Who oversees and analyzes utility rate increases?

As you know, electricity and water are provided by the Los Angeles Department of Water and Power (LADWP). Under the City Charter, LADWP is a proprietary department governed and managed by an independent board. However, while all rate increases are approved by the board and analyzed by the ratepayer advocate, they are officially enacted by the City Council; the current rate ordinances were adopted in 2016. While many people provide their opinion, the Office of Public Accountability (OPA) was specifically established in 2011 to serve as an independent watchdog and to explicitly analyze proposed rate increases. The Executive Director and rate payers advocate is Fred Pickel. He has issued many reports and reviews all proposed increases. You can learn more about him and his work with this link. Also, this is the link to the most recent LADWP rate increase report.

How are LADWP rates determined?

The LADWP rates are established to recover the costs of providing electricity and power to Los Angeles residents. There are three basic categories of costs: (1) the cost for LADWP to generate or acquire water and power; (2) the capital costs of the infrastructure (e.g., power lines and substations; water mains and water lines) that bring electricity and water to customers; and (3) operations and maintenance (O&M) costs. For FY2017-18, the LADWP Power System had a $4 billion budget; only $1.5 billion was for fuel and purchased power; the Water System had a $1.45 billion budget; only $114 million was for water purchases. The infrastructure and O&M costs are relatively constant and don’t change much even if people use less water and power. This is one reason why, even as you use high-efficiency appliances, electronics, and lights, there isn’t always a corresponding and proportionate reduction in your LADWP bill. The LADWP electric rate structure is quite complex. A complete explanation can be found on the LADWP website 

Concerning water rates, the cost of purchased water makes up only a relatively small portion of your water bill. The rate for water is set by several factors including the source of the water, your average consumption, and the particular season. Unfortunately, one of the long-term effects of climate change is that the amount of precipitation we receive here in Los Angeles or from the Owens Valley will be more variable. This means we cannot be lulled into a sense of water abundance based on a few years of rain after a fairly lengthy drought.

Although solid waste and sewer charges appear on your LADWP bill, those services are provided by the Department of Works Bureau of Sanitation (Sanitation). Under the California Constitution, enacted by Proposition 218, the City’s solid waste and sewer charges may not exceed the actual cost of providing each service. Until 2003, the City paid for the cost of solid waste collection from the General Fund rather than user fees.

The Sewer Service Charge (SSC) is based on metered water usage, the same meter for general water usage. The SSC has several planned rate increases over the next few years to accommodate inflation and generate funds for constructing and maintaining waste infrastructure and facilities around the city. The charge uses a single base rate which is multiplied by the number of days in the billing period and average daily sewage volume. The average daily sewage volume also incorporates a figure called the Dry Winter Compensation Factor (DWCF). The DWCF accounts for the prior winter’s rainy season. You can read more about the rate calculation, find ways to lower your charge, and find other resources to mitigate the SSC on the flyer LA Sanitation sends annually or with this link. The City adopted a new SSC ordinance in 2012. More than three-fourths of the additional revenue generated by that rate adjustment is going to maintain and expand the capital improvement program. Moreover, this is an area where stronger environmental regulations increase the cost of providing sewage services. 

Because the Bureau of Sanitation does not provide solid waste collection to apartment buildings and condominiums with more than four units, this meant that residents of multi-family buildings were subsidizing single-family homes, which was one reason the City shifted to fully funding solid waste collection through user fees. Both the City and State have enacted requirements that Los Angeles substantially reduce the amount of waste it sends to landfills. These waste reduction and recycling programs cost more. I believe these environmental goals, including the need to support recycling and organics separation.

How can I lower my LADWP bill?

There are a couple of items worth noting that may help you lower your own LADWP bill. First, the rate you pay is partly determined by the time of day that you use power. This reflects the fact that it costs LADWP more to acquire or generate power to meet peak demand periods from 1 pm to 5 pm Monday to Friday. Second, there is a fixed monthly charge tied to your highest level of energy usage over the past year called the Power Access Charge. This charge can be lowered by reducing your overall electricity usage each year. If your annual monthly average consumption does not reach or exceed 3,000kWh in a year, you can choose to receive service under Rate A or B. The difference between Rate A and B can be seen in how prices are capped, how prices vary based on the usage tier (price for the first 500kWh, next 700 kWh, etc), and the service zone (set by zip code). The complete difference and breakdown of the rate calculation can be found here.

Depending on if you qualify there are also alternative pricing such as the Time-of-Use Rate (TOU) and Contract Demand Service. Under the TOU rate, your monthly bill may be lowered if you use 65% or more of your electricity during the base hours and your bimonthly electric bill is over $350. I suggest you use this link to check if you qualify for the Time-of-Use Rate.

What is being done to lower utility rates?

You may be pleased to hear about several infrastructure improvement initiatives I have led since I was first elected to the City Council. Large scale infrastructure projects, across multiple states, to import water are likely to take years and large sums of money. Alternatively, local projects using advances in technology are likely more cost effective and feasible to create in the short-term. In 2014, I introduced and passed a motion which created the LA-Israel Task Force with the express purpose of fostering mutually beneficial technology development and collaboration as we share similar ecosystems and water and power issues. One issue where the Task Force found benefits for Los Angeles is the remediation of the San Fernando Valley groundwater aquifer. Israel has technology that can allow us to clean more water for less money. This is critical, especially as we are to meet our goal of reducing purchased imported water by 50% by 2025. You can read the full report from the LADWP with this link.

Also, because so much of the San Fernando Valley has been paved over, most of our rainwater goes directly into the Los Angeles River and flows directly to the ocean. The passage of Measure W in November 2018 means an infusion of money for storm water projects that are aimed at increasing the amount of storm water that is captured in our local groundwater aquifers. Also, much of the water we use ends up in the sanitary system, where it is treated to near drinking water standards, and then dumped into the LA River or directly into the ocean. We are exploring ways to use that water to recharge our aquifers. Reusing locally-generated water is less costly and more sustainable than costly infrastructure projects. As you may know, the State of California is considering a tunnel project to bring water from Northern California through the San Francisco Bay Delta to Central and Southern California. While there are many political, technical, fiscal and environmental challenges before this WaterFix project can come to fruition, the City is on record as supporting a version of this project that is fiscally prudent for LADWP ratepayers.