Mayor Antonio Villaraigosa today will propose a monthly carbon surcharge for Department of Water and Power customers to help the city switch from coal to renewable energy.
Villaraigosa did not specify the amount he has in mind, but Deputy Mayor Jay Carson told the Los Angeles Times 55 percent of DWP customers – those who use the smallest amount of power – would see their bills go up $2 a month.
Carson did not know the size of the increase for the remaining 45 percent of DWP customers.
A recent survey commissioned by the mayor's office showed 64 percent of respondents were willing pay an extra $2.50 a month to help the DWP transition to renewable energy sources.
"The carbon surcharge proposal is part of the mayor's ambitious environmental agenda to make Los Angeles the cleanest, greenest city and to eliminate the use of coal in Los Angeles by 2020," the Mayor's Office said in a statement.
"The increase will incentivize stakeholders to use alternative energy and therefore reduce Los Angeles' dependence on fossil fuels," it added.
The proposal comes after a study by PA Consulting revealed the current surcharge – the Energy Cost Adjustment Factor – is not bringing in enough money to help Villaraigosa realize his goal of ending the city's reliance on coal by 2020.
Currently, the DWP can raise the Adjustment Factor quarterly but only up to 0.1 cent per kilowatt-hour. The study recommended gradually raising the cap to 2.7 cents per kWh over the course of a year, starting next month.
At present, the Adjustment Factor is 5.09 cents per kWh, according to the Los Angeles Times. If the proposal is adopted, the surcharge would end up being 7.79 cents per kWh. That would result in the average residential customer's monthly payments increasing $11 to $14 over the course of a year under the current rate structure – a 16-21 percent hike in the current average bill, according to the study.
The average low income customer's monthly payments would go up $7 to $9 over a year, a 20-27 percent increase. But Lifeline customers, who receive a discounted rate, would pay $8 to $11 or 25-35 percent more.
Rates for commercial customers would go up 15 percent to 20 percent, the study added.
The DWP intends to revise the current rate structure at some point, with the goal of "reducing the price for residential customers who use small amounts of power and increase the price for large users," the study said.
The mayor's office said funds generated by the carbon surcharge would be deposited into a renewable energy investment fund that would be used to pay for wind, solar and geothermal power sources.
The City Council has the option of either approving or rejecting – but not amending – the proposal to raise the Adjustment Factor.
Councilwoman Jan Perry, who chairs the City Council's Committee on Energy and the Environment, said the issue will be taken up on Tuesday.
The committee last discussed the ECAF in October, shortly after the appointment of S. David Freeman as interim general manager of the DWP.
He agreed to postpone the proposed increase but stressed it was necessary to meet Villaraigosa's goal of making renewable energy 20 percent of the DWP portfolio by 2010, 40 percent by 2020.
"You can't go from coal, which costs 4 cents, to solar and wind that costs 8, 9 or 11 cents without the costs going up – it's just simple plain math," he said.