Although wholesale prices have moderated somewhat in recent months, the Los Angeles Department of Water and Power (LADWP) Wednesday gained approval from the city council to raise its power rates to cover higher natural gas costs. The action authorizes surcharges for the city-run utility, the nation’s largest municipal utility, whose base electric rates have been frozen for almost a decade.
The utility’s ability to pass on higher costs of fuel was frozen in the late 1990s at a time when the average cost of gas for LADWP was slightly less than $3/MMBtu. Last December, the city’s utility was paying as much as $15/MMBtu, and the utility said that the average price has fallen to $7 currently.
Under the surcharge approved by the city council, LADWP will make quarterly adjustments in retail rates — up or down — based on wholesale gas costs. LADWP General Manager Ron Deaton told council members before their vote that gas prices stayed relatively stable for a number of years before they became quite volatile in recent years.
In the LADWP power supply portfolio natural gas-fired generation makes up about 30%, with coal-fired generation from outside of California being its primary power source (48%). Nuclear and hydroelectric make up the rest (22%).
LADWP’s latest fiscal year 2006-07 budget estimated $2.5 billion in electricity revenues, and a projected cost for wholesale natural gas over the next 12 months of $444 million. During the next 10 years, the city utility expects its gas bill annually to range between $470 million and $367 million.
©Copyright 2006Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.
© 2020 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 |