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Critics say DWP risks lockout in looming green energy grab

Unless the DWP moves quickly to lock in contracts with alternative energy providers, it risks paying exponentially higher rates for green power to meet a 2010 deadline to double its renewable energy supply. Despite assurances from the Department of Water and Power, some city leaders are skeptical the utility will be able to meet and sustain the 20 percent renewable energy mandate set by Mayor Antonio Villaraigosa. ...customers are already paying more to cover the transition to green power. The DWP can and has tacked on a surcharge of as much as 4 percent a year to customer bills to cover renewable energy and natural gas expenses.

Unless the DWP moves quickly to lock in contracts with alternative energy providers, it risks paying exponentially higher rates for green power to meet a 2010 deadline to double its renewable energy supply.

Despite assurances from the Department of Water and Power, some city leaders are skeptical the utility will be able to meet and sustain the 20 percent renewable energy mandate set by Mayor Antonio Villaraigosa.

And they worry that as the deadline draws near, the utility will be competing with other agencies across the state for solar, geothermal and wind power at premium prices.

Water and Power Commissioner Wally Knox said he is concerned that the DWP's current plans assume at least five major green power projects will come on line during the last six months of 2010.

But because some of those might fail to deliver, Knox said the DWP should look in and out of state for providers willing to sell futures contracts guaranteeing prices at more reasonable rates.

"My concern is that more (projects) will fail than we anticipated," he said. "If our projects fall short at the very end, everybody knows we'll go into the market and start purchasing green renewable energy. It is entirely... more [truncated due to possible copyright]  

Unless the DWP moves quickly to lock in contracts with alternative energy providers, it risks paying exponentially higher rates for green power to meet a 2010 deadline to double its renewable energy supply.

Despite assurances from the Department of Water and Power, some city leaders are skeptical the utility will be able to meet and sustain the 20 percent renewable energy mandate set by Mayor Antonio Villaraigosa.

And they worry that as the deadline draws near, the utility will be competing with other agencies across the state for solar, geothermal and wind power at premium prices.

Water and Power Commissioner Wally Knox said he is concerned that the DWP's current plans assume at least five major green power projects will come on line during the last six months of 2010.

But because some of those might fail to deliver, Knox said the DWP should look in and out of state for providers willing to sell futures contracts guaranteeing prices at more reasonable rates.

"My concern is that more (projects) will fail than we anticipated," he said. "If our projects fall short at the very end, everybody knows we'll go into the market and start purchasing green renewable energy. It is entirely likely there will be a scramble in 2010 for short-term renewable energy."

The DWP currently has 11 renewable projects - small hydropower plants, contracts for wind farms, landfill gas-to-energy plants and a deal for geothermal power in Mexico - that generate 10 percent of the city's power supply.

About seven projects are under construction that would boost the green power supply by 5 percent. Nearly a dozen other projects are planned or under negotiation that could deliver an additional 10 percent of green power.

Knox, who chairs the commission's oversight committee on renewable energy, has pushed DWP General Manager H. David Nahai to develop a backup plan to buy more green power now in case crucial renewable energy projects get delayed.

Nahai said the DWP has a "comfortable cushion" of projects and power-purchase contracts in place so the utility should have 25 percent renewable energy in place by the end of 2010.

"Nobody thinks every single project we're looking at will proceed smoothly without issues," Nahai said. "The cushion is there to provide the comfort that we will make that 20 percent goal. Even if the cushion is cut substantially, we still have the ability to go into the market and purchase short-term green energy."

But Nahai acknowledges that challenges remain.

The 20 percent goal is a moving target. The utility will have to buy more green power to maintain the one-fifth if Angelenos continue to consume more and more electricity - through the summer, the utility repeatedly hit record energy use.

And the financial crisis, with bank failures and reluctance of lenders to loan money, has put a crimp in some renewable projects that were in the development stage.

A wind farm in Utah that was financed by the failed investment bank Lehman Brothers needs to find new underwriters and investors to proceed or it could fall off the utility's project list, Nahai said. In response, he's asked staff to re-evaluate the financing on all of the DWP's green power projects to make sure they're stable.

"What had not been predicted is the tumult in the markets and how that will affect all of us," Nahai said. "It's not something that is clear yet."

DWP officials also can't say how much they'll have to spend to reach 20 percent renewable energy by 2010, although Nahai said the utility will be able to meet the goal without further raising base power rates, which were hiked 5.8 percent this summer and will go up 2.9 percent in July 2009.

But customers are already paying more to cover the transition to green power. The DWP can and has tacked on a surcharge of as much as 4 percent a year to customer bills to cover renewable energy and natural gas expenses.

Neighborhood council activist Jack Humphreville said that is another reason his group has been pushing for a ratepayer advocate - to monitor the expenses of green power and to ensure the costs don't become a burden to ratepayers.

Villaraigosa's aides argue that buying more green power is no longer a choice - state laws aimed at slowing global warming require utilities to cut their greenhouse gas emissions. The DWP gets half its electricity from coal power plants that spew tons of pollution.

The renewable energy goal has been the centerpiece of Villaraigosa's green platform.

Originally, in 2004, the City Council and former Mayor James Hahn set a goal that 20 percent of the city's electricity supply would come from clean, renewable sources by 2017.

But after he was elected mayor, Villaraigosa had his appointees to the Board of Water and Power Commissioners push the 20 percent deadline up to 2010, and the mayor set a goal of 35 percent by 2020.

Villaraigosa said his commissioners should be scrutinizing the DWP's progress.

"They're doing their job. They've got to push the agency to develop the secondary plans to ensure that we meet our goal," he said. "I made a promise, and I'm going to do everything I can to keep it. We'll have to make the appropriate decisions to ensure that we reach that goal."

That was seen as particularly ambitious at the time, but the California Public Utilities Commission later required investor-owned utilities, such as Southern California Edison and Pacific Gas & Electricity, to meet the same goal.

Edison is now at 16 percent renewable energy, but company officials said they are still struggling to reach 20 percent.

"We have under contract far more than 20 percent," said Stuart Hemphill, Edison's vice president of renewable and alternative power. "The big challenge is getting renewable projects to deliver."


Source: http://www.contracostatimes...

OCT 19 2008
https://www.windaction.org/posts/17547-critics-say-dwp-risks-lockout-in-looming-green-energy-grab
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