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RPS, DWP, renewables & your rates: 5 things you want to know

California's new law requiring its utilities to get a third of their energy from renewable sources has changed the landscape for a group of public utilities in southern California: in Burbank, in Pasadena, in Glendale, and the biggie, the Los Angeles Department of Water and Power. (Check out Air Talk - we talked about the RPS today.)

Not only did the previous state-level driver - the Governator's executive order mandating 20% renewables - apply solely to the investor owned utilities like was an executive order. Vaguely unenforceable, immediately revocable by anyone who sat in that chair next. This one's for reals.

The news comes after LA City Controller Wendy Greuel released a scathing 68-page audit of DWP's renewable energy program - the one Mayor Antonio Villaraigosa congratulated the department for last year. It made its target last year, she writes - the whole report is available on SCPR's website. "It appears that this was likely due more to luck than to strong planning and policies," Greuel wrote. "Our auditors estimate that the DWP only achieved a 20% renewable energy portfolio due to abnormally cool temperatures and higher than expected wind at Department owned wind farms," she argues. This year the renewable energy percentage will likely drop back.

In theory, a record of what resources the DWP plans to use to power the city is located in the Integrated Resources Plan. Greuel notes that at in 2007, "DWP developed a new IRP reflecting, among other things, the revised renewable targets of 20 percent renewables by 2010 and 35 percent by 2020." Other goals included:

*transmission upgrades and additional transmission facilities to address aging infrastructure as well as the need for renewable upgrades.

*a reduction in greenhouse gas emissions to 35 percent below 1990 levels by 2030.

*repowering in-basin generation consistent with system needs and environmental requirements.

*triplingits investment in energy efficiency and conservation programs from prior years.

Thing is, the IRP isn't the same as the budget. The IRP is a framework document; it gets re-evaluated every several years; there's one out right now from 2010, and you had all of last fall to comment on it. But it's separate from DWP's budget, a cruel and annual mistress. In laying out her solution, Greuel points out the obvious:

[I]t would be wise for the Department to make the necessary investments now and increase its renewable energy portfolio sooner rather than later. This can only be done, however, if the DWP has a well defined financial plan and funding in support of its operational program to achieve the city's renewable energy goals.

I could really wonk out on this, but maybe you're more interested in: what does this mean to rates? Five quick things (for now): 

1. Rates include the ECAF - energy cost adjustment factor - do you remember what's in it? Fluctuating oil and gas rates, yes, and renewable energy. Except they're called fuel procurement expense and purchased power cost. Also: the 8 percent city transfer. Also "demand side management" - it's basically energy efficiency: encouraging those who demand, to demand less. (We'll come back to that one.) ECAF's a catch-all for diverse needs within the utility, and it's been undercollected for at least 5 years. That means rates have been artificially low against costs DWP incurred to keep the lights on. It may not mean that they've been artificially low against what costs DWP should have incurred, but figuring that out after the fact might be like using M&Ms as abacus beads to do your taxes.

2. In coverage last year of the rate fiasco-squabble-imbroglio-idiocy, a lot of what city political leaders said got shorthanded to "we want to raise rates to get more renewable energy." But, and this shouldn't surprise you, it's way more complicated than that. Facts laid out in Greuel's audit seem to suggest the same problems that have caused DWP to price oil and coal energy inaccurately for the ECAF have also caused DWP to inaccurately cost out renewable energy. Greuel's 68 page document can't and doesn't explain all of the reasons for that. DWP opted not to separate out costs of going renewable back in 2005, instead folding that into the ECAF gumbo. Keeping a close eye on how city council fills in the blanks on the ratepayer advocate matters: DWP watchdogs, environmentalist and not, say that job will need to see into not just rates, but into all the decisions that influence rates.

3. We also know who was in charge. Ron Deaton, David Nahai, David Freeman and Austin Beutner sat in the big chair at DWP while the 2007 IRP was developed and after it became the governing plan for DWP's energy mix. Those 4 GMs and an evolving board of Water and Power commissioners all different approaches - sometimes, at the same time - to adding renewables to the mix: for example, Nahai approved purchase power agreements through SCAPPA to add renewables, and is getting Monday morning quarterbacked about that now. But it's helpful to remember that Mayor Villaraigosa first issued the call to action the IRP contained: 20% by 2010, 35% by 2020. He repeated it often. He told Nahai and possibly others that his job was staked on getting that. The mayor's the only one in the same job as when this all started, and he's the one who has decided who sits in the GM and board chairs along the way. You could argue that the DWP is an independent entity, and I'd be interested to hear your arguments, but the point is: one guy it's easy to forget about in this discussion, who picked a lot of the people making decisions about your rates, sits over at City Hall. 

4. Renewable energy costs more - we could talk about externalities, but on a per-kilowatt-hour, it just does right now. It's also now required under state law - both directly, since the DWP is included in the renewable portfolio standard, and indirectly, since AB 32 - the landmark greenhouse gas law - demands that everyone in the state cut greenhouse gas use. State law also will cause DWP to end its relationship with out-of-state coal no later than 2027. So, no two ways about it: renewable energy is necessarily going to be part of your future if you're a customer of the DWP. Buckle up, it's the law.

5.There's a difference between higher rates and higher bills. I've never called myself a ratepayer in my life. I think of people who use energy in their homes as consumers or customers; I wonder whether "ratepayers" focuses too much on rates and not enough on the whole enchilada of a good operation. On top of that, we have choices about how much we consume. California's already bad ass when it comes to energy efficiency; has been for decades. But even in a climate where we require increasingly efficient washing machines and toasters and building insulation and lighting, a lot of energy's out there to be conserved. (Today's story on Casa Heiwa - an Enterprise Community Partners/City of LA/stimulus funds partnership - found  20-40% savings in low income apartments with pretty standard retrofits.) New GM Ron Nichols has said he wants to up energy efficiency a lot - doing that effectively shrinks the pie a portfolio has to fill, which means you can fill that pie tin faster. Demand side management, people! Energy efficiency - is increasingly important to consumers, and you gotta look close at DWP's IRP and its budget to see what they're doing over there and whether it's enough. Some utilities excel at demand side management. Some suck; after all, they're trying to sell you energy. But quite often the ones who do best at it are also on track to switch to renewable energy for good. Encouraging conservation while you're switching over to a more expensive source masks the rate rise and keeps the cost closer to what people are used to.

As usual, this ain't never noways near over: Mr. Nichols will present his first DWP budget - with energy efficiency, renewables, and rates - this spring.