Is the LADWP Rate Hike Temporary or Not? Here's Your Clarification
Was the approval of a rate hike last week temporary or not? Many are confused, even some councilmembers, and it's bleeding into media reports (even we've been confused). So after discussions within city hall, here's what we know.
As approved by the City Council and Board of Water and Power Commissioners, a 4.6% annual increase will take affect in July. That rate is not temporary or bound by any three-month time period so unless it's voted to be increased or decreased, it stays. What is temporary is the ability of the Board to adjust rates by that much again.
So here's the nerdy version of that. Currently, the LADWP base rate for electricity is 13-cents per kilowatt hour and as of July 1st, the new rate will be 13.6-cents per kilowatt hour. The difference comes in the Energy Adjustment Cost Factor, or ECAF (currently it's 5.2 cents of the 13-cent base rate). The ECAF is basically a pass through that utilities are allowed to charge on a quarterly basis for fluctuations in price of fuel (if fuel goes up, they can charge customers more). However, by law, there is a cap on how much that adjustment can be and it's currently at 0.1-cents. But with the economy as of late and Mayor Antonio Villaraigosa's vision of a green city, the Carbon Surcharge plan called for changing the ECAF cap way beyond the 0.1-cent one, allowing for bigger rate changes on a quarterly basis.
And that's where a lot of the tug-and-war politics began. What was eventually approved by the City Council and LADWP Board was a temporary increase in the ECAF by 0.6-cents (meaning it goes from the current 5.2-cents to 5.8 cents--that's how we go from 13 cents to 13.6 cents in the total base rate), allowing for the rates to go up by that much. What was temporary was the cap on the ECAF, meaning by September 30th, the LADWP Board cannot increase rates again by 0.6-cents. Instead, the limit is back to 0.1-cents. But remember, the July 1st one-time 4.6% annual rate hike stays and if nothing changes.
That is, at least for now, how it stands as we understand it (got another way of explaining it, put it below in the comments, thanks!). Here is the first paragraph of the Board's resolution that states this in their language:
Now, therefore be it resolved, that the existing 0.1 cent per kWh quarterly ECAF adjustment limit shall be increased to a 0.6 cent kWh quarterly EFAF adjustment limit only for the fiscal quarter July 1st, 2010 to September 30, 2010. In accordance with the Electric Rate Ordinance, such increase from the April 1, 2010 ECAF amount shall be implemented on July 1, 2010. The Board herby finds and determines that such increase in the adjustment limit of the ECAF is necessary to maintain the LADWP's financial integrity and is in the public interest.