DWP BOARD OKS AVERAGE $24 ANNUAL HIKE IN BILL.

Byline: KERRY CAVANAUGH Staff Writer

Despite widespread condemnation of massive pay raises granted last summer, the Department of Water and Power board approved rate increases Tuesday that will raise the average bill $24 annually with even higher rates expected in 2007.

The DWP's $3.9 billion budget was approved even though a community outreach effort has yet to be completed. A formal vote is scheduled for next month after the budget year begins.

Mayor Antonio Villaraigosa praised the DWP board for working to contain the rate hikes but neighborhood council activists remained wary although they acknowledged that natural gas prices have soared.

Under the new budget, water rates would increase by 2.75 percent and energy rates would go up 2.5 percent. The rate hikes would take effect later this year.

Additional increases are planned for next year - with another 2.75 percent increase for water and an estimated 3.9 percent hike in power charges.

Still, that's smaller than the four-year, 18 percent water rate increase DWP staffers proposed earlier this year, DWP Board of Commissioners Chairwoman Mary Nichols said.

``It's as low as we could get it and still keep up with water quality and ensure a continuous water supply. It was a tough struggle to keep it that low. This paves the way for much more rigorous oversight of the department's expenditures.''

Nichols said DWP commissioners and staffers spent five days going line by line through the budget to cut costs, at the request of Villaraigosa. They were able to cut outside contracts, lobbying and sponsorships, but could not diminish the need for increases to pay for major infrastructure investments and to cover the high cost of natural gas that fuels L.A.'s power plants.

Villaraigosa was pleased the board was able to find efficiencies and savings, even if an increase is still required.

``It is clear the members went through the budget with a fine tooth comb and that ratepayers will benefit from their hard work,'' said Joe Ramallo, spokesman for the mayor.

Members of neighborhood councils said they remained concerned about continuing DWP rate increases.

``We accept the rate increase this year but we want to study the issue again in the coming fiscal year and see if it's justified the second year,'' said Joe Vitti, who has followed the rate increase for the Granada Hills North Neighborhood Council.

Soledad Garcia heads the committee that oversees the DWP's agreement to work with neighborhood councils, and she was initially opposed to the rate increase.

``Now we understand the need. I can say they're doing a good job of sharpening their pencils and bringing the rate down.''

DWP officials have said they need to raise water and power rates to defray the high cost of natural gas, major infrastructure improvements needed for water quality and Owens Valley dust mitigation and environmental restoration work.

However, some members of the City Council and neighborhood councils have protested against past rate increases until the DWP stops wasteful spending on public relations, extracurricular programs for employees and contracts with outside firms.

The utility also took heat from residents after approving a contract last summer with the DWP's union that gives employees raises up to 28 percent over five years.

Frustrated with requests for rate increases, the City Council voted down a two-year 7 percent water hike and hired the Barrington-Wellesley Group for $360,000 to analyze the DWP's spending habits to see whether a rate increase was justified.

The study found that the utility wasted money on activities that had nothing to do with water or power, including $28,000 for a DWP choir and $1.1 million for family care and breast-feeding training.

But Barrington-Wellesley said the DWP should raise water rates by 3.9 percent this year and 3.5 percent next year. Those recommendations were reduced by the DWP Board of Commissioners to 2.75 both years.

The commissioners kept the recommendation to pass along the high natural gas prices to DWP customers for the first time since 1998. Like other fossil fuels, natural gas prices have more than doubled in recent years.

Also, the DWP will include a surcharge on electricity bills to cover the increased cost of developing lower-polluting renewable energy.

Villaraigosa has committed the city to buying 20 percent of the city's power from wind, solar, geothermal or other green sources by 2010, although that could raise the cost of electricity for customers.

Together, the natural gas and renewables charges could add about $15 this year to customers' electricity bills, and $24 next year.

Some environmental groups question whether the renewable surcharge is necessary if green power projects cost the same or less than the city's existing energy supply.

``If it's not warranted based on the price of renewables then it sends a message to the public that renewables are costly, when they're competitive and are beating the cost of gas,'' said Rhonda Mills with the Center for Energy Efficiency and Renewable Technologies.

The DWP must now finalize a rate increase plan and the Board of Commissioners will vote to raise rates on July 18.

kerry.cavanaugh(at)dailynews.com

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