LADWP needs an Advocate for Customers, not an Advocate for Rates

The Los Angeles Department of Water and Power (LADWP) is proposing to create a “Ratepayer Advocate” who would be paid with LADWP customer funds but remain an independent analyst.  LADWP has formed an advisory group to help them shape the role, qualifications, and compensation of such an advocate.  Cecilia K. T. Weldon, Chief Administrative Officer of LADWP, coordinates the group, which consists of:

• Chuck Ray, Vice-Chair Neighborhood Councils;
• Carol Schatz, President and CEO Central City Association and Downtown Center Business Improvement Center;
• Stuart Waldman, President Valley Industry and Commerce Association; and
• Me (Kristin Eberhard, NRDC)

We have had one meeting so far, and there was some disagreement over what exactly a “Ratepayer Advocate’s” role and responsibilities should be.  I believe that a pure ratepayer advocate, with a mandate to focus narrowly on cents per kilowatt-hour rates, instead of what is in the best interests of the customer, could be a waste of (your) money and a distraction from the important decisions LADWP has to make in the next few years.   What LADWP customers need is a “Customer Advocate,” with a clear mission to ensure that you, the customer, has an independent voice at the table advocating for lower bills and better service.

What’s the difference between a “ratepayer” and a “customer” advocate, you ask?

In a nutshell: you, the customer, pay a bill, not a rate (think about it: you probably know how much your utility bill was last month, but when’s the last time you looked at how much each kilowatt-hour cost?).  The amount you pay equals the rate multiplied by your usage. LADWP can help you reduce your usage by helping you replace your old refrigerator with a more efficient one, or install a new, more efficient air conditioner, or any number of such efficiency improvements.  By using less energy, your energy bill drops.  A customer advocate will recognize this and push LADWP to expand these important programs to help save you money.  A ratepayer advocate who only cares about rates (just one part of your bill) doesn’t care about your usage.  Such an advocate will fight to keep rates down, even if that means LADWP has to cut all of its efficiency programs.  This would not only mean that you wouldn’t be able to get help getting your old refrigerator replaced, it would mean LADWP would be foregoing the cheapest, fastest, cleanest source of power available.

The problem with a ratepayer advocate is that you, the customer, probably care about more than just rates.

A ratepayer advocate may fight to keep rates down even if that means LA remains dependent on dirty coal.  LADWP has made great progress getting off coal: five years ago, the majority of your power came from coal.  Today, only 39% of your power is from coal.  In order to continue that progress, LADWP has to keep investing in clean energy technologies.  This is something that you may care about.  This is not something, however, that an advocate focused exclusively on short-term rate impacts will care about, which may put them at odds with LADWP’s efforts to move towards a new clean energy future.

A ratepayer advocate won’t care about creating new job opportunities in LA and stimulating our struggling local economy.  Investing in clean energy, including energy efficiency and rooftop solar, creates good jobs, right here in LA.  That might be something that you, a customer of LADWP and resident of LA care about, but a pure ratepayer advocate would not.

A ratepayer advocate might not care about LADWP’s long-term plan to provide secure, stable, and clean energy to the people of LA.  Responsible long-term planning requires hedging against future risks, including the likelihood that fossil fuel costs will continue going up.  If we suspect fuel prices will go up (the Energy Information Agency, generally conservative with their estimates, estimates that natural gas prices will rise almost 100% in the next 25 years and that coal prices could double over the same period of time), then we need to have an alternative plan in place.  That means spending money today to save more money tomorrow.  A pure ratepayer advocate might focus only on the short-term rates, and try to forestall investments in clean energy.  When we find ourselves locked-in to another generation of power plants that require increasingly expensive fossil fuels, the ratepayer advocate might encourage LADWP to look into cheaper alternatives, but by then we will already have wasted time and money.

A ratepayer advocate focused on cents per kilowatt-hour rates might not care about some of the other risks of staying dependent on dirty coal.  He or she might not care that the pollution from burning coal kills people.  A ratepayer advocate also might not care that coal can cost LADWP a lot of money down the line that does not show up on today’s balance sheet.  I’m talking about costly accidents at coal mines.  You’ve heard of the BP oil spill, and the Massey mine collapse in West Virginia, and the explosion on yet another oil rig in the Gulf just yesterday.  You may not have heard that LADWP had its own accident three years ago at Crandall Canyon in Utah that killed nine workers and rescuers.   After being sued, LADWP and its partners paid the largest settlement in Utah mining history to the families of those killed or injured.  You know who ultimately pays that cost of dirty fossil fuels?  You.

If LADWP is going to spend your money to pay for an advocate, that advocate’s mandate should be to represent you, the customer.