Motion by Supervisor Zev Yaroslavsky

January 9, 2001

MOTION BY SUPERVISOR ZEV YAROSLAVSKY AND SUPERVISOR MICHAEL ANTONOVICH

California’s current energy crisis has serious financial implications for Los Angeles County government and the citizens it serves. As one of the top five single consumers of electricity in the state, Los Angeles County’s government has already been hit by a 17 percent increase in power costs, amounting to $10 million in this fiscal year. In addition, rate increases recently approved by the California Public Utilities Commission (CPUC), as well as other factors, are projected to impact the County's electricity budget by an additional $10 million this fiscal year. Much of this added cost will come at the expense of County services.

As a local government, the County has no regulatory authority over the power market. However, as one of the State’s largest consumers the County may be able to use its purchasing muscle to promote its electrical needs at lower costs than is available to it under current arrangements. Under deregulation, the County as a consumer can bypass utilities and enter into a direct access contract with power generators. The County could then purchase power directly from a private generator and not be subject to the turbulent hourly fluctuations of California’s power exchange spot market. Other large consumers, such as the University of California at San Diego have entered into such agreements, which mitigated the significant price increases experienced in San Diego, this past summer. As a large electricity consumer utilizing significant amounts of power during low demand periods at night and on weekends, when surpluses exist, the County would be an attractive direct access customer.

Moreover, similar arrangements between the County and municipal electrical utilities, which are not impacted by the State’s deregulation law, could be another source of more affordable power for County government. For example, the Los Angeles Department of Water and Power (DWP) currently serves the County’s electricity needs within the City of Los Angeles. However, under the State’s deregulation law, it is unable to provide electricity to the County in areas outside the DWP’s service area (approximately 2/3 of its electricity use) without jeopardizing the protection it has from deregulation. An amendment to State law, allowing municipal utilities to provide electricity service to neighboring public agencies, could be financially advantageous to the County, not to mention the Los Angeles Unified School District, the Los Angeles Metropolitan Transportation Authority, and others.

The County also owns numerous utility assets, including co-generation plants, standby generators and natural gas fields. The value of these assets has changed in the current energy marketplace, and their utilization by the County should be reassessed in light of what is taking place in the regulation, cost and generation of electricity and natural gas.

In light of the uncertainty of electricity cost and service, Los Angeles County should pursue policies that advance its own interests of minimizing electrical costs and disruption of public services. The County, acting alone or in conjunction with other public agencies, should explore all available options in this regard.

WE, THEREFORE, MOVE that the Board of Supervisors direct the Internal Services Department (ISD), Chief Administrative Office (CAO), and the County Counsel, in collaboration with the Departments of Public Works and Parks and Recreation, to:

Provide an analysis and timetable on the advisability of the County obtaining its electricity directly from private power generators through the issuance of a request for proposal for a direct access contract for electricity.
Promote and support legislation in the current special session of the legislature that would permit municipal utilities to enter into agreements with neighboring public agencies for the provision of electricity service. Explore agreements with the Los Angeles Department of Water and Power to provide electrical service to County facilities outside the City of Los Angeles, assuming current barriers to such agreements are removed through State legislation, and assuming such agreements are financially advantageous.
Explore agreements with other municipal electricity providers for the provision of electricity to County facilities if such agreements are financially advantageous.
Re-evaluate the County’s numerous utility assets, including its co-generation plants, standby generators and natural gas fields, in order to fully utilize their potential within the current and future utility marketplace.
Report to the Board of Supervisors within 30 days on the progress being made on these objectives.