Introduction to LADWP Electric & Water Rates

Introduction to LADWPElectric & Water Rates Rate Applications Group LADWP Rates & Contracts July 2014

Electric and Water Rates - Introduction • Rates are designed to reflect DWP costs • Designed to reflect the costs incurred for all aspects of providing electric and water service for the city • Rates are set by ordinance • Designed by DWP staff, with input from consultants • Reviewed thoroughly by the independent Ratepayer Advocate • Submitted to the Board of Water and Power Commissioners • Approved by the Los Angeles City Council • Rates are applied based on DWP rules and policies

Electric Rate Overview • Electric bill line items: • Service charges or minimum charges • Energy charges (tiered or TOU) – applicability set by ordinance • Demand charges (commercial only) • Other line items: capped: ECA, ESA, RCA adjusted quarterly: VEA, CRPSEA, VRPSEA adjusted annually: IRCA • City and state taxes

Electric Rate overviewResidential • Rates are designed to encourage conservation • Line items are either fixed by ordinance or adjusted seasonally or quarterly • Base rates are seasonal • High Season is June 1 – September 30 • Low Season is October 1 – May 31 • Bill consists of kwh charges and taxes • DWP charges are per kwh • Taxes are imposed by governing bodies • City tax is 10% of the DWP subtotal • State tax is per kwh

Electric Rate OverviewResidential • Standard rate (R-1A) overview: • Tiered rates are determined based on basic usage requirements for residential DWP customers • Tiered rates are in effect year-round • Zone 1 customers receive 350 kwh per month on Tier 1 and another 700 kwh per month on Tier 2. Excess kwh are billed on Tier 3 • Zone 2 customers receive 500 kwh per month on Tier 1 and another 1000 kwh per month on Tier 2. Excess kwh are billed on Tier 3 • Kwh totals are doubled on bi-monthly bills

Electric Rate OverviewResidential • Optional rate overview: • Time of Use (TOU – Rate B) is available when a TOU meter is present • Low Income Discount (Rate D) and Lifeline (Rate E) provide a flat discount from a bill calculated on the Standard Rate • Low Income for customers who meet income requirements • Lifeline for customers who meet income and other requirements • Customers are not allowed to be billed on more than one rate; i.e., a customer cannot be billed on the TOU rate and on the Lifeline rate at the same time • Customers on any of the optional rates may opt out at any time

Electric Rate OverviewResidential • Optional TOU rate R-1B: • Peak rates are higher June – September • All kwh usage is billed on the base, low peak and high peak effective rates • Tiered rate structure is not used under TOU • Recommended for customers who can control their energy usage, high kwh users and solar customers • Also recommended for customers with electric vehicles. Base kwh usage is discounted when charging consumption is metered separately • Not recommended if 2 month consumption averages less than 2000 kwh, or if summer usage is higher due to high AC usage • A customer who opts out of TOU may not return to TOU until 12 months have elapsed

Electric Rate OverviewResidential Residential TOU – some important points to remember: • Meter availability is limited, and DWP has discretion over which customers will receive them • Not every customer who requests a TOU meter will get one • Solar and EV customers have priority • Customers can opt out of the TOU rate at any time, but they cannot return to the TOU rate until 12 months have elapsed • After a TOU meter has been installed, it will remain at the customer’s location on a permanent basis, and the old meter cannot be returned

Residential Rates – Q & A • Q: why are my rates so high? • A: DWP residential electric rates are among the lowest in CA • Q: why is my bill so high? • A: The bill is based on consumption as recorded by the electric meter. The usage should be analyzed to check for consistency, seasonal variations, or anything that may appear unusual • Q: why are there so many line items? • A: Every line item represents a specific cost that is incurred by DWP as it provides electric service • Q: why did my rate go up in the summer? • A: Seasonal rates are in effect June – September. This is not an increase: it is simply a seasonal variation • Q: I have solar – why do I still get a bill? • A: All customers receive an electric bill, even if there is no consumption. Every customer incurs costs of service (for billing, meter reading, etc), even if the usage is low or negative • Q: why don’t my regular and solar bills agree? • A: The solar statement supersedes the regular bill because it shows credits and numbers that the regular bill is unable to display • Q: I have solar, so why am I not on TOU? • A: The TOU rate is optional, not mandatory. Customers must request it in writing

Electric Rate OverviewCommercial • Bill consists of kwh and kw components • Kwh line items refer to energy components • Kw line items refer to demand components • Facilities demand represents the highest kw read during the previous 12 months • Customers using more than 250 kw demand also pay reactive energy (kvar) charges • City tax is 12.5% of the DWP subtotal • State tax is per kwh

Electric Rate OverviewCommercial • Rate is determined based on the Facilities kw demand and the service voltage • A1: demand is less than 30 kw • A2: demand is greater than 30 kw, service voltage is 4.8 kv • A3: demand is greater than 30 kw, service voltage is 34.5 kv • A4: demand is greater than 80 Mw, service voltage is 138 kv • CG, XRT eligibility requires separate analysis and special DWP approval • OAL, LS and TC are unmetered and billed off system • There is no “clean and show” rate • TOU is optional for A1, mandatory for A2 and A3 • Demand meters are installed at DWP’s discretion • There is no separate solar commercial rate

Commercial Rates - components • The electric bill consists of service charges, kw charges, kwh (and kvar) charges, and taxes. (Please note: these terms are defined and explained in the ordinance, which is posted on the DWP website) • Kwh charges: • Energy charges • ECA, VRPSEA, CRPSEA, VEA • State tax • Kw charges: • Facilities • Demand • ESA, RCA, IRCA • Reactive (Kvar) charges (only with minimum 250 kw): • Nonexistent on Rate A1 • Per kvar when kvar is metered • Per kwh when kvar is unmetered

Commercial Rates Q & A • Q: why is my bill so high? • A: The bill is based on kwh usage and kw demand. Billing history should be analyzed to determine if there are any inconsistencies or any other information that may indicate there is a possible error • Q: why is the commercial rate so high? • A: DWP commercial rates are competitive with those of neighboring utilities • Q: why is my demand charge so high? • A: Demand is a major component of the bill. A relatively high demand and low kwh usage will have disproportionally high demand charges • Q: why do I have to pay a facilities charge? • A: Facilities represents another main component of the bill – it is not optional • Q: why is the facilities charge for a whole year? • A: This is a rate ordinance requirement. The kw read helps DWP determine the service size and transformer requirements of equipment that serves multiple customers • Q: why are my reads multiplied by a k constant? • A: A meter with a k multiplier is designed to read higher volumes of kwh and kw. This provides DWP with an opportunity to bill more accurately • Q: why am I being billed on the A2 rate, even though I haven’t exceeded 30 kw? • A: This can be corrected retroactively by Rate Applications • Q: where are my commercial solar credits? • A: These will be present if the net energy kwh total is negative. The primary benefit provided by a commercial solar installation is to benefit a customer in a similar manner as any other energy efficiency project – by reducing kwh usage

Electric rates – more general Q & A • Q: there is no way this bill is correct. How can I challenge the meter reads? • A: The DWP representative should try to help the customer determine why the reads may be relatively high, as well as check for historical consistency. The customer may also request a field investigation • Q: my bill went up when you replaced my meter. How can I get my old meter back? • A: Meters don’t use energy – they are simply recording devices. In most cases, the old meter is no longer available • Q: why are my taxes, sewer charges, and trash fees so high? • A: These bill components are controlled by the City Bureau of Sanitation. DWP is only the billing agent • Q: why do I have to pay a “cost adjustment?” • A: The term “adjustment” indicates that this particular billing component may be adjusted quarterly. The ECA is not a surcharge or a bill correction. It is a main component of the bill that represents certain variable costs and DWP programs • Q: my service is a residence. Why am I on the commercial electric rate? • A: The A1 rate applies to common area meters serving 2 or more units. This determination is made by providing a meter survey in the field • Q: why haven’t I received the TOU meter I requested? • A: TOU meters are installed based on availability. When TOU is optional and not mandatory, DWP has the discretion to determine meter installation priorities • Q: how can I lower my electric bill? • A: By identifying energy usage and demand characteristics in order to manage costs, and by using electricity as efficiently as possible. There is a lot of valuable and useful energy efficiency information on the DWP website

Water Rate Overview • Rates are designed to encourage conservation • Line items are either fixed by ordinance or adjusted seasonally or quarterly • Bills are based on HCF usage • 1 HCF = 748 gallons • Sewer charges are also present on DWP bills but are controlled by the City’s Bureau of Sanitation

Water Rate Overview • Rate A: single family residential • Rate B: multi-family residential • Rate C: commercial • Rate D: recycled/reclaimed water • Rate components set by contract • Rate E: fire service • Bill amounts determined by size of service • Rate F: large turf for public usage

Water Rate Overview • Residential and commercial water rates are tiered and designed to encourage conservation • Currently a two-tiered billing system • Residential Tier 1 allocation: • Fixed by ordinance and seasonal • Based on customer lot size and ZIP code • Can be increased based on household size • Multi-family and Commercial Tier 1 allocation: • Based on the customer’s own average winter usage (December – March) • Original data used by DWP is from 2007-09, but we can also use the most current winter period • New customers are billed 100% on Tier 1 until a winter average is determined • Can be reevaluated on a case-by-case basis if customer circumstances change substantially

Water Rate Overview • Water bill line items: • Commodity charges – set by ordinance • General Provisions – adjusted quarterly • F: Water procurement factor (purchased water) • G: Water quality factor • H: Water revenue adjustment factor • I: Water security adjustment • K: Owens Valley regulatory adjustment • L: Low Income • Sewer charges – itemized separately on the “City Services” portion of the bill

Water Rate Overview • “Shortage Year Rates” – introduction • Enacted by ordinance in 2009 • Reduces Tier 1 allocation across all rate classes • We are currently under a 15% declared shortage • Provides for year-round tiered rates • Normal year: Tier 2 rates in effect in High Season (June 1 – October 31) • Shortage year: Tier 2 rates in effect year-round

Water Rate Overview – some important points to remember • Recent years have seen our pass-through components continue to rise • DWP cannot control the increasing costs for water purchased from outside of our system • Residential Tier 1 allocation can not be adjusted • Commercial and multi-family Tier 1 allocation may be adjusted based on more recent average winter usage (on a case by case basis) • While DWP does not have control over sewer rates, DWP can help customers lower their sewer costs with the installation of a private water sub-meter

Water rates Q & A • Q: Why have water rates been increasing so much? • A: the current state-wide drought has caused our Purchased Water component to increase • Q: why are we still using Shortage Year rates? • A: the Shortage Year declaration is made by the Mayor’s office • Q: can I get an adjustment on my Tier 2 charges when I refill my swimming pool? • A: the Water Rate Ordinance does not allow for adjustments when filling a pool, but the City may grant a credit on sewer charges • Q: will I get fined if I water during the middle of the day? • A: not likely, because our field staff tries to educate and give warnings before enacting penalties for excessive usage • Q: when my bill has both High Season and Low Season usage, why isn’t the bill prorated more fairly? • A: DWP uses a Daily Average when calculating prorated bills. When a bill has High and Low Season usage, there is a High Season daily allocation as well as a Low Season daily allocation • Q: can I get a lower water rate when I plant more drought-friendly landscaping? • A: the rate cannot be lowered, but the customer will still save by using less

Electric and Water Rates Overview - Conclusion • In general, DWP’s residential electric rates are competitive with other municipalities and lower than private utilities • In general, DWP’s commercial electric rates are competitive with neighboring utilities • In general, DWP’s residential and commercial water rates are competitive with neighboring utilities • Like other utilities, DWP rates will probably continue to increase in the future • DWP will continue to offer efficiency programs to help mitigate those future cost increases

Introduction to LADWP Electric & Water Rates