the ladwp on its rate hike

8/20/2019 The LADWP on its rate hike

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LADWP Newsroom

Citywide Public Education and Outreach Is Planned Over Next Four Months

LOS ANGELES – The Los Angeles Department of Water and Power (LADWP) has proposed a 5-year water and power rate acti

that provides funding to accelerate the replacement of aging infrastructure, better protect against drought conditions, and meet wa

and power supply mandates while improving customer service. The proposed rates are also designed to further incentivize

conservation while keeping LADWP’s rates low in comparison with nearby utilities.

LADWP presented the Water and Power Rates Request 2016-2020 to the Board of Water and Power Commissioners during a

special meeting Wednesday, kicking off a four-month outreach effort to inform L.A. residents, businesses, and stakeholder groups

about the rates proposal and get their input. The process follows an agreement LADWP has with Neighborhood Councils and othkey business and community stakeholders to provide a 120-day review period prior to adoption of new rates.

“The Board will take a close look at this rates proposal to ensure it both focuses on providing positive savings and also the necess

revenue for upgrading and replacing aging water and power infrastructure, expanding the local water supply to protect against

drought conditions, continuing to meet mandates that are transforming our power supply, and creating a clean energy future for Lo

Angeles. We also look forward to recommendations that will be provided by the Ratepayer Advocate,” Board President Mel Levi

said. In May, the Board had asked LADWP management to develop a rates proposal based on an independent 5-year revenue

requirement study.

“The rates proposal must address these needed investments while incentivizing conservation and keeping rates low and competitiv

Levine said. “The next step is to share this proposal with our customers so that they understand the need and have opportunity to

provide input,” Levine said.

The first public meeting, which will also be streamed online, is scheduled for Wednesday, July 22, at 6 p.m. at LADWP’s John

Ferraro Building in downtown Los Angeles. Web streaming will be available at www.MyLADWP.com. A series of additional

community meetings will be announced soon, followed by hearings by the Board and City Council in the fall.

The proposed rate changes presented to the Board today would vary, depending on how much water and power a customer uses

and whether they are a residential, commercial, or industrial customer. A residential customer using a typical amount of water an

OR IMMEDIATE RELEASE DATE: July 8, 2015 2:30:45 PM

WP Presents 5-Year Water and Power Rate Proposal to Replace Agin... http: //www.ladwpnews.com/go/doc/1475/

7/8/2015


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power would see an average annual rate increase of 3.4%, or $4.75 per month over the next five years. This means a typical

customer’s water and power bill would increase by $23.73 per month—from $132.44 to $156.17 at the end of five years.

Customers who use a low amount of water and power would see a 2.4% average annual increase, about $1.95 per month – a

difference of $9.74 per month at the end five years. Approximately 75% of residential customers fall into either the low or average

user category. Customers using a high amount of water and power would see a 5.4% average annual increase, about $17.64 per

month – a difference of $88.19 per month at the end five years. I f adopted, LADWP’s combined water and power rates would stil

remain below those of most neighboring utilities.

“We know from experience that investing in the city’s critical pipes, poles and other water and power infrastructure pays off in

reducing main breaks and power outages,” said Marcie Edwards, LADWP General Manager. LADWP water main leaks are less t

half the state average, and have decreased by 37% over the past seven years thanks to proactively replacing older and more

vulnerable pipes. “But our cycle of replacement is still too slow and more pipes are getting older at a faster rate. We need to ram

up replacement of this and other infrastructure to minimize disruptions for our customers and save water,” Edwards said.

“The proposed rate changes over five years will provide the steady, gradual revenue increases necessary to achieve a reliable an

sustainable water and power future for Los Angeles, while giving our customers the certainty they need in setting their own budge

as well as more opportunities to save through expanded conservation programs,” Edwards said. About 85% of new water revenue

will go toward investing in infrastructure and about 75% of new power revenues will be used to meet existing state and local powesupply mandates to transition to cleaner energy.

In addition to improving reliability, new revenues are necessary to expand and secure the city’s local water supply and reduce

dependence on more expensive, purchased water that is imported from Northern California and the Colorado River. The revenues

support local water supply programs already underway, including providing matching funds for grants, to accelerate groundwater

cleanup, improve stormwater capture, and expand recycled water for irrigation and industrial uses, as well build an advance

treatment facility to replenish groundwater. The funds will also support conservation programs that help customers manage their

water and power use and potentially save on their bills.

To further incentivize water conservation, the proposal recommends increasing water rate tiers, which are based on consumption,from two to four tiers for single-family residential customers. The goal is to incentivize conservation while recovering costs of

providing water to those customers who consume higher amounts of water. The proposed tiers are based on utility costs and

conservation goals and will result in lower rates for customers who use low amounts of water.

Increasing revenues to upgrade and replace aging infrastructure is also needed on the power side. Over half of LADWP’s 320,000

poles are at least 60 years old, which is the average design life of a power pole. In addition, 75% of new power revenues are

necessary to continue the transition of LADWP’s power supply to comply with goals and mandates. Over the next 10 to 15 years,

LADWP will eliminate the use of coal power to reduce greenhouse gas emissions, expand renewable energy to 33% of power sal

ncrease energy efficiency to reduce electricity use by 15%, and rebuild coastal power generating stations to eliminate ocean wate

cooling.

General Manager Edwards said the rates proposal comes after LADWP has significantly cut costs, completed an independent

benchmarking study and cost studies, reviewed and negotiated new labor contracts with pension reform that will achieve significan

savings for customers.

In April, LADWP completed Phase 1 of an independent benchmarking analysis that showed LADWP’s electric rates are below tho

of privately owned utilities in the region and the state. LADWP’s water rates are also competitive with those of other water utilities

the region. LADWP compared favorably on water and power service reliability and overall operating costs—a key measure of

efficiency.


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From FY 2011- 2013, LADWP saved nearly $467 million by reducing labor costs, refinancing, and other cost cutting measures. In

addition, a new labor contract with its largest employee bargaining unit, the International Brotherhood of Electrical Workers (IBEW

will save $456 million over four years (FY 2013/14 – 2016/17) and an estimated $5 billion over 30 years. The contract also include

salary reforms to bring the pay scale of 34 common civil service classifications in line with other City of Los Angeles employees an

pension reforms for all new employees.

LADWP also has made strides to correct problems that ensued following the launch of its new customer care and billing system.

During the peak of the problems, customers were waiting over 30 minutes on hold. Call hold times were under five minutes as of la

week. Other key indicators have consistently exceeded industry standards consistently below industry standards, including the

number of meter reads, estimated bills, and timeliness of billing.

As part of the outreach process, LADWP has launched a new website, www.MyLADWP.com. Visit the website to:

Learn more about the 2016-2020 Rates Request

Check upcoming community briefings and webcasts

Provide comments, sign up for email notifications and participate in a customer survey that will help LADWP improve its

customers’ experience.

# # #

or more information contact:

Joseph Ramallo

Communications Director, LADWP

(213) 367-1361


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The Los Angeles Department of Water and Power (LADWP)is proposing a five-year rate action that seeks modest waterand power rate increases each year based on the followingpriorities and key principles:

• Replace Aging Water and Power InfrastructureOver a century of delivering water and power requiresmajor investment to accelerate replacement of aginginfrastructure to ensure continued reliability.

• Transform Water and Power SuppliesLADWP water rates must support expanding our local

water supply to reduce reliance on more expensive,purchased water. Legal mandates require a completetransformation of our power supply.

• Improve Customer ServiceLADWP is working to provide high-quality and responsiveservice in every interaction, increase timeliness of bills,and enhance self-service options and offer other waysto improve our customers’ experience. LADWP will alsocontinue to expand programs and measures that help ourcustomers manage their water and power use and saveon their bills.

• Keep Rates CompetitiveLADWP will make these needed investments whileensuring that our rates remain competitive withnearby water and power utilities and affordable for ourcustomers. LADWP will continue to find cost savingsthrough process improvements, benchmarking againstpeer utilities, and other measures.

Proposed Rate ChangesTypical residential customers will see an average increase ofabout 3.4%, or $4.75 per month, for water and power on theirbill each year for five years. Low-use customers will have acombined water and power bill increase of 2.4% on averageper year, or about $1.95 per month. High-use customers (top10%) will pay about 5.4% more, or $17.64 per month eachyear for five years.

Proposed Rate Structure ChangesExpanding Water Rate Tiers

LADWP uses a water rate design with tiered pricing tiedto a customer’s water consumption. The rate requestrecommends increasing the number of tiers from 2 to4 for single-family residential customers. The goal is toincentivize conservation while recovering the higher costsof providing water to high users.

The proposed tiers are based on utility costs and conservationobjectives, and are comparable with those set by otherCalifornia water utilities. They are also consistent with theMayor’s Executive Directive No. 5, which requested a review owater rate tiers to optimize conservation.

Other Changes• Adding a reliability “pass-through” factor to pay for water

and power infrastructure improvements.• Restructuring rates to encourage conservation while

covering basic service costs.• “Rebalancing” the rates among customer sectors, based

on the recently completed Cost of Service Study.

WATER AND POWER RATES REQUEST 2016-2020Fact Sheet

Proposed 5-Year Water and Power Rate Changes with Monthly Costs

Low-Use Residential(250 kWh/Month

8 HCF/Month)

Typical Residential(500 kWh/Month12 HCF/Month)

High-Use Residential(900 kWh/Month27 HCF/Month)

Small Commercial(1,000kWh/Month

15 HCF/Month)

Current Monthly Bill $76.14 $132.44 $292.33 $240.04

5-Year Avg. Annual Power Rate Change $1.37 (3.5%) $2.28 (3.0%) $7.31 (4.7%) $6.65 (3.8%)

5-Year Avg. Annual Water Rate Change $0.58 (1.4%) $2.46 (3.8%) $10.33 (6.1%) $2.35 (2.8%)

Total 5-Year Average Rate Change $1.95 (2.4%) $4.75* (3.4%) $17.64 (5.4%) $9.00 (3.5%)

Average Monthly Bill IncreaseAt the End of 5 Years

$9.74 $23.73 $88.19 $45.02

Average New Monthly BillAt the End of 5 Years

$85.88 $156.17 $380.52 $285.06

* Amount is rounded up


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Cost SavingsTo help keep rates low, LADWP has saved $467 million overthree years by reducing labor costs, refinancing, and otherspending cuts. This exceeded the reduction goal of $459million that was established during the prior power rate actionin 2012. In addition, a new labor agreement with the largestLADWP employee bargaining unit will provide $456 million insavings over three years (fiscal years 2013-14 through 2015-2016), and an estimated $5 billion in savings over 30 years.

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Local Solar

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Follow us on:

Power: $900 millionPower revenues will need to increase from $3.5 billionto $4.4 billion over the next five years. The majority –75% – will support the transition to a clean energy futureand meet state mandates for reducing greenhouse gasemissions, expanding renewable energy, and rebuildingcoastal power plants to eliminate ocean water cooling.

Water: $230 millionThe majority of new water revenues – 85% – will supportinfrastructure repair and replacement for reliability, andinfrastructure improvements to meet water quality regulationsAdditional revenues will also support the Local WaterSupply Program, which is especially critical due to therecord, multiple-year drought facing Los Angeles and theState of California.

5-Year Revenue Needs

Competitive Rates

Additional informationVisit www.myladwp.com to:• Learn more about the 2016-2020 Rates Request• Check for upcoming community briefings and

webcasts• Take our survey and contact us with comments

and questions

www.myladwp.com

Santa Barbara

San Francisco

San Diego

Beverly Hills

Arcadia (GSW)

GlendaleLong Beach

Torrance

Santa Monica

Pasadena

Burbank

LADWP

$0 $50 $100 $150 $200 $250

FY 16/17Anticipated Combined Increase

FY 15/16Anticipated Combined Increase

Combined Average Monthly Bill

7.5% of power funds are for labor

*Data for the listed utilities only available for FY 15/16 and FY 16/17

*6% of water funds are for labor

Where the New Revenues Will Go

How L.A. Water and Power Bills Compare Before and After Rate Changes


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Rates FAQs 1 6/26/2015

Water & Power Rates Request 2016-2020 Frequently Asked Questions

General Questions

Why does LADWP need a rate adjustment?The Los Angeles Department of Water and Power (LADWP) is requesting a five-year rate change thatseeks small rate increases each year based on the following investment priorities:

•

Replacing and upgrading aging water and power infrastructure to ensure reliability.• Transitioning water and power supplies to meet regulatory mandates and sustainability goals by

expanding renewable energy, local water supplies, energy efficiency and water conservation.

• Improving customer service.

LADWP will make these investments while ensuring that our rates remain lower than similar utilities and

affordable for our customers.

How will t he proposed rate changes affect my bill?Typical residential customers will see an average increase of about 3.4% for water and power on theirbill each year for five years—about the same as the rate of inflation. This reflects an increase of about$4.75 more per month, each year from 2016 through 2020 for the typical LADWP customer. A typical

residential customer averages 12 hundred-cubic-feet (HCF) of water and 500 kilowatt-hours (kWh) ofpower.

Customers using low amounts of water and power will have a combined water and power bill increaseof 2.4%, or about $1.95 per month, annually for five years. High-use customers will see a combinedwater and power bill increase of 5.4% on average per year, or about $17.64 per month. About 10% ofresidential customers fall in the highest tiers of water and power consumption, averaging 27 HCF ofwater and 900 kWh per month.

What is the process for approving the rate changes?LADWP has been providing water and power rate reports to the Rate Payer Advocate (RPA) for reviewsince February 2015. The RPA’s analysis and recommendations are expected in the fall of 2015.

Based on the RPA’s review, LADWP may make changes to its original rate plan to address specificRPA recommendations. Once the rate plan is finalized by LADWP, the rate ordinance will need to beapproved by the Board of Water and Power Commissioners and the L.A. City Council. If approved, therate ordinance must be signed by the Mayor and will be effective 30 days after that.

When wil l the new rates go into effect?Under the current timeline, LADWP anticipates providing the proposed rate ordinance to the Board ofWater and Power Commissioners in November 2015 and to the City Council for consideration inDecember 2015. If approved by the Board and City Council, and signed by the Mayor, it is expected


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that the first rate change would go into effect during the first quarter of 2016. Incremental adjustmentswould become effective July 1, 2016, July 1, 2017, July 1, 2018, and July 1, 2019.

Is this rate increase going to pay for better customer service?LADWP is working to improve the customer experience by increasing the timeliness of bills, expeditingresponse to customer calls, enhancing self-service options, and other measures. Additional revenueshave been allocated in the proposed rate request to accomplish these goals. LADWP continues to workon programs that provide customers with water and energy saving rebates, technical assistance,incentives, and direct installation of water and electricity efficiency measures in their homes and

businesses to better manage their use and save costs.

Will your new billi ng system be able to handle the changes to the rates and rate structuresgiven the past issues?Yes, LADWP has verified that its billing system is capable of handling the new rate structure.

Why are you asking us to conserve and then asking for more money?The rate increases are necessary to keep up with the increasing costs to operate and maintain areliable utility as well as to meet regulatory mandates. LADWP plans to accelerate the pace of replacingaging water and power infrastructure to improve reliability now and in the future. While the rates willincrease on average overall, the rates are designed to encourage conservation so that customers who

use the least amount of water and power pay lower rates.

How do LADWP rates compare to other utili ties? Historically, LADWP’s water and electricity rates have been among the lowest in the region whencompared to neighboring utilities in Southern California, and the rates will remain competitive after thenew rates take effect. The chart below illustrates how much money a typical residential customer inLADWP’s service area has saved compared to customers using the same amount of water and powerin neighboring areas and other major cities in the state.


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How will LADWP rates compare after the proposed rate changes?

*Data for the listed utilities only available for FY15/16 and FY16/17.

What is LADWP doing to help customers keep their utili ty bill s low?LADWP offers a variety of programs and incentives designed to help customers use less water andelectricity and save on their utility bills. These programs include rebates and incentives for allcustomers—residential, small and large businesses, and industrial customers—to reduce their waterand energy use. LADWP also has programs that offer free installation of efficiency upgrades for homesand small businesses that can help save electricity, water, and natural gas. More information about

ways LADWP can help you conserve can be found at ladwp.com/save.

For qualified customers, LADWP will continue offering lower rates through the Low-Income DiscountProgram and Lifeline Program. Visit ladwp.com/lowincome to learn more.

What efforts have been made by LADWP to reduce costs prior to seeking rate changes?From February 2011 to June 2014, LADWP implemented a multi-million dollar cost reduction plan toachieve a quick and measurable impact on LADWP’s expenses, and to help keep rates reasonable inlight of industry-wide operational, regulatory and financial challenges.

As of June 2014, LADWP had saved an estimated $467 million, which exceeded the target by $8million.

Additional cost savings going forward include:• The most significant cost savings comes from a new labor contract with LADWP’s largest

employee bargaining unit, which will save $456 million over four years (ending in October 2016).This will represent a savings of $5 billion over 30 years.

• Lower cost financing for water and power projects will save approximately $267 million.• Corporate Performance Unit benchmarking and performance metrics will ensure cost efficiency

and accountability.

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What would happen if the proposed new rates are not approved in timely manner?The outcome depends on the length of the delay. If it is only a few months, LADWP has the option ofabsorbing the short-term losses or using the decoupling mechanism that is proposed in the water andpower rates request. Decoupling allows a potential revenue shortfall to be recovered in the followingfiscal year. (See below for a full discussion on decoupling.)

For longer delays, LADWP would likely need to request a substantially larger rate increase in the futureto collect the additional revenue needs, which are described in the water and power rates sectionsbelow. The longer the delay, the higher the risk for a larger rate increase as well as potential cuts in

programs that are beneficial but not directly tied to reliability or regulatory mandates.Is there an opportunity to comment about the rate changes?LADWP welcomes your feedback. We are hosting a series of public meetings and webinars, as well asthe opportunity to provide information online at www.ladwp.com/rates. Through the website, you willalso be able to ask questions and provide feedback. You can also connect with us on social media,including Facebook (/ladwp) and Twitter (@ladwp).

The public may also provide comments during public hearings of the Board of Water and PowerCommissioners, the City Council Energy & Environment Committee, and the full City Council when therate ordinance is heard by those governing bodies. Visit ladwp.com/Board for the LADWP Boardagendas and http://council.lacity.org for agendas of the Energy & Environment Committee and the CityCouncil.

Has the Rate Payer Advocate provided an opin ion about these rate changes and how can Iobtain the RPA’s report?LADWP has worked extensively with the Office of Public Accountability, staffed by the Rate Payer

Advocate, holding regular meetings and soliciting feedback since February 2015. Since July 2013, bi-weekly meetings have been held to review major aspects of LADWP’s financial plans. The proposedrate design and financial plans for fiscal years 2016-2020 are continuously reviewed.

The RPA’s analysis and recommendations are expected to be available in June 2015. LADWP maymake changes to its original rate plan to address specific RPA’s recommendations. The RPA report willbe posted at LADWP.com/rates under “Downloads.”

Power Rates

How much will the power rate increase?Typical residential customers will experience an average annual increase of 3% or less on their electricrate.

How will the proposed rate changes affect my electrici ty bil l?The table below shows the anticipated rate changes for low-use, typical use, and high-use customers.

Proposed Power Rate Changes

*Bills are estimated based on low use (250 kWh), typical use (500 kWh), and high use (1,000 kWh)

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Why are LADWP’s power rates going up?The power rate increase is necessary to expedite the pace of replacing aging infrastructure to ensurereliable power delivery to customers now and in the future. Additional revenues are necessary tocontinue the transition of LADWP’s power supply to comply with regulatory mandates. Over the next10 years, LADWP will eliminate the use of coal power, expand renewable energy and energy efficiency,decrease greenhouse emissions, and repower the generating units at coastal power plants to eliminateuse of ocean water cooling. Additionally, funds will be used to improve timely and accurate billing and

customer service, expand online customer service options, and expand rebate programs to offset billincreases.

How much in power revenues are needed to meet these goals?LADWP’s power system needs about $900 million additional revenue over the next five years totransition its power supply, comply with regulatory mandates, fund infrastructure reliability projects, andcover increased fuel costs. Failure to meet the regulatory mandates could result in significant fines forLADWP, which would in turn have adverse effects on rates.

How are the additional revenues going to be used?The table and pie chart below show how the funds will be used. About 75% is necessary to meetmandates and transition the power supply to create a clean energy future for Los Angeles. The

remainder will support the infrastructure reliability program and increased fuel costs.5-Year Budgeted Costs

Historical Average

*

CoreInitiative

Proposed 5-Yr Avg.

Proposed 5-Yr Total

$525MInfrastructureReplacement

(PSRP)$895M $4.5B

$785MSupply

Transition &Mandates **

$1.1B $5.5B

$61M EnergyEfficiency

$176M $879M

$1.4BTOTAL

(Capital andO&M)

$2.2B $10.9B

*Historical average is based on most recently competed fiscal years, 2012-13 and 2013-14.**Supply transition and mandates includes coal transition, renewables and repowering coastal power plants.



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When was the last time power rates went up?In 2012, LADWP received approval from the Board of Water and Power Commissioners and the CityCouncil for an increase in the water quality adjustment and a two-year power rate increase. The two-year power rate increase totaled 11%, or 1.41 cents/kWh and took effect in November 2012 and July2013.

Are there any changes to the power rate structure?While there are no changes to the existing tiered structure for usage and geographic location during thepeak season, June through September, LADWP is proposing several other changes including:

• Infrastructure reliability “ pass through” : Much of LADWP’s power grid was built in the1940s –1960s. Over 45% of LADWP’s 321,000 poles are 60-plus years or older and more thanthat will need replacing in the next five years. The infrastructure pass-through factor will supportthe cost of upgrading and replacing these poles and other critical infrastructure that is aging. Toprotect customer costs, this factor includes an annual cap and only collects for expenses thathave been incurred.

• Restructuring to encourage conservation: This pass-through factor enables LADWP tomaintain stable revenues, which is necessary to continue receiving strong bond ratings, andkeep the costs of borrowing low. Decoupling allows the Department to recover fixed operatingcosts while encouraging conservation as well as distributed generation technologies, such ascustomer-owned solar systems. Decoupling is a standard utility solution to recover fixed costs ifthe target amount of revenues is not achieved. Decoupling also protects customers. Forexample, if forecasted usage and revenue is higher than expected, decoupling protects thecustomer from over collection.

• Power access charge: Currently LADWP has no service charge (a fixed monthly charge) forresidential customers. The 2016-2020 rates request introduces a graduated, consumption-based service charge. The charge is designed with three tiers of usage—Tier 1 being the

lowest. The goal is to ensure that all customers contribute to the fixed costs of operating thepower system in proportion to the amount of power they use.

• Rebalancing: In developing the proposed rates ordinance, LADWP has “rebalanced” the ratesto be equitable among customer sectors, based on a 2014 Cost of Service Study.

How will the rates encourage conservation and sustainability?LADWP uses a tiered rate structure for electric rates that encourages conservation, especially duringthe summer months. See “Proposed Power Rate Changes” Table above.

How do LADWP power rates compare to other util ities?Historically, LADWP’s electricity rates have been lower than similar power utilities in the region and

state. LADWP electric rates will remain competitive after the new rates take effect.


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Rates FAQ 7 6/26/2015

Electric rate comparison before and after LADWP proposed rate changes

Water Rates

How much wil l the water rate increase?Typical residential customers will experience an average annual increase of 2.5% or less on their waterrate, assuming non-drought weather conditions.

How will the proposed rate changes affect my water bi ll?The table below shows the anticipated impact on a typical residential customer’s bill.

Why are LADWP’s water rates going up?The July 2014 water main break on Sunset Boulevard highlighted the need to accelerate thereplacement and/or upgrade of LADWP’s vast array of infrastructure that is critical for reliably deliveringhigh-quality water to Angelenos. With a significant amount of pipe installed at the turn of the century,LADWP faces a major challenge in keeping pace with the replacement and upgrade of these aging castiron water mains and riveted-steel trunk lines. The water rate adjustment is also necessary to continuemeeting stringent water quality regulations, and to continue expanding the local water supply to help


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reduce reliance on expensive purchased water. The need to expand L.A.’s local water supply hasbecome more critical as drought conditions continue throughout the state.

How much in additional water revenues are needed to meet these goals?LADWP’s Water System needs about $230 million in additional revenue over the next five years, from$1.1 billion to $1.4 billion.

How are the additional revenues going to be used?The table and pie chart below show how the funds will be used. The majority--63%--will go toward theWater Infrastructure Program for reliability. Another 26% of the funds will support water quality andOwens Valley regulatory mandates. The remaining rate adjustments will support the Local WaterSupply Program, including expanding conservation programs, water recycling, stormwater capture, andgroundwater cleanup.

5-Year Budgeted Costs

Historical Avg.

Core Initiative 5-Yr Avg.5-YrTotal

$306M InfrastructureReplacement

$523M $2.7B

$134MSupply

Transition*$341M $1.7B

$299MMandates:

Water Quality$314M $1.6B

$103MMandates:

Owens Valley$217M $1.1B

$842MTotal

(Capital & O&M)$1.4M $7.0B

*Supply Transition includes Conservation, RecyclingGroundwater Remediation, Stormwater Capture,

In-City Pumping, and Resource Development


When was the last time water rates were increased?LADWP has not increased basic water rates since July 2009 when a 3.1% water revenue adjustmentwent into effective. Subsequently, shortage year rates have been in place since June 1, 2009. In March2012, LADWP received approval to raise the water quality adjustment factor from $0.50 to $0.80 – a35-cent adjustment on water rates.

How do LADWP water rates compare to other uti lities?Historically, LADWP’s water rates have been among the lowest in the region when compared toneighboring utilities and other water agencies in the state. The proposed residential single family waterrates will continue to be competitive with other California water utilities.


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Water rate comparison before and after LADWP proposed rate changes

What impact, if any, will the drought have on my water bil l?When LADWP’s water supplies are lower than normal, the Department must increase the amount ofmore expensive water purchased from the Metropolitan Water District (MWD). LADWP rates aredesigned so that MWD purchased water is coverd by a pass-through factor on customer bills. In thepast few years of the drought, the amount of MWD purchased water has been much higher thannormal—averaging over 50% of L.A.’s water supply.

If drought conditions continue, a typical customer’s bill could increase more than the estimated levelsshown above—from 2.7% to 2.9% annually, or an average of $3.75 to $4.02 on their monthly bill eachyear. A high-use customer’s bill could increase from a 5.6% annual increase during a normal year to5.8% during a drought year. This represents a range of $16.58 to $17.17 more on their monthly bill overfive years than at present rates.

When will LADWP know how much the drought will impact rates?When setting the Water System budget each fiscal year, LADWP determines the amount of water thatwill be available through LADWP-owned supplies from the Los Angeles Aqueduct or local groundwaterand recycled water based on the prior year’s precipitation and snowpack levels.

Why are water rates going up even though we are being asked to use less water?Over the next five years, LADWP’s water system needs $230 million in additional revenue to fundinfrastructure reliability projects, comply with water quality requirements and other regulatory mandates,

and expand the local water supply. That said, however, LADWP rates are designed to encourageconservation, so those who use the least amount of water will see a lower increase on their bill. If thewater supply levels improve, and there is less reliance on purchased MWD water, customers may seetheir bill decrease further.


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What changes are being proposed to the water rate structure and wil l they encourageconservation or sustainability? LADWP currently has two rate tiers based on water use. Given the serious water supply shortage, therate request proposes increasing the number of tiers from two to four for single-family residentialcustomers. This change is designed to further incentivize conservation, while ensuring lower rates forcustomers who use the least amount of water. Following is the average annual bill impact for a high-use residential water customer.

How will the tiers be determined?

• Tier 1 – Basic use; the lowest tier covers the cost of basic indoor water use (approx. 8 HCF/month).

• Tier 2*‒ Efficient use; covers the cost of basic indoor water use and outdoor water use fordrought-resistant landscaping.

• Tier 3*‒ Considered high water use. Price based on above-average outdoor water use forlandscaping and the need to supplement with more expensive imported purchased water.

• Tier 4 ‒ Considered excessive use. Price reflects cost of increased purchased water andexpanding local water resources, such as recycled water.

*Tier 2 and 3 allotments will also vary based on temperature zone and lot size.

How will the new tiers affect customers’ rates?The majority of water customers–about 55%–will fall in the lower two tiers (Tiers 1 and 2). Only 9% ofwater customers use an amount of water that will put them in the highest tier (Tier 4). The diagrambelow shows how the rates will change for each tier under the rates proposal.


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Are there other new charges being considered for the water rates?LADWP is proposing to add the following:

• Infrastructure Reliability: As described above, LADWP must accelerate and expand itsinfrastructure reliability program. This pass-through factor would cover the cost of increasingmainline repairs and replacements, trunk line improvements, and other critical infrastructurereliability efforts. To protect customers, this factor includes an annual cap and only collects for

expenses that have been incurred.

• Revenue Decoupling (or Expense Stabilization): The same as the decoupling factor beingintroduced for electric rates, this is a mechanism to ensure financial stability and maintaininghigh bond ratings. It will allow the recovery of fixed costs to meet financial requirements, andalso protects customers from over collection.

• Securitization: Under AB 850, LADWP formed a Joint Powers Authority (JPA) with the city ofBurbank to receive low interest f inancing for mandated and local water supply projects. Thispass-through adjustment, which will appear as a line item on customer bills, will reduce theWater revenue requirement by $45 million over five years, which represents a 2.9% savings onfuture rates.

What wi ll happen to the “ Shortage Year” rates?The proposed water rate structure calls for eliminating shortage year rates. LADWP’s revised water ratestructure is being designed to ensure financial stability even during periods of drought.

Will there be any financial impacts because of the drought?Mayor Eric Garcetti issued an Executive Directive on October 14, 2014 to dramatically reduce the useof costly MWD purchased water while increasing water conservation and the use of recycled water. Keygoals include:

• Reduce water use per capita in the city by 20% by 2017• Reduce the purchase of imported water by 50% by 2024

The proposed water rate structure and rate changes have taken these policy goals into account byincentivizing conservation, and allocating additional revenues to expand the local water supply. Asstated above, customers will also see fluctuations in the purchased water pass-through depending oncontinued drought conditions.

the ladwp on its rate hike

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