This month Los Angeles city officials and the city’s power company (LADWP) have been sparring over big increases in electricity rates that the utility says it needs to pay for a push into renewable energy. So far, the city council is balking at the requests. But both sides agree the utility will need more revenue, making some substantial increases likely later this year. 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, substituting more power from renewable sources for power from coal- or gas-burning plants.
The Los Angeles Department of Water and Power, the nation’s largest municipal utility, says it needs to collect significantly more money to manage costs associated with an ambitious plan to get more electricity from renewable resources and less from coal. The utility currently gets about half of its power from coal, an unusually large amount for a utility in California, a state with no significant coal deposits. The city’s goal is to get 20% of its electricity from green sources by the end of the year, which it is on track to achieve. It hopes to raise that to 35% to 40% by 2020. The city council had authorized the utility to raise rates 5%, or 0.6 cents a kilowatt hour, on April 1. That plan dissolved Thursday, 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 budget crunch stems from lingering effects of high fuel costs two years ago and, more recently, increased purchases of renewable energy. The utility has been unable to charge customers the full amount of its rising costs because the city council has capped rates.
Source: Wall Street Journal