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LADWP Proposed Renewable Portfolio Standard

Fact Sheet

LADWP is developing a Renewable Portfolio Standard (RPS) designed to increase the amount of energy it generates from renewable power sources to 13 percent of its energy sales to retail customers by 2010 and to 20 percent by 2017. The policy will provide a long-term framework to achieve the 20 percent goal without compromising power reliability or the financial stability of the Department and its customers.


Background

An RPS is a goal to generate a certain percentage of the energy delivered to the customer from renewable resources by a certain date. An RPS improves air quality and provides a sustainable energy resource. In 2002, the state Legislature approved SB 1078 requiring investor owned utilities (IOUs such as PG&E, SCE, SDG&E) to provide 20% of their energy from renewable resources by 2017. SB 1078 does not apply directly to the municipally owned utilities; however it does require those utilities to develop their own RPS. On June 29, 2004, the City Council approved a resolution supporting the concept, or “roadmap” for achieving a 20% by 2017.


RPS Proposal

The LADWP RPS “roadmap” or proposal includes the following key elements:
• Issuing a Request for Proposal (RFP) to develop and/or purchase renewable energy resources. Proposed development and/or purchase opportunities would be evaluated based on “least cost, best fit” technologies.
• Soliciting feedback from key stakeholders, including elected officials, labor unions, the environmental community, the business community and Neighborhood Councils.
• Completing an independent review of the RPS plan and subjecting the RPS to an annual compliance audit.
• Establishing a renewable surcharge to recover anticipated additional costs of renewable energy.


RPS Goals

• Integrate renewables into LADWP’s retail energy mix without compromising system reliability.
• Procure renewable energy resources for ownership and/or purchase, based on least-cost & best-fit technologies. Mitigate the financial impact on retail customers.
• Ensure LADWP’s financial integrity is maintained.
• Continue to encourage voluntary contributions from customers to fund renewable resources.
• Support and build on the 2000 Integrated Resource Plan objectives:
Reliable Service, Competitive Prices, and Environmental Leadership.


Eligible Renewable Resources

LADWP’s proposed RPS includes the following types of renewable resources: hydroelectric, biomass, biodiesel, digester gas, waste gas, landfill gas, solar thermal, geothermal, photovoltaics, fuel cells with renewable fuels, ocean wave technologies wind, and other renewables.

Under the state legislation, only “small hydro” (30 megawatts or less) is an eligible renewable energy resource. However, to help mitigate the impact of the RPS on ratepayers, city officials may decide to include LADWP’s four aqueduct hydro power plants, each of which has slightly more than 30 megawatts. If included in the RPS, these hydro facilities would add 1.8 percent renewables to LADWP’s existing portfolio. In addition, LADWP has 491 megawatts of capacity in the Hoover Power Plant, representing another 2.8 percent in potential renewable energy. If Hoover were also included in the RPS, that would bring LADWP’s current renewable generation to about 8 percent of its energy sales to retail customers.


Funding the RPS

For LADWP to develop a responsible and practical renewable energy policy, it must balance environmental objectives such as fuel diversity, energy efficiency and clean air against the Department’s core responsibility to distribute safe, reliable and low-cost energy to its customers.

The financial impact of meeting the 20 percent RPS goal will vary depending on the mix of resource types and associated costs. Generally, renewable energy costs more than traditional energy sources such as natural gas and coal. However, a diversified energy portfolio, including a larger mix of renewables, would also reduce the risks of price spikes due to fuel supply shortages and price fluctuations.

LADWP proposes to recover the costs for renewables by establishing a renewables energy surcharge to cover interconnection costs, transmission costs, renewable energy costs that exceed the cost of providing power from traditional sources, and renewable power procurement and administrative costs. Elements of the proposal include:
• A cap on what LADWP would pay for renewable energy at 7.0 cents per kWh, escalated annually at a fixed rate of 1.5% to cover inflation.
• A cap on annual increases in the renewables surcharge to customers at $0.001 per kWh.
• A cap on the cumulative lifetime surcharge at $0.0061 per kWh.
• Deferral of the renewables surcharge for first 3 years (through June 30, 2007).


For more information, please send an email to Renewables@ladwp.com.