Editor’s Note: The City Council, after a lengthy debate about Google vs. Microsoft email products, unanimously approved both the water and power bond plans of DWP without debate, setting the stage for further rate increases. Google email won unanimous approval to be City Hall’s email.
I’m not very careful about money but I have become quite observant about what’s going on at the Department of Water and Power which regards OPM (other people’s money) as so much water over the aqueduct.
But I took an interest when my wife pointed out that the DWP bill that arrived last week was huge even though we cut our water use in half. The problem was on the electricity side of the bill
where I was startled to see that there was a 10 percent utility tax for power. Who knew?
That means that the city is getting the utility tax plus sweeping 8 percent more (up from 5 percent in 2005 when this mayor took office) out of the power side and using it in the general fund to pay its bills — 80 percent of which goes for salaries and benefits.
That’s a pretty heavy tax on electricity — 18 percent — and comes with a 7 percent sweep of water revenue.
Today, the council is set to approve measure that will insure my DWP bills — and yours — go even higher.
The DWP is seeking approval to borrow $980 million to fund $1.17 billion in upgrades to the water system and $1.57 billion this year and next to help fund a five-year, $5.8 billion capital improvements program for the power system. Together, they will cost more than $150 million dollars for 30 years to pay off.
The power system bonds are the more controversial.
“The Department intends to pay the costs of the distribution system projects, transmission system projects, and generation system projects with internally generated funds and through the issuance of revenue bonds,” according to the ordinance documents.
Projections for the five-year period show the DWP expects to increase power evenue by 50 percent from $2.9 billion this year to $4.4 billion in 2014. I can only assume that most of that increase is supposed to come by raising rates by roughly the same 50 percent which will make my DWP bill about equal to my mortgage payment.
Here’s the numbers in millions of dollars:
2009 2010 2011 2012 2013 2014
Revenue $ 2.900 $3.242 $3.591 $3.873 $4.143 $4,405
Net Income $ 407 $ 405 $ 428 $ 512 $ 593 $ 744
The revenue increase of $1.5 billion a year will also provide a bonanza to the general fund because of the 10 percent utility tax and the 8 percent donation of power funds.
Where that money goes is an even greater concern.
Thanks to the clout of union bully boy Brian D’Arcy, DWP workers got 5.9 percent pay raises in recent years and is set to do well in the next few years with terms of a new contract being finalized and expected to take effect this week.
Although there’s deflation in LA of nearly 2 percent, DWP workers are looking at 2 percent raises this year and from 2 to 4 percent raises the following three years depending on inflation plus some sort of cash payment for renegotiating the 3.25 raises due them this under the final year of the contract the mayor rewarded them with for the D’Arcy’s help in getting elected.
At the same time, the DWP payroll is being padded with what I presume is hundreds of workers being transferred from other city jobs as part of the plan to fill the general fund’s $400 million hole.
Additionally, tens of millions of dollars of city costs — like $3 million for new irrigation systems in parks — are being paid by the DWP. And political retreads like Wally Knox — the former Assembly member, DWP commissioner and Harbor consultant – are being put on the payroll for something like $200,000 a year to work with community groups where he has zero credibility.
But I digress from the issue of borrowing the $1.57 billion that goes before the council today.
The DWP wants to negotiate privately for the sale of those bonds at a cost of $12 million to underwriters rather than throwing it open to competition for the best rates. This allows them to channel the bonds to favored private investment banks and to provide “meaningful opportunities for local and regional Minority/Women/Small Business Enterprises” — a noble if not cost-conscious goal. The same private sale is being used for the water bonds.
According to the documents, the $5.8 billion capital improvement program breaks down this way:
» Infrastructure and Power Reliability – $2.568 Billion
o Temporary Circuits Restoration
o Power Pole Replacement
o Cable Replacement; and
o Various Generating Station Improvements
» Renewable Portfolio Standard (RPS) – $0.954 Billion
o Major Transmission Systems (Pine Tree; Barren Ridge-Castaic; Green Path North;
and the Southern Transmission System Upgrade)
o Existing Resources (aqueduct; Hyperion digestion; Lopez Canyon microturbines;
solar rooftops; landfill gas projects; and the Wyoming Wind project)
o Planned Resources (Wind, Geothermal; Biomass; and Large Scale Solar projects);
o Various Southern California Public Power Authority (SCPPA) projects
» Integrated Resources Plan (IRP) – $1.084 Billion
o Generating Station Repowering projects (Haynes; Scattergood; and Castaic
» Generation and Infrastructure Improvements – $543 Million
o Repair as well as replacement of aging and inefficient equipment
In other words, $5 billion of the nearly $6 billion goes to fixing the infrastructure that the DWP has allowed to deteriorate or become obsolete because it really has been running a jobs program offering spectacular salaries and benefits and not operating as a municipal utility providing power and water.
That’s why LA has the least clean energy in the state and the most electricity from dirty coal-burning power plants.
Some projects in the renewable energy list are already online like Pine Tree windmill farm and some like Green Path North are already abandoned.
So the list of projects has no meaning at all. It simply represents a blank check for clean energy without any ability of the public to make sure it’s getting what it wants at the best price.
This goes to why so many activists are demanding creation of an independent Rate Payer Advocate’s office.
It’s why Neighborhood Councils should be able to name one of the five DWP commissioners.
And most of all it’s why the bond sale should not be approved, why no rate increases should be approved, until there is a full accounting of where DWP’s billions of dollars in revenue has gone and how i
ts rate increases and tiered-rate structures are impacting homeowners, apartment dwellers, different businesses, government agencies and various regions of the city.
The problem with the DWP is there is no transparency, no accountability and thus no credibility.
Fix those things and we can talk about how to fix the rotting infrastructure and actually pay for and get clean power.