Los Angeles DWP Accepts Rate Increase

SAN FRANCISCO — The Los Angeles Department of Water and Power’s board approved an electricity rate increase, accepting a smaller-than-requested hike to end a standoff with the Los Angeles City Council.

The Board of Water and Power Commissioners voted unanimously Thursday evening to accept a 0.6-cent per kilowatt hour, or 4.5%, rate increase after Mayor Antonio Villaraigosa relented in his push for a bigger increase. The increase goes into effect July 1.

The mayor and utility wanted a 0.8-cent rate increase as the first step in a year-long, 2.7-cent per kilowatt hour rate hike that would have amounted to a 22% rate increase. Villaraigosa wanted a bigger increase to help accelerate the utility’s shift from dirty coal power to renewable energy, but local residents and the council balked at such big increases in the midst of a deep recession.

The council last month asserted jurisdiction over the rate increase proposal and blocked it, plunging the city into a political and fiscal crisis.

The electric rate standoff had a big impact on Los Angeles’ budget because the utility subsidizes the general fund with transfers of about $220 million a year. Without its rate hike, the utility said it couldn’t afford to make its final $73.5 million payment to the general fund for this year because it would have no surplus to transfer.

The transfer is crucial this year because the city expects to run a deficit of $149 million for fiscal 2009-10. Without the LADWP’s money, the deficit would have ballooned to $222.4 million, eating up almost all of the city’s $261.7 million in reserves. The council expects the transfer to be approved now that a rate increase has been approved.

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California
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