RPA’S FIRST REPORT - At the Wednesday afternoon meeting of the Board of Commissioners of our Department of Water and Power, Dr. Fred Pickel, new Ratepayers Advocate, recommended that the Department’s 11.2% increase in our power rates be approved.
Underlying these rate increases are unfunded environmental mandates and the need to maintain and repair its aging infrastructure. As a side note, personnel costs will also be increasing as will interest expense due to the $3 billion capital expenditure program.
And over the next five years, our power rates will be increasing by 36.5% based on preliminary estimates by DWP. During this period, DWP anticipates capital expenditures of $7.4 billion, pushing the debt to capitalization ratio to 65%, considerably higher that it is today.
As a result, the Department’s credit rating will most likely be downgraded.
During his brief presentation, Pickel also alluded to the IBEW’s high labor rates relative to other utilities as well as the need for DWP to benchmark its operations to be better able to judge the efficiency of its operations. He also called for a more rigorous analysis of DWP’s programs which would include performance assessments, cost / benefit analyses, and the financial impact on Ratepayers.
Pickel also complimented DWP management for its openness and cooperation as well as for the increased efficiency of its operations resulting from plans that management began implementing within the last 15 months.
Overall, the power rate increase on the surface appears to be reasonable given the cards DWP has been dealt: unfunded environmental mandates, a neglected infrastructure, a high cost labor agreement, and significant political interference.
Importantly, this assessment is based also on the trust that the straight shooting management has earned over the last two years.
The preliminary report did not touch on the rates in 2020, the legality of the $250 million transfer fee to the City’s General Fund, the City council’s pet projects, pricing arrangements with the City, the dumping of 1,600 City employees on the LADWP and the amount of the IBEW Labor Premium.
We will have more after we have had a chance to review the PA Consulting Report.
(Jack Humphreville writes LA Watchdog for CityWatch He is the President of the DWP Advocacy Committee and the Ratepayer Advocate for the Greater Wilshire Neighborhood Council. Humphreville is the publisher of the Recycler -- www.recycler.com. He can be reached at: [email protected]) –cw
CityWatch
Vol 10 Issue 68
Pub: Aug 22, 2012