LOS ANGELES — The Los Angeles Department of Water and Power is going to restart the public hearing process on rate increases proposed last year to pay for a five-year, $6.1 billion capital plan the agency says it needs to replace aging infrastructure and meet state and federal environmental mandates.
Ron Nichols, the department’s general manager, conducted more than a dozen presentations at public meetings throughout Los Angeles last summer to explain the agency’s need for rate increases of 15.3% for water and 16.8% for power spread over three years.
Officials at LADWP, the country’s largest utility with 3.9 million customers, had originally hoped to have approved rate hikes by Nov. 1, 2011.
At the City Council’s request, the agency’s board of commissioners agreed last year to postpone rate increases until a ratepayer advocate could be hired and get up to speed.
Energy consultant Frederick Pickel was named to the position in January.
The City Council did approve a partial water-rate increase in February after LADWP convinced Los Angeles officials it needed to move forward on awarding $600 million in contracts to meet federal and state mandates for clean drinking water. No increases were made on the power side.
The department had been operating under a cloud for several years before Nichols was named general manager in December 2010.
The problems included high turnover in the general manager position, with six different people holding the job between 2007 and 2011.
Accusations about LADWP’s lack of transparency came to a head in early 2010 when City Council members refused to approve proposed rate increases of 5% to 20%.
The ratepayer advocacy position was created in March 2011 following public disputes between elected officials and the department over the rate increases.
Last year’s delay in approval of the rate increases caused concern for Fitch Ratings, which on Dec. 14 downgraded $3.39 billion of water system revenue bonds and $225 million of water system variable-rate bonds to AA from AA-plus, though it maintained the stable outlook.
Fitch did affirm the AA-minus rating on $6.3 billion of power system revenue bonds and the AA-minus on a $580.8 million bank bond on the same day.
If the rate increases are approved, the utility hopes to issue bonds to fund its capital program this fall, according to Nichols.
The proposed rate hikes would only cover the $1.5 billion necessary to meet state and federal environmental mandates, but not repairs needed to aging infrastructure.
LADWP expects to issue debt to fund 60% of the $6.1 billion capital program, according to a Fitch report.