A battle is brewing between city officials and the largest Los Angeles-area utility provider over big increases in electricity rates that the power company said are necessary to pay for the city’s push into the renewable energy generation.

The L.A. City Council already authorized a 5% hike in utility rates, or about 0.6 cents per kilowatt hour, on April 1. However, that plan quickly dissolved when the utility’s board instead moved to impose an increase of about 5.7% and was halted by the city council, postponing any action for three months.

The Los Angeles Department of Water and Power, the nation’s largest municipal utility provider, said it needs significantly more money to manage costs associated with the state’s ambitious plan to get increasingly more power from renewable resources.

The city’s goal is to get 20% of its electricity from green sources by the end of this year, a goal it is on schedule to meet and a goal it hopes to raise to 35% – 40% by 2020. The L.A.D.W.P. currently gets about half of its power from coal – which is an unusually large amount for a utility in a state with no significant coal deposits.

At play here is not only a huge hike in rates, inevitably angering customers and businesses, but also a looming revenue shortfall at the L.A.D.W.P. that prompted its board to demand a double-digit increase of 2.7 cents a kilowatt hour earlier this year. The utility has blamed the shortfalls from lingering effects of the high fuel costs from two years ago and increased purchases of renewable energy. The utility said it has been unable to charge customers the full amount of its rising costs because the city council has capped rates.

But, the plot thickens. City officials aren’t buying it – and, making things worse, the city Controller, Wendy Greuel, announced that L.A. would run out of cash by Cinco de Mayo. Partially to blame for the shortness of cash is the L.A.D.W.P. indicating that it will not send a $73 million payment to the city’s general fund, a payment the utility normally makes in lieu of taxes, saying it does not have the money because the city council blocked the proposed rate hike.

Councilwoman Jan Perry, who is chairwoman of an energy subcommittee, said the appointed utility board “overplayed its hand” in thinking it could ignore the wishes of the city’s elected officials.

Los Angeles’s case could serve as a warning to officials in other cities and states who are also trying to change the energy mix of local utilities, attempting to swap more and more coal for renewable sources, such as wind and sun, to generate power.

The business community has been very vocal in its opposition to rate increases in a weak economy and has warned that the city’s push to generate green jobs is being undercut by high utility prices that would drive businesses from the city.

“We’re going to lose a lot of jobs,” Councilman Greig Smith said. “And this proposal doesn’t shut down a single coal plant.”

This entry was posted on Tuesday, April 6th, 2010 at 2:09 pm and is filed under Los Angeles Law Firm Main Articles. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.