lines

A deeply divided Los Angeles City Council on Tuesday backed increases in electric rates, acknowledging that they will be painful for customers but insisting that the hikes are needed to maintain the Department of Water and Power’s financial health.

The council’s decision capped months of debate and political maneuvering -- as well as an outcry from L.A. residents and business owners who say they already pay enough for electricity.

Revenues from the rate hike would go in part to environmental initiatives backed by the mayor, including renewable energy contracts and more aggressive conservation programs. Without the hike, the Department of Water and Power said it could have its bond rating downgraded.

The fee structure backed by the council would increase electric rates 4.5% for both residential and business ratepayers. That would generate a quarter less revenue than what the mayor proposed over the next three months.

After the vote, Villaraigosa said he had “serious reservations” about the council’s action, adding that revenues generated from the rate hike would not be enough for the DWP to pay for expenses as well as his environmental programs.

A significant concern is the fluctuating cost of coal, which makes up 44% of the DWP’s power. While the mayor’s fee hike proposal has won praise from environmentalists, it has come under withering criticism from business interests and ratepayer activists who say the city should not be charging more during an economic downturn.

City Council members Tuesday said they were sensitive to these concerns and tried to do what they could to lessen the blow. 

“People are worried to death about their next bill,” said Councilman Bill Rosendahl. “I’ve had more people come up to me in the last two weeks and say, ‘Councilman, for God’s sake. I can’t take another hit.’ "

The lowered fee increases were approved on an 8-to-6 vote, with some in the minority saying they could not support any increases in electric rates. Tuesday’s showdown is considered the first act in a series of electric rate hikes the mayor is proposing, which would increase residential bills anywhere from 9% to 28% over a 12-month period.

The council’s action signals that Villariagosa is going to have a fight on his hands. The rate issue has put the mayor at odds with some L.A. business interests at a time when Villaraigosa has vowed to refocus his administration on job creation.

The mayor and DWP argue that rate hike will create 18,000 “green jobs” over the next decade. Critics, however, dispute that number and worry that other jobs will be lost.

“The DWP proposal is the wrong idea at the wrong economic time,” said Estela Lopez, executive director of the Central City East Assn., a business group with 1,800 members.

Some environmentalists immediately bashed the council’s decision to reduce the size of the rate hike.

“The funding for renewable energy and energy efficiency programs that was approved today is insufficient to move us forward on the goal of getting off coal,” said Sierra Club regional representative Evan Gillespie.

-- David Zahniser and Maeve Reston

Photo: L.A. Times file