A deeply divided Los Angeles City Council on Tuesday backed increases in electric rates, acknowledging they will be painful for customers but insisting the hikes are needed to maintain the Department of Water and Power's financial health.
The council's decision capped months of debate and political maneuvering -- as well as outcry from both L.A. residents and business owners who say they already pay enough for electricity.
Revenues from the rate hike would go in part toward environmental initiatives backed by the mayor, including renewable energy contracts and more aggressive conservation programs. Without the hike, the DWP said it could have its bond rating downgraded.
The fee structure backed by the council would increase electric rates 4.5% for both residential and business ratepayers. That would generate 25% less revenue than what the mayor proposed over the next three months.
After the vote, Villaraigosa said he had "serious reservations" about the council's action, adding that revenues generated from the rate hike would not be enough for the DWP to pay for expenses as well as his environmental programs. A significant concern is the fluctuating cost of coal, which makes up 44% of the DWP's power.
Though the mayor's fee hike proposal has won praise from environmentalists, it has come under withering criticism from business interests and ratepayer activists, who said the city should not be charging more during an economic downturn.
City Council members Tuesday said they were sensitive to those concerns and tried to do what they could to lessen the blow.
"People are worried to death about their next bill," Councilman Bill Rosendahl said. "I've had more people come up to me in the last two weeks and say, 'Councilman, for God's sake. I can't take another hit.' "
The lowered fee increases were approved on an 8-6 vote, with some in the minority saying that they could not support any increases in electric rates.
Tuesday's showdown is considered the first act in a series of electric rate hikes the mayor is proposing, which would increase residential bills anywhere from 9% to 28% over a 12-month period.
The council's action signals Villaraigosa is going to have a fight on his hands.
The rate issue has put the mayor at odds with some L.A. business interests at a time when Villaraigosa has vowed to refocus his administration on job creation. The mayor and DWP argue that the rate hikes will create 18,000 "green jobs" over the next decade. Critics, however, dispute that number and worry that other jobs will be lost.
"The DWP proposal is the wrong idea at the wrong economic time," said Estela Lopez, executive director of the Central City East Assn., a business group with 1,800 members.
Some environmentalists immediately denounced the council's decision to reduce the size of the rate hike.
"The funding for renewable energy and energy efficiency programs that was approved today is insufficient to move us forward on the goal of getting off coal," said Sierra Club regional representative Evan Gillespie.
The council's rate proposal now goes to the DWP board whose members are appointed by Villaraigosa. The board will need to decide whether to adopt the council's recommendation or try to get the mayor's original plan through the council a second time. Either way, the council's vote signaled the level of distrust between council members and the nation's largest municipal utility, which only last week threatened to withhold $73 million from the city budget if the increases were rejected.
"They tried to bully us and blackmail us," Councilman Herb Wesson said.
Villaraigosa has pushed hard for the rate increases, announcing endorsements from leaders such as Gov. Arnold Schwarzenegger and former Vice President Al Gore and accusing the City Council of weakening in their commitment to the environment.
Villaraigosa has compared his renewable energy plans to two of his other big initiatives: the effort to hire 1,000 police officers and his push to build a subway to the sea. In both of those cases, the mayor found ways to get the public to pay more -- either through fee hikes or tax increases.
Union leaders waged their own lobbying effort for the DWP increases. A day before the council's vote, the county Federation of Labor, which plays a major role in city elections, made prerecorded "robo calls" to residents criticizing at least one council member for speaking out against Villaraigosa's package of increases.
Councilman Paul Koretz said one of those taped messages named him as an opponent of job programs and efforts to clean the environment. "I disagree with labor on an issue once every decade or so, so I'm not used to being in this position," he said.
Villaraigosa's environmental message was clouded by the threat, made in writing by a mayoral aide last week, that the city would be plunged into bankruptcy if the rate increases were not approved. The mayor later disavowed that statement but warned that the city's general fund budget, which pays for basic services, would run out of money unless the first increase was approved.
The mayor's proposal called for four DWP increases that would add 2.7 cents to each kilowatt hour of electricity. The first increase, which was approved by the DWP board on March 18 and scheduled to take effect Thursday, would have added 0.8 cents to each kilowatt hour purchased by ratepayers. Of that total, 0.3 cents would have gone into a "lockbox" for new conservation and renewable energy programs.
The council voted 8 to 6 for a counterproposal, one that called on the DWP to allow only for an increase of 0.5 cents per kilowatt hour. In addition, the council voted 9 to 5 to allow an additional 0.1 cent that would go toward Villaraigosa's renewable energy lockbox.
Some council members who backed the rate hike said they did so largely out of concern over the revenues needed to continue DWP operations.
Four council members -- Bernard Parks, Greig Smith, Paul Krekorian and Dennis Zine -- said they weren't prepared to support any increase at this time.
"This is probably the worst managed proposal that I've seen in five or six years in the council," Parks said.
