Clean Power, Good Jobs - RePower L.A

February 2012

Clean Power, Good JobsRealizing the Promise of Energy Efficiency in Los Angeles


laane: a new economy for all1

Table of Contents

Foreword 2By Phaedra Ellis-Lamkins, Chief Executive Officer, Green For All

Executive Summary with Recommendations 3

Introduction: Energy and the Future of Utilities 6

Our Local Utility: Los Angeles Department of Water and Power 7

Utility Challenges 9

Energy Efficiency 14

Making Buildings Energy Efficient 19

Recommendations 24

References 25

Prepared by Cynthia Strathmann for RePower LA



laane: a new economy for all laane: a new economy for all2 3

ForewordBy Phaedra Ellis-Lamkins Chief Executive Officer, Green For All

Economies evolve. Failed and failing markets are

inevitably replaced – but never without tension.

We’re in just such a moment of tension. Traditional

sectors of employment are generating fewer jobs

with worse salaries and benefits. At the same

time, our old, dirty sources of energy are growing

more expensive as we continue to learn about the

myriad ways they damage our economy and our

environment.

This report establishes a strong new argument for

how we move forward. That it comes from Green

For All’s long-time partners at LAANE should

come as a no surprise; their unparalleled work

on analyzing trends and advocating for smart

economic policy primes them well for the argument

made here. We know what the next economy looks

like. It’s cleaner, greener, smarter. And we know a

place perfectly poised to jumpstart that economy:

Los Angeles.

While discussions of pollution in Los Angeles often

focus on transportation, a huge amount of energy

is consumed by using electricity in buildings – and

that energy is usually produced in heavily polluting

coal plants.

Changing that is important, but it’s also in the hands

of the utilities that provide the power. We must

challenge them to be at the forefront of addressing

our pressing environmental challenges. To do

this, they must change the way they do business.

They must shift from fighting to protect artificially

low costs of production to forward-looking green

energy generation and distribution - and they must

address energy use by consumers.

In making this transition, Los Angeles can lead.

The Los Angeles Department of Water and Power

(LADWP) is the largest municipally owned utility

in the country. It has the size and influence to be

a model for other utilities around the country, and

as an entity owned by the city the Department

of Water and Power has a moral and financial

obligation to pursue a path that will prepare

residents and infrastructure for the future, instead

of managing the past.

We know how to do this, and the role we can

play in easing the transition for LADWP. Building

efficiency upgrades such as cool roof installation,

lighting swaps, and air conditioning tune-ups will

substantially lower power use, decreasing the

costs the utility incurs generating energy and the

costs customers incur when they buy it. Keeping

customer bills low should be a top priority for the

LADWP - particularly now. And energy efficiency

work can also create quality jobs in hard-hit

communities, as shown by RePower LA.

This report outlines how we get there, how we put

LA residents to work improving local buildings so

that they are more energy efficient, thereby helping

the utility meet many of its own needs. It will lower

the utility’s power generation expenses and help

them comply with new environmental regulations.

At the same time, the jobs created by this policy will

offer people a career path in the utility sector and

a chance to pursue rewarding work, work that can

support a family and revive our local economy.

LADWP can and should become a model for

utilities around the country, demonstrating the

value of efficiency work for meeting new challenges

and transforming utilities into cleaner, greener

entities that will play a crucial role in our energy

future.

Transition is hard but inevitable. We know what

tomorrow’s economy looks like; we’ve just been

trying to figure out how to get there. This report

outlines a key path that will position Los Angeles as

a leader – while putting its citizens to work.

Executive Summary with RecommendationsUtilities around the country are facing serious

challenges, including an aging infrastructure and

a need to transition to cleaner energy sources.

These challenges are particularly evident at the Los

Angeles Department of Water and Power (LADWP),

the nation’s largest municipally owned utility.

The LADWP can begin to meet these challenges

by adopting an innovative and ambitious energy

efficiency policy with new programs that save

customers money, reduce greenhouse gas pollution,

and create good jobs. In doing so, the LADWP

will take a significant step towards modeling

a transition all utilities must make, from being

entities concerned solely with the rapid acquisition

and dispersal of natural resources to agencies

proactively engaged with energy planning and

management.

Findings:The Los Angeles Department of Water and Power,

like other utilities around the country, faces

serious challenges:

• Economic and population growth, technological

changes, and climate change will fuel increased

energy use. A study recently done for the

LADWP predicts that electricity consumption

in Los Angeles will rise by more than 10%

between 2010 and 2020 1. To meet this demand,

the LADWP will have to make substantial

investments in building a stronger and more

secure infrastructure to generate and distribute

power.

• Environmental regulations and rising fossil

fuel costs will require utilities to make new

investments in clean energy. Los Angeles

generates over a third of its electricity by

burning coal, a very dirty energy source. New

state-level regulations addressing climate

change will require the LADWP to get 33%

of its electricity from cleaner but more costly

renewable sources by 2020.

• Without substantial investments in maintenance

and repair, aging infrastructure will lead to

decreased reliability in the delivery of power

and water. Not only must the LADWP build new

infrastructure to produce clean power, its current

infrastructure is in dire need of repair and

replacement. For example, the typical lifespan of

a wooden utility pole is only 40 years2, but 75%

of the LADWP poles are older than that3.

• Los Angeles has many older buildings that do

not use energy efficiently. In the United States,

70% of electricity is used in buildings4. Building

efficiency has improved dramatically with new

building codes instituted in the 1970s, but

housing stock in Los Angeles is, on average,

45 years5 old and pre-dates those codes. The

electricity generated by new investments in

clean power will be squandered in out-of-date

buildings unless those buildings can be made

more efficient.

• Faced with an aging workforce, utilities around

the country are struggling to replace skilled

workers. The U.S. Bureau of Labor Statistics

reports that 53% of the utility workforce is 45 or

older, compared to only 42% of the workforce

as a whole6. The LADWP must train a new

generation of workers with the skills to both

maintain the current system and meet the needs

of a 21st century utility.

• The LADWP invests less and achieves lower

savings through energy efficiency programs

than other California utilities. Although the

LADWP has an excellent track record of

providing reliable power at reasonable prices,

the LADWP invests less in energy efficiency and

has lower saving goals than other comparable

utilities. It recently set a savings goal for the next

ten years (8.5% of consumption) that is less than

the goal of 10% a year set by state law and saves

less energy than neighboring utilities.




Well-designed energy efficiency programs can

help utilities save customers money on their bills,

decrease utility infrastructure costs and create job

pipelines for qualified workers.

• Energy efficiency is a cost effective way for

utilities to meet electricity demand generation

while keeping power generation costs down.

The LADWP’s current energy efficiency

programs cost the LADWP four cents per kwh7,

compared to an average cost of over five cents

per kwh8 for power as a whole. Programs that

lower energy use during “peak” periods, like

very hot summer days when many people have

their air conditioners on, are especially cost

effective for the utility.

• Energy efficiency can help utilities transition to

clean energy sources. Efficiency is the cleanest

source of power available. By increasing

efficiency, utilities can reduce their production

of “dirty” energy. With aggressive energy

efficiency programs, the LADWP could achieve

a 15% reduction in power consumption by 2020.

• Energy efficiency programs that improve

buildings can boost the local economy by

lowering bills for customers. Building upgrades

typically help consumers save between 15 and

20% on their bills, and those savings return

to the local economy and insulate residents

from the effects of rate increases. With energy

efficiency measures in place, some small

businesses could save hundreds or thousands

of dollars each year and use that money to buy

new equipment or pay workers more.

• Energy efficiency programs create local jobs.

Building upgrades generate three times as many

jobs as investments in coal9, jobs that are all local.

• Energy efficiency programs can be a vehicle

for training future utility workers. LADWP and

IBEW Local 18’s new Utility Pre-Craft Trainee

position is an 18-month traineeship that, while

outside of the civil service, provides a pathway

to careers in the utility, where over a third of

workers are of retirement age. A pilot building

upgrade program is already in place that is

putting these trainees to work upgrading homes

of low-income customers under the supervision of

highly trained journey level workers.


should increase its energy efficiency investment

and goals to be at parity with similar utilities

and in alignment with state goals. The utility

needs a policy that spurs the development of

energy efficiency programs that produce verifiable

benefits, serve hard-to-reach customers, create a

pool of qualified workers, and have mechanisms

in place to ensure that ratepayer money is funding

quality work. The policy should:

• Set an energy efficiency goal to reduce

consumption 15% by 2020. This commitment

by the LADWP would put it in alignment with

the goal set by state law while spurring it to

invest in programs that ramp up over time and

that provide customers with certainty about

both savings and the availability of energy

efficiency services.

• Provide broad benefits. The policy should

ensure that energy efficiency services are

received by customers who need them the

most, and work done under the policy should

create good, career-path jobs and improve Los

Angeles’ historically inefficient building stock.

• Treat energy efficiency as the power resource

it is. The LADWP should develop measurement

and verification systems for energy savings that

let it count on those savings when planning

for the city’s future energy needs and should

reinvest those savings into energy efficiency

programs.

• Build new capacities that can bring energy

efficiency work to scale. The LADWP should

develop the ability to do more face-to-face work

with customers, and also explore mechanisms

that leverage outside financing to encourage

building owners to pursue energy efficiency

work on their own.

Projected Benefits of the LADWP’s Building Upgrade Programs

RePower LA asked sustainability consultants Haig Barrett to illustrate the benefits a new suite of energy efficiency programs could provide given a particular initial investment. Program components include free energy efficiency assessments, weatherization for low-income housing, HVAC (heating, ventilation, and air-conditioning) tune-ups, cool roofs, rain barrels, and turf replacement. Carbon dioxide pollution would be greatly reduced — every year the program was in place it would be like taking 10,000 cars off the road. Over the lifetime of the measures, customers would save over $500 million and the utility would save over $300 million. By year four 1,600 sustainable jobs would be created. (This number refers to a mix of permanent and temporary — but career-track — positions and does not include the indirect benefits of local investment in energy efficiency.)

Table 1

Benefits from Investing in Energy Efficiency

Year 1 Year 2 Year 3 Year 4

Annual Investment $29,204,614 $52,413,262 $69,581,680 $83,066,380

Customer Savings* $95,583,553 $112,244,503 $142,159,706 $173,800,247

Financial Benefits for

the LADWP*$37,002,017 $82,655,545 $91,115,288 $111,346,805

Avoided CO2 Production

(metric tons)*461,921 543,436 687,447 847,760

*Over the lifetime of the measures.

Source: Haig Barrett Sustainovation

Group (January 2012) The Case for

Expanded Energy Efficiency Programs and

Workforce Development at the Los Angeles

Department of Water and Power




communities they serve than privately held utilities,

and the LADWP is unusual even among these

because of the control it exerts over its resources

and because of its unusually large size. It is in a

unique position to explore bold new initiatives

that address its challenges. In the future, utilities

must move from being entities that procure as

many natural resources as they can and then

distribute them as cheaply and quickly as possible

to organizations that engage in thoughtful planning

and management of resource distribution. The

LADWP should seize this opportunity to proactively

address its own problems and in doing so become

a national leader in the re-formation of the utility

sector.

Los Angeles at Night

Introduction: Energy and the Future of Utilities The need for vast amounts of energy is a defining

feature of modern life, and concerns about securing

energy have been a driving force in local and global

politics for decades. Energy acquisition will only

increase in importance as populations grow and

our supplies of primary energy sources like oil and

coal diminish. Currently the United States consumes

40% of its energy in the form of electricity10, the

overwhelming majority of which is delivered

by utilities.

Utilities have provided us with energy and water

for over 100 years, building a vast infrastructure of

transmission wires and pipelines. Sprawled across

the landscape or tunneled deep underground

these networks have provided

the silent underpinnings of

prosperity, feeding the

growth of our cities and

providing the basic fuel for

America’s economy.

Now American utilities find

themselves at a crossroads

as they face new economic,

social, and environmental

conditions. This is particularly

evident at the Los Angeles

Department of Water and

Power (LADWP) as the

Department faces a series

of interrelated and serious

challenges in the coming

years, including an aging

infrastructure, pressing

environmental issues, and a

workforce nearing retirement.

These are common problems,

shared by utilities around the nation11.

The LADWP differs from most other utilities,

however, because it is publicly-owned and because

it has enormous financial and logistical influence.

Public utilities must be more responsive to the

The LADWP is a municipal utility — owned by

the citizens of the city — and is a proprietary

department of the City of Los Angeles. It is governed

by a board of commissioners who are appointed by

Our Local Utility: Los Angeles Department of Water and Power

the mayor and confirmed by the city council for five

year terms. It was founded in 1902 to deliver water

and began delivering electricity in 191612.

The LADWP serves over four million people13

through 1.46 million electric and 680,000 water

connections14. The Department provides Angelenos

with 77 million kilowatt-hours of electricity and

450 million gallons of water15 every day (and two

times that amount of electricity on hot summer

days). The Department’s 2010–2011 budget was

over four billion dollars and they employed over

9,000 people16. It has 3,655 miles of transmission

lines that comprise 27% of the California grid17,

and has a profound impact on resources across

the west, drawing water from around California

and electricity from as far away as Utah and the

Washington border.

The LADWP is the largest municipally owned public

power system in the country18. Municipally owned

utilities are utilities that are owned and operated

by a city or town. Unlike investor owned utilities

(often called IOUs; Southern California Edison is

an example) public power systems are not-for-

profit organizations that do not pass money on to

stockholders or investors. On average, public power

systems provide 15% more revenues to state and

local governments, through in-lieu-of-tax payments,

than privately owned power systems provide

through taxes. At the same time, public power

systems have rates that are an average of 14% lower

than private power suppliers. There are over 2,000

public power systems in the United States serving

46 million people19. Historically, the LADWP has

been vertically integrated, meaning that it owns and

operates most of the generation, distribution, and

transmission systems that supply Los Angeles

with electricity20.

In this report we focus on the LADWP’s challenges.

These challenges have often led, directly or




The cost of power interruptions can be significant. One study estimates that, on average, a sustained

interruption (defined as an interruption lasting longer than five minutes) costs a commercial customer

$1,067 and an industrial customer $4,22725.

indirectly, to public criticism of the

Department, but at the same time one

should remember that the LADWP

has successfully supplied the city with

power and water at reasonable rates

and in a reliable manner for almost a

hundred years; in fact it is more reliable

and less expensive than many of the

surrounding utilities.

Jawbone Siphon in the Mojave Desert Courtesy of Los Angeles Dept. of Water & Power

Table 2

The LADWP is Relatively Reliable and Inexpensive

2010 PG&E (%)Southern California

Edison (%)

Additional service interruptions per customer per year (compared to LADWP). 71% 37%

Additional cost in cents/KwH for residents (compared to LADWP). 23% 20%

Rates for the DWP are for 2010/2011 21, 22, 23, 24.

Utility ChallengesAging InfrastructureUtilities around the country are concerned

that aging infrastructure will negatively impact

reliability26, and in Los Angeles infrastructure

issues present the Department with serious and

immediate challenges. To illustrate, the Haynes and

Scattergood Generating Stations, both of which are

fueled by natural gas, have units that are between

43 and 52 years old27 and must be replaced.

In addition to these types of large projects the

LADWP must also attend to basic maintenance

issues. For example, the typical lifespan of a

wooden utility pole is only 40 years28, but 75% of

the LADWP poles are older than this29; the average

age of a LADWP wooden distribution pole is about

55 years30. The Department is not currently able to

rectify this, at its current pace the Department can

only replace power poles once every 149 years31.

The water infrastructure also has problems. In

recent presentations on their current budget

situation LADWP personnel have said that they

can only afford to replace water pipelines once

every 400 years. The average

lifespan of a pipe is 100 years, and

in Los Angeles 700,000 feet of

pipe are already over 100 years

old. The LADWP has argued

that this rate of replacement is

not sustainable32, and while the

Department has been attending

to the situation, high profile water

main breaks have amply illustrated

the magnitude of the problem.

New Renewable InfrastructureIn addition to replacement and maintenance, the

LADWP will have to pay for improvements to the

power and water systems that are required by new

regulations ensuring clean water and air. The cost

of these adds up; the Department has estimated

that “water and power combined need to invest

$1.5 billion each year over the next five years to

provide safe and reliable service, and to pay for legal

mandates”33.

Rising Fossil Fuel CostsAlmost half the electricity in the country

comes from coal-fired power plants34,

and 39% of the electricity used in Los

Angeles comes from burning coal at

two large power plants, Navajo and

Intermountain Power Plant (IPP), located

in Arizona and Utah. In an independent

review of proposed changes to rates and

other customer costs at the LADWP, the

outside firm PA Consulting noted that

“Coal prices are projected to increase

substantially over the next five years,

especially at IPP”35, a prediction also

reported by the U.S. Department of

Energy which notes that coal prices are

expected to increase in the western and

interior states at a rate of 1.1% a year from

2009–203536. Scattergood Generating Station Courtesy of Los Angeles Dept. of Water & Power




Environmental IssuesLargely because of L.A.’s reliance on coal-fired power plants, electricity generation accounts for about a

third of Los Angeles’ CO2 emissions38,39. In Los Angeles over a thousand pounds of CO2 is produced for

every MWh hour generated and the city uses about 25 million MWh a year40. Carbon dioxide emissions are

a large component of greenhouse gases and greenhouse gases are a key cause of climate change.

Climate change is expected to have a profound effect on our environment. The California Energy

Commission writes that impacts in California include “sea level rise, increasing temperatures, shifting

precipitation trends, extreme weather events, increasing size and duration of wildfires, and earlier melting

of The Sierra Nevada snowpack41.” In Los Angeles we should expect a four to eight fold increase in heat wave

days by the end of the century.42

Figure 1

LADWP Energy Sources for 201037

39%Coal

24%Natural Gas

20%Renewables

10%Nuclear

5%Hydro

1%Energy Efficiency

1%Other

The State of California is already acting on

concerns about climate change and the Global

Warming Solutions Act of 2006 (AB32) includes

a requirement that greenhouse gas emissions be

reduced to 1990 levels by 202044. The LADWP’s

coal-fired plants account for 70% of the utility’s

greenhouse gas production45. Decreasing the

production of greenhouse gases means that the

LADWP will have to find different, cleaner sources

of energy. This need for clean energy is underlined

by separate state requirements that utilities increase

their use of renewable energy to 33% by 202046.

(Renewable energy sources can be replenished and

produce far less greenhouse gases than burning

fossil fuels. The five most common are biomass,

hydropower, geothermal, wind, and solar.)

The California Global Warming Solutions Act built

on the requirements of Senate Bill 1368 which set

emission standards for baseload generation at

facilities that publicly owned utilities either owned

or with which they had long-term contracts47. Fines

for not meeting these new requirements have not

been determined but could be substantial.

Natural gas is the fuel used by the LADWP’s

local power plants: Haynes (Long Beach), Harbor,

Scattergood (El Segundo), and Valley. Natural gas is

a cleaner fuel than coal, but these power plants are

also in the Los Angeles basin and any pollution they

generate directly affects Los Angeles. In addition,

the future availability of natural gas is uncertain due

to controversies over the environmental impact of

new extraction methods.

Health concerns have also driven government

action on emissions. The widely known negative

health effects of pollution produced by burning

fossil fuels, particularly coal48, have been a key

driver in trying to move utilities away from a

reliance on fossil fuels.

Increasing ConsumptionIn other parts of the country, per capita electricity

consumption has steadily increased. In California,

however, growth has been uneven. Per capita power

consumption increased at an average annual rate of

7% from 1960–1973, but then slowed down to .29%

during 1974–1995 when new building codes and

aggressive energy efficiency programs were put

into place49. In recent years per capita consumption

has started to rise and the average annual increase

rose to .63%. Existing energy efficiency measures

and strong building codes clearly had an impact

on electricity consumption, but experts predict

that growth in the population and economy will

create new challenges in meeting demand in the

future50. A study done for the LADWP has recently

predicted that without energy efficiency measures

electricity consumption will rise 10.6% between

2010 and 202051.

Over the long term technological changes are

likely to increase consumption, particularly the

use of electric vehicles (EVs). Experts warn that

“If 25% of all vehicles were EVs today, the current

infrastructure in the U.S. would have a difficult time

supporting the charging of these EVs — substantial

technological, infrastructure and behavioral

changes would be required to do so in a scalable

and efficient manner.”52 Concerns about increased

According to the United States Environmental Protection Agency Los Angeles should expect a four to eight fold increase in heat wave days by the end of the century43.

Haynes Generating Station Courtesy of Los Angeles Dept. of Water & Power




An Aging Workforce Without New Utility SkillsUtilities around the country are expecting a wave

of retirements from linemen, steam-plant operators

and other workers in positions essential to the

delivery of power and water. The U.S. Bureau

of Labor Statistics found that 53% of the utility

workforce was 45 or older, compared to only 42%

of the workforce as a whole60. A 2005 survey

of public utilities by the American Public Power

Association found that “64 percent of respondents

believe that retirements will pose either a moderate

or very great challenge to their utility” and that

the “most significant challenges created will be the

loss of knowledge due to retirements, the difficulty

finding replacements, and the lack of bench

strength within the organization.”61 In a recent

Energybiz magazine article the author notes that

“As of 2008, about 53% of the utilities industry workforce is age 45 or older. Many of these workers will either retire or prepare to retire within the next ten years. Because on-the-job training is very intensive in many utilities industry occupations, preparing a new workforce will be one of the industry’s highest priorities during the next decade.”– U.S. Bureau of Labor Statistics65

electric vehicle-created demand are especially

relevant here given the number of cars on the road

in Los Angeles. A report by UCLA’s Luskin Center

predicts that by 2020 11.7% of total car sales in Los

Angeles will be electric vehicles53.

Climate change may prove to be one of the biggest

drivers of increased demand for electricity due

to the increased need for space cooling as local

temperatures rise. A report by the California Energy

Commission notes that “By the end of this century,

demand is forecasted to increase by 20–50%”54.

Old, Inefficient Building StockDiscussions of energy use frequently focus

on transportation and our resulting need for

petroleum, but 40% of the energy used in the

United States is in the form of electricity55, and the

U.S. Department of Energy estimates that 70%

of that electricity is used in buildings56. Building

efficiency has improved dramatically with new

building codes instituted in the 1970s, a key reason

for the general lack of large increases in energy

use in California. But in Los Angeles housing is, on

average, 45 years old57, pre-dating those codes,

and substandard housing is common throughout

the city58. Poorer areas are particularly affected: in

South Los Angeles there are over 75,000 housing

units that are over 50 years old, in the northwest San

Fernando Valley barely over 1,200 are that age59.

Around the country electricity rates are rising,

and these rate increases will be especially difficult

for poor people to bear, not only because they

have fewer resources but because they are more

likely to live in older, less efficient buildings. The

energy needs of inefficient buildings are also an

unnecessary drain on utility resources.

“The national unemployment rate is 9.2 percent yet

positions remain unfilled for months because of the

lack of qualified candidates.“62

That candidates be qualified is vitally important due to

the hazardous nature of electric utility work. Electric

power-line installers and repairers have one of the

most dangerous occupations in the United States.

Business Insider magazine ranked it as the tenth most

dangerous profession, just behind police officers63.

While a hiring freeze was instituted after the

economic downturn, the LADWP — like utilities

around the country — needs to replace a staff that is

disproportionately nearing retirement age. In 2007

the LADWP was already anticipating that 28% of

its employees would be eligible to retire during the

next five years64, and now management estimates

that number has risen to as high as 40% as staff has

put off retirement because of the recession.

In addition, new environmental and population

pressures will require a change in the skill sets

of utility employees, who will have to focus on

community relations and customer outreach and

not exclusively on resource procurement and

distribution. The LADWP, for instance, is currently

not staffed or organized to embark on close

customer contact. Highly publicized problems

with customer billing and service have hurt their

relationship with some customers as well as their

public image66, despite their good track record

providing reliable services at a relatively low cost.

“The national unemployment rate is 9.2 percent yet positions remain unfilled for months because of the lack of qualified candidates.”– Jennifer Zajac, Energybiz magazine, writing about utility jobs




Energy EfficiencyThe Advantages of Energy EfficiencyEnergy efficiency means employing technology so

that people can pursue the same activities but use

less energy doing so. It is different from energy

conservation, which often requires that people

change their behavior in order to realize energy

savings. For example, if one turns out the lights to

save energy one is engaging in conservation, but

if one uses a compact fluorescent bulb instead of

an incandescent one (because CFLs use much less

energy) one is being energy efficient.

Energy efficiency programs are one way that

utilities can address their numerous challenges.

First, energy efficiency helps utilities cope with

demand issues. From the perspective of a utility,

there are two ways to meet demand for electricity:

supplies can be increased or demand can be

decreased. Utilities think of energy efficiency

measures as a way to acquire energy because by

reducing demand they increase the supplies they

have available. Experts in the utility industry often

say “the cheapest kilowatt hour is one that is never

generated at all.” Utilities can calculate the per

kwh cost of energy efficiency work just as they

calculate the per kwh cost of energy generation.

The LADWP has calculated the per kwh cost of

energy efficiency to be around four cents67. The

generally low cost of energy efficiency prompted

the consultancy group McKinsey and Co. to call the

lack of interest in it a “puzzle,” asking how “energy-

saving opportunities worth more than $130 billion

annually to the U.S. economy can go unrealized”68?

Energy efficiency is also a key part of a utility’s

transition to renewable energy sources because

one way to increase the percentage of energy that

comes from these sources is to decrease the total

amount of energy consumed.

For this and many other reasons legislation has

pushed utilities to pursue energy efficiency,

requiring that they invest in energy efficiency

before expanding generation70 and that they

establish annual energy savings targets71. Recently

the legislature also required that the California

Energy Commission develop a plan to upgrade

existing buildings “to achieve greater energy

efficiency in existing residential and nonresidential

structures, especially those structures that fall

significantly below the efficiency required by the

current California Building Energy

Efficiency Standard”72.

“In short, energy efficiency is California’s cheapest, cleanest, and fastest resource available to meet the state’s energy needs.”– Natural Resources Defense Council69

Table 3

Legislation Affects the Way LADWP Produces Energy and Pursues Energy Efficiency

Legislation Requirements include:

California Senate Bill 1037 (2005)73Utilities must first acquire all cost-effective, reliable, and feasible

energy efficiency measures before investing in other resources74.

California Senate Bill 1368 (The California Greenhouse Gas Emissions Performance

Standard Act; 2006)75

Utilities may not make long-term investments in power plants

that do not meet certain emission standards76. (This means investments in coal-fired plants must be reduced.)

California Assembly Bill 32 (The Global

Warming Solutions Act of 2006)77

California must reduce its greenhouse gas emissions to 1990 levels

by 202078.

California Assembly Bill 2021 (2006)79

Locally owned public utilities must establish annual savings targets that help meet the state’s goal of reducing electricity

consumption by 10% over ten years80.

California Assembly Bill 758 (2009)81The Energy Commission must implement a comprehensive energy

savings program for California’s existing building stock82.

California Senate Bill X 1 2 (2011)83One-third of the state’s electricity must come from renewable

sources by 202084.

An energy efficiency program that reduces demand

during the hottest hours of the year can save the

utility money on infrastructure. By reducing the

amount of infrastructure that needs to be built

out to accommodate Los Angeles’ increasing

population and growing electric demands, the

LADWP could significantly reduce its costs85.

Energy efficiency programs help customers.

Electricity and water rates may rise, but if

consumption goes down bills will stay relatively low.

The money saved by people who are not spending

it on electricity or water circulates back into the

community as it is spent on other things, helping

boost the economy.




Why Reducing Energy Use at Peak Times Saves Utilities Money

Peak demand refers to the times when people are using the most electricity which is usually during the day and, in Los Angeles, is usually during the hottest days of summer (as air conditioning uses a large amount of electricity). For instance, on a typical day in Los Angeles the base load (the minimum amount of energy used by the city) at 4 a.m. might be 2,000 MW. Twelve hours later at 4 p.m. the peak load might be 4,800 MW86, more than twice as much.

To prevent blackouts during times of peak demand the department must have the ability — and built infrastructure — to supply the city during these times, even if it is substantially more than the average that the city uses. The city’s highest peak use ever was on September 27, 2010 at 3:45 in the afternoon when the temperature was over 113 degrees F87 and the city reached a peak demand of 6,177 MW88, more than three times the typical day’s baseload. To meet demand like this the utility has an installed capacity of 7,100 MW, which is .7% of the generating capacity of the United States’89. The LADWP could save significant money if it can keep peak use as low as possible. For instance “peaker plants” in the Los Angeles basin that must be modernized could be taken out of service instead.

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Customers Can Save Money with Energy Efficiency Upgrades

The non-profit “Initiating Change in Our Neighborhoods Community Development Corporation” (ICON CDC) surveyed 240 small businesses in the San Fernando Valley, most of which are in premises under 2,200 square feet. Over 80% of the businesses surveyed said that an energy efficiency campaign would be “very helpful” or “extremely helpful.” High utility bills are a financial difficulty for many businesses of this size.

At Birrieria Rosamaria, a small restaurant in Pacoima, the rent is $1,150 a month. Utility bills are an additional $1,100, almost as much as the rent itself. To save money the restaurant washes and dries their dishes by hand. They would like to purchase new equipment and hire additional employees. A program that saves them money on their electricity bills could help them do that.

“I’m interested in learning how to make my business more efficient. We have to figure it out in order to stay in business, be in compliance, and be part of this community.”

– Xotchil Oliveras, Owner

Historic Underinvestment in Energy EfficiencyWhile the LADWP has an outstanding track record

of providing power reliably and inexpensively,

historically the utility has not pursued energy

efficiency as aggressively as other large utilities in

California, including the other municipally owned

utilities90. The Natural Resources Defense Council

has noted that the LADWP has not been setting

energy efficiency goals in a timely fashion91, and has

singled the LADWP out as falling short in its pursuit

of energy efficiency92.

The Department recently set its energy efficiency

goal at 8.5% of baseline forecast over the next

ten years93, less than the 10% goal set by the state

and less than the 10.6% increase in consumption

predicted to occur during the same period94. In

contrast, the Sacramento Municipal Utility District

(SMUD), the second largest publicly owned utility

in California, has as a goal a 15% reduction in

consumption over ten years95, the highest target of

any publicly owned utility in the state. As one might

expect given their higher goals, Sacramento has

also achieved twice the energy savings as a percent

of sales that Los Angeles has96.




Figure 2

LADWP and SMUD Energy Efficiency Savings Goals as a Percentage of Consumption

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The state goal is a 10% reduction in

electricity consumption over ten years.

In recent years the LADWP’s energy efficiency

budget has been decreasing. The budget declined

from $90 million in the 2010 fiscal year to $50

million in 2012. The June 7, 2011 budget presentation

gives the 2011–2012 energy efficiency budget as

$50 million97. For perspective, the LADWP power

system budget is about $3 billion98.

In the past the LADWP has focused heavily on

rebate and replacement programs as energy

efficiency measures. One of the LADWP’s largest

programs has been a refrigerator exchange

program for low-income customers, through

which qualified customers can trade in their old

refrigerator for an Energy Star refrigerator. While

valuable, programs like these do not include many

untapped sources of energy efficiency, such as

cool roofs and HVAC (heating, ventilation, and

air conditioning) tune-ups. Many experts look to

comprehensive building upgrades (usually called

“retrofits”) to achieve deeper energy efficiency

savings by considering buildings as whole systems

and evaluating them as a whole.

Table 4

Energy Efficiency Budget and Expenditures at the LADWP

Fiscal Year 2008–2009 2009–2010 2010–2011 2011–2012

Energy Efficiency Budget(in millions of dollars) $9099 $77100 $50101

Energy Efficiency Expenditures

(in millions of dollars)102 $68 $44 $50

Making Buildings Energy Efficient

in the homes of residents107. In the first 15 months,

Burbank Water and Power upgraded 1,700 homes,

saving customers an average of $129 each on

their yearly bills and a total of a million KwH of

electricity while avoiding 1.3 million pounds of

carbon dioxide production. Programs like this that

focus on upgrading a particular location allow more

opportunities for verifying savings while ensuring

that measures are installed and used correctly.

The LADWP is also beginning to embrace a

more comprehensive and face-to-face energy

efficiency model for both business and residential

customers. The LADWP has weatherized over a

thousand low income residences including multi-

family dwellings as part of a program funded by

Energy efficiency work that focuses on entire

buildings, not just specific appliances, makes sense

as a way to reduce greenhouse gas production,

save money for utilities and consumers, and create

jobs. Research scientists, environmental activists,

and business analysts all agree that energy

efficiency upgrade work in buildings represents

an excellent opportunity to help the environment

while conserving financial and natural resources.

In addition, several recent studies have shown that

homes that have energy efficiency certifications

may sell faster and fetch higher prices103, a not

insignificant detail in places like Los Angeles given

the distressed housing market. Energy upgrade

work can also make buildings more comfortable

by making interior temperatures more uniform and

ensuring that temperatures are properly set.

Burbank, a close neighbor to Los Angeles that also

has a publicly owned utility, recently received a

public benefits award from the California Municipal

Utilities Association for their “Green Home House

Calls” program in which the city pays for qualified

energy efficiency measures to be directly installed

What is building upgrade work?

Energy efficiency building upgrade work changes buildings so they use power more efficiently. The same can be done for water.

Energy efficiency and water conservation work is often discussed in terms of specific measures, pieces of work that – if done correctly – will lead to lower energy and water use. Common water conservation measures include low-flow showerheads, waterless urinals, and more efficient irrigation. Common energy efficiency measures include heating, ventilation, and air-conditioning (HVAC) tune-ups and duct sealing, as well as the installation of more efficient lighting.

Many building upgrade advocates support an “audit” model, wherein trained specialists visit customers to assess a building’s need for specific energy efficiency or water conservation measures; this is often called an “energy audit.” Assessments might include things like blower-door tests, when auditors check to see how leaky a building is. Simpler audits may be done by trained experts making more basic observations of a building. Audits need to be done because every building is different and will have different upgrade needs.

Once the audit is complete, crews install appropriate measures. After the installation is complete an inspector returns to ensure that installations have been executed correctly. Multiple sources predict at least 15-20% savings for a properly identified and installed set of energy efficiency measures104,105.

“The potential for large, cost-effective energy savings in buildings is well documented.”– National Academy of Sciences106




the American Recovery and Reinvestment Act and

plans to continue this program. The LADWP is also

proposing a “Whole-House” program for residential

consumers. The program would have three

components: building audits, the direct installation

of some energy efficiency measures, and workforce

training and participation108. A Whole-House

Performance Program that follows an ENERGY

STAR model was recommended to the Department

by consultants who wrote the most recent energy

efficiency potential study.

Utility Provided ServicesThere are several advantages to having some

types of energy efficiency building improvement

work done directly by the utility. First, by locating

responsibility for the process with the utility and

not a third party the procedure is simple from the

customer’s perspective. (Avoiding the confusion

and delays that can be introduced when multiple

parties are involved has been one reason that other

utilities are beginning to do building upgrade work

with their own staff109.) Second, the utility can also

easily identify and contact high users; one problem

with some energy efficiency programs has been

a lack of awareness by potential participants110.

Another obvious appeal of utility-staffed programs

is that customers incur no costs, making it more

likely that they will do the work.

Utility funded programs that service customers

directly can pursue work in small businesses or

low-income residences that would otherwise not

be done at all, as these types of customers are

famously difficult to reach with energy efficiency

programs and often lack the capital to do energy

efficiency upgrades on their own. Such programs

would also solve the “split incentive problem” (see

box), which is particularly noteworthy for landlord/

tenant situations. Additionally, because there is no

direct cost to the recipients, it is in everyone’s best

interest to have building upgrade work completed.

New building upgrade programs at the LADWP

could be supported by the current energy efficiency

budget and by savings realized from a reduction in

expenditures on infrastructure over time.

Utility Pre-Craft Trainees Photo Credit: Barbara Grover


When directly installing energy efficiency measures, it

makes sense for workers to also install any appropriate

water saving measures. The LADWP has an excellent

track record of pursuing water conservation and

the city’s per capita water consumption is among

the lowest in the state111. In fact, the Department’s

reliance on conservation as a core strategy in

improving water supply reliability should be a

model for their approach to energy efficiency.

Water conservation not only addresses concerns

about water supplies, it also leads to electricity

savings. The California Energy Commission

estimates that 19% of the electricity used in

California is used to move water112.

Green Verdugo Reservoir Courtesy of Los Angeles Dept. of Water & Power

Split Incentives: A Barrier to Energy Efficiency Work

The term “split incentive” refers to the financing problem posed when retrofitting a rental building. Tenants generally pay electric bills, so it is in their best interest to lower power use. Any capital improvements, however, stay with the building and ultimately that value accrues to the owner. The owner, however, does not benefit from lowering electric bills. Consequently, it is more difficult to develop programs that require financial contributions from tenants or landlords. Because of this, residents of multi-family rental units and small-businesses that rent their premises have historically been difficult for building upgrade or retrofit programs to reach, despite the fact that they are often those most in need of financial help with bill reduction.




Job Creation and Energy Efficiency Work in BuildingsEnergy efficiency building upgrade programs have

the potential to create good jobs for residents. The

work generates a large number of jobs because it

is labor intensive; studies estimate that it generates

three times as many jobs as investment in coal113.

These jobs are also local, whereas investment

in fossil fuel sends money elsewhere and other

types of jobs can move overseas. There is also job

growth potential in manufacturing the materials

used to do the work. A conscious effort must be

made, however, to ensure that these are not only

green jobs but good jobs. A UC Berkeley study

that reviewed the energy efficiency workforce in

California found in interviews that “the residential

retrofit sector seems to provide low wages and few

benefits” and that “career ladders are currently very

limited in the residential retrofit industry114.“ Entry

level wages for technician installers (a common job

description for retrofit work) ranged between $8

and $15 an hour115.

The same UC Berkeley study found that “there is

clearly a connection between the number of trained

workers, the quality of work performed, and the

level of energy savings that will be achieved”116 and

noted that, “A key obstacle to achieving energy

goals, which was frequently identified in our

interviews, is the prevalence of low-quality energy

retrofit work, with the improper installation and

maintenance of HVAC (heating, ventilation, and air

conditioning) equipment being a prime example.”117

Without quality work, real energy savings are

unlikely to be realized, obviating an energy

efficiency project. In Illinois a Department of Energy

audit of 15 homes weatherized by contractors

found that 12 failed inspection due to substandard

workmanship118, and eight of the fifteen homes

audited were either missing key energy efficiency

measures or received inappropriate measures.

If the LADWP supports energy efficiency building

upgrades, it should ensure that job standards are

met so that real energy savings can be realized

and that the jobs produced are quality jobs.

One way to do this is to staff a program with in-

house employees, and the recently created Utility

Pre-Craft Trainee classification (UPCT) is an

appropriate position for this kind of work.

Utility Pre-Craft Trainees

The Utility Pre-Craft Traineeship is an 18 month long position at the LADWP that pays a living wage — $16 per hour — and has health benefits. Hiring these trainees is a way to both staff energy efficiency work and create a pool of workers with basic utility training that could replace the large numbers of LADWP staff nearing retirement. Trainees are members of IBEW Local 18, the union that represents most LADWP employees, but are not part of the regular civil service. While in the program, trainees can take the city’s civil service exam and, if they pass it, have the opportunity to stay with the Department. During their tenure with the Department, trainees receive general training in LADWP procedures as well as training specific to the work in which they are currently engaged. Their training includes extensive instruction on safety, appropriate work procedures, and relevant policies. UPCTs finish the traineeship with a certification and, if they do not stay with the Department, they will leave with a new skill set and augmented job experience that can help them secure an energy sector or utility job elsewhere.

Utility work is dangerous as well as being crucial to the functioning of the city. The UPCT position allows prospects to see what utility work is like, and have the option to leave, before the department has made a significant investment in their training, thus reducing training costs. IBEW Local 18 is working with RePower LA to ensure that those in line for future jobs come from the Los Angeles communities hardest hit by unemployment and poverty.

Support and Prospects for Energy Efficiency Work at the LADWPTo bring building upgrade programs to scale, the

LADWP will need to include private contractors

and energy savings experts. This would increase

the reach of the programs, leverage non-

departmental funding and expertise, and create

even more jobs in the private sector.

Energy efficiency is popular locally; in June

2011 the non-profit group Strategic Concepts in

Organizing and Policy Education (SCOPE) polled

over 9,000 Los Angeles voters. Of those surveyed,

93% said they supported LA Department of Water

and Power investments in energy efficiency to

lower energy bills and create good jobs.

In sum, energy efficiency work addresses many

of the challenges utilities face today. It decreases

greenhouse gas production, saves the utility money,

reduces customer bills, and creates good jobs.

“I enjoy this work. A big part of what I like about the UPCT position is that I’ve been able to work with customers who wouldn’t otherwise be able to afford to have some of these things done – like insulation – because the houses are cold in the winter and hot in the summer. And when we tell them they’ll see savings on their bills they’re grateful. In this economy right now everybody likes to save a dollar.”

– L.J. Davis

“I got offered a job from a different company, but it was part time and provided no benefits, so I turned it down. I was so excited when I got into the LADWP and IBEW Local 18’s Utility Pre-Craft Trainee program. To me it’s not just a job, but a good, lasting career. It’s where I want to be.”

– Ernie Vigil





should increase its energy efficiency investment

and goals to be at parity with similar utilities

and in alignment with state goals. The utility

needs a policy that spurs the development of

energy efficiency programs that produce verifiable

benefits, serve hard-to-reach customers, create a

pool of qualified workers, and have mechanisms

in place to ensure that ratepayer money is funding

quality work. The policy should:

Set an energy efficiency goal to reduce consumption 15% by 2020.This commitment by the LADWP would put it in

alignment with the goals set by state law while

spurring it to invest in programs that ramp up

over time and provide customers with certainty

about both savings and the availability of energy

efficiency services.

Provide broad benefits.The policy should ensure that energy efficiency

services are received by customers who need them

the most. The LADWP should not only try to reach

high users but low-income residents, multi-family

residences, and small businesses, all customers

that have been difficult to reach with energy

efficiency programs. The work should improve Los

Angeles’ inefficient building stock, and create good,

career-path jobs. The new Utility Pre-Craft Trainee

program should constitute the initial workforce

since job and training standards (as well as a

pipeline from high unemployment communities)

are already in place. To get programs to scale,

contractors should be used who comply with

training and job standards, as well as appropriate

hiring practices.

Treat energy efficiency as the power resource it is.As well as reducing overall power use, the

RecommendationsLADWP should work to lower peak demand. Such

programs are especially cost effective for utilities

and produce more savings that can be invested

in energy efficiency. The LADWP should develop

measurement and verification systems for energy

savings that let it count on those savings when

planning for the city’s future energy needs and

should reinvest those savings into energy efficiency

programs.

Build new capacities that can bring energy efficiency work to scale.The LADWP should develop the ability to do more

face-to-face work with customers, and also explore

mechanisms that leverage outside financing to

encourage building owners to pursue energy

efficiency work on their own.


14. California Municipal Utilities Association. (March, 2011). Energy Efficiency in California’s Public Power Sector: A Status Report. Pg. 112.

15. Los Angeles Department of Water and Power. (June 4, 2011). LADWP – Challenges, Policies, and Financial Stability. http://64.147.173.150/ladwp/documents/ladwp_june4_presentation.pdf, accessed on August 2, 2011.

16. Los Angeles Department of Water and Power. (2010). Building a New Los Angeles: Water & Power Budget Presentation Fiscal Year 2010-2011. Pg. 4. http://www.ladwpnews.com/external/content/document/1475/601647/1/01%20Board_Presentation.pdf, accessed on August 2, 2011.


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