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PA Consulting’s Independent Fiscal Review is a thorough but dense analysis of the Energy Cost Adjustment Factor (the “ECAF”) that was authorized by the City Council as a result of its rejection of the motion by the DWP Board of Commissioners to essentially eliminate the cap on the ECAF. In many ways, it is an extension of the IEA Survey that PA Consulting submitted to the City in early February, 2009, right during the heat of Measure B, and highlights the urgent need for the Department of Water and Power to implement the recommendations of the IEA Survey, especially as it relates to the lack of a realistic Integrated Resources Plan and model based strategic planning.
While it will take some time to digest all this complex material, hopefully with the help of PA Consulting, Ratepayers can rest assured that our power rates are going to increase dramatically … most likely north of 20%.
This does not take into consideration the proposed 16% increase in Base Rates that is being considered for next year.
Put in another perspective, if the proposed rate increases are implemented, our power rates will have increased by almost 60% from the time of the last Rate Increase in 2008, from under 10¢ to almost 16¢ per kilowatt hour. In addition, single-family residences may experience even higher increases.
One very appropriate recommendation is to “decompose” the ECAF, eliminating the controllable costs associated with renewable energy procurement and development, the Demand Side Management program, and the City Transfer. This will allow for greater transparency of the yet to be determined costs associated with the Renewable Portfolio Standards that are being proposed by Mayor Villaraigosa and which are a major factor in the rate increases.
The PA Consulting Report outlines DWP’s rationale for maintaining its AA- credit rating, which calls for DWP to maintain certain financial ratios. However, this may be very difficult given the anticipated massive short term and long capital expenditure program.
Of particular note is the Solar Plan consisting of 1,280 megawatts, consisting of 380 megawatts of Customer Solar Programs; 500 megawatts of Large Scale Solar Projects; and 400 megawatts of Utility Owned Solar Projects, the Son of Measure B (the “SOB”).
To date, little progress has been made on the Customer Side. There is no feed-in tariff program, despite its resounding success in other parts of the USA and the rest of the world. There is no Sun Shares program. And progress has been very slow on the residential with only 3 megawatts installed to date.
Likewise, DWP has made scant progress on Central Station Solar which represents 40% of the overall Solar Plan. Of the two projects being discussed, the 55-megawatt Niland project in the Imperial Valley has been postponed, while the 200 megawatts of projects in the Owens Valley are “optimistic, both in terms of cost and timing.”
But it appears that DWP is barreling ahead with the SOB, the 400 megawatts of In Basin Solar Power, using notoriously inefficient IBEW construction work crews, without bidding out the work, contrary to the intent of the voters when they rejected Measure one year ago.
Given that DWP is “very optimistic relative to demonstrated performance” and is relying on the inexperienced DWP management, this exclusive, no bid project will cost Ratepayers $1 billion to $2 billion extra than if the work were competitively bid out to private contractors.
This amount will double because of interest costs, the 8% transfer fee, and the 10% City Utility Tax. And this is in addition to the already high cost of solar power.
Furthermore, this monopolistic hogging of all the work will create fewer jobs than if the work were performed by the private sector, since the private sector can serve customers other than DWP. (READ THE FULL STORY, HERE.)
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