The Los Angeles City Council and the Los Angeles Department of Water and Power dueled over rate increases late Wednesday, with each side rejecting the other's proposal to boost the price of electricity.
By the end of the night, the standoff had effectively killed the effort by Mayor Antonio Villaraigosa, the council and the DWP to impose higher rates for the next three months. That's because Thursday was the deadline to sign off on the increases, which can only be imposed on a quarterly basis under California law, officials on both sides of the dispute said.
The power struggle over the rates began Wednesday evening, when Villaraigosa's appointees on the DWP board met to review the council's proposal for a 4.5% electric rate hike.
In a unanimous vote, the DWP board opted for a larger increase that was closer to the amount the mayor had sought to pay for his renewable energy proposals. In doing so, the panel ignored the wishes of council members Eric Garcetti and Jan Perry, who appeared at the meeting to ask the board personally to respect the council's rate increase of 0.6 cents per kilowatt hour, on the grounds that it would have a softer financial impact on ratepayers.
Instead, the board voted for an increase of 0.7 cents per kilowatt hour, which would translate into a 5.7% rate hike for residents and businesses, according to a high-level utility executive. DWP board members portrayed that as a compromise, saying it showed respect for both the council and the mayor -- who wanted an increase of 0.8 cents per kilowatt hour.
The council responded swiftly. At 9:10 p.m., less than an hour after the DWP board's vote, the council voted 13 to 0 to veto the rate increase and send it back to the utility for more work. The exchange eliminated any chance for either plan to go into effect on Thursday, as originally planned, Perry said.
"They overplayed their hand and they didn't need to," said Perry, who heads the council's Energy and Environment Committee. "The council had voted on a reasonable proposal and they still rejected it."
Villaraigosa, in turn, said in a statement that he was "disappointed" in the council's veto. "The commission took the council's concerns seriously and did its best to address them and meet them halfway," he said.
The volley of votes showed the depth of the disagreement between Villaraigosa's office and the council over the issue -- a dispute that comes in the middle of a major budget crisis.
DWP officials had warned that if they don't receive the additional money from the rate hike, they will not be able to transfer $73 million to the city's struggling general fund, which pays for basic services. That money is more than the city would need to pay 1,000 employees for a year.
Though the mayor's fee hike proposal had won praise from environmentalists, it had come under withering criticism from business interests and ratepayer activists, who said the city should not be charging more during an economic downturn. Several executives told the DWP board that they would likely move or lay off employees if Villaraigosa's plan went into effect.
The DWP board went into its meeting shortly after 5 p.m. to discuss the council's proposal. During that session, utility officials said the council's plan jeopardized one of Villaraigosa's central environmental initiatives: securing 20% of the DWP's power from renewable sources, such as wind and solar energy. Utility officials warned that the renewable energy portfolio is in danger of declining to 12% by 2014 without additional funds.
Meanwhile, Raman Raj, the DWP's acting general manager, told the board that the money provided by the council's proposal would jeopardize the agency's bond rating because it would only last for three months.
"Our obligation must first and foremost be the fiscal health and stability of this agency," said Raj, who is running the utility while General Manager S. David Freeman is on vacation.
Council President Eric Garcetti challenged that view, saying that the council's proposal set aside the same amount for the DWP's existing financial obligations as Villaraigosa's. The additional money sought by the DWP board was earmarked for new conservation and renewable energy programs planned by Villaraigosa, he said.
"The numbers don't lie," he told the board.
Perry accused Raj of setting in motion "an Armageddon scenario" by threatening to withhold $73 million from the city's general fund. And Garcetti warned that the council would likely reject any effort to increase the size of the rate hike.
Shortly after Garcetti spoke, the DWP board took a 45-minute break, then returned to discuss and change the rate hike plan. Board President Lee Kanon Alpert said that during the break, each panelist reviewed the information presented by utility staff and by council members.
During that time, Perry said she saw three of the mayor's top executives -- Chief of Staff Jeff Carr, Deputy Chief of Staff Matt Szabo and Chief Deputy Mayor Jay Carson -- meeting in the area behind the DWP board room, but not with commissioners.
Villaraigosa warned earlier this week that the DWP needs to embrace more wind, solar and geothermal power to avoid hundreds of millions of dollars in state penalties that are expected for utilities with a high reliance on fossil fuels. In his statement, he said the board's proposal would have protected the DWP's fiscal security and its commitment to renewable energy.
