Public Power Magazine

Reinventing LADWP

From the January-February 2012 issue (Vol. 70, No. 1) of Public Power

Originally published January-February 2012

January-February 2012
LADWP built and operates the Pine Tree Wind Farm in California's Tehachapi Mountains, north of Los Angeles. Photo courtesy LADWP.

Lights, camera, action. It's a phrase many associate with the city of Los Angeles, the movie and television capital of the world. Los Angeles Department of Water and Power, the utility responsible for keeping the lights on in Tinseltown and the surrounding city, is immersed in a fast-action feature of its own. Utilities traditionally plan for the long term, building infrastructure to serve basic energy and water needs for decades. But the industry today is undergoing a dramatic transformation. The changes were triggered in the late 1990s when policymakers in California and elsewhere deregulated electricity markets. Concerns about the environment are forcing the industry to reduce reliance on carbon-based fuels and to meet electricity needs with cleaner, but highly variable, renewable resources.

In California, where state and local laws are often set by initiatives enacted in general elections, many changes are not optional for LADWP.

"If the transformation of the utility industry were an archery range, LA is the bull's-eye," said General Manager Ron Nichols.

The utility is required by state law to stop using coal to generate electricity by 2029. Today, coal accounts for 39 percent of its power supply. State law also requires all California utilities to meet 33 percent of electricity needs with renewable resources by 2020. And, the utility must rebuild 2,700 megawatts of gas-fired generation to comply with a state mandate to eliminate once-through ocean water cooling—that, too, by 2029.

"That's nine separate units at three sites," said Nichols. "We have to be constantly rebuilding all of those while keeping that same total amount of generation operating.  I liken it to flying a 747 across the Atlantic and repairing the engine while in flight.  We'll get there.  We have a plan, but it all has to go right."

The timeline is stunning.  "It took us about 100 years to get where we are today and in a decade and a half, we're going to replace 70 percent of that," Nichols said.

Converters at the southern end of the Pacific DC Intertie transform power from direct current to alternating current before energy is delivered to customers in Southern California. Photo courtesy LADWP.

The utility's plan calls for meeting 8 percent of energy needs through energy efficiency by 2020. Today, efficiency measures account for 1 percent of the portfolio. The utility has inaugurated a novel program to address two of its challenges: ramping up efficiency and cultivating a new work force. Energy efficiency is a long-term strategy for LADWP, said Aram Benyamin, senior assistant general manager for the power system.

"Physical achievement of energy efficiency is very important for us," he said.  "We want to make sure we have a direct involvement with our customers.  We want to be sure our customers understand that energy efficiency is the number one source of energy for us.  It's important to be frugal with the energy that we have."

Los Angeles' investments in efficiency cannot be spaghetti thrown at the wall to see what sticks.  The money spent needs to produce direct results. To strengthen its connection with customers, the utility has worked with community groups to identify candidates for entry-level unskilled jobs. The new hires are trained to deploy weatherization and other efficiency measures and are mentored and trained for 24 months with an eye on entering the utility's apprenticeship programs and developing a career at LADWP. At the end of 24 months, utility personnel assess the capabilities and aptitude of each member of the Utility Pre-Trainee Class (UPTC) and encourage entrance into formal training programs for operations, maintenance, instrument tech, line work, underground mechanics, control or transmission.

The UPTC program solved an identity problem for the utility. Before hiring its own workers to do weatherization measures, LADWP relied on contractors. The face of LADWP was missing from the programs—all customers got from the utility was a check, said Randy Howard, director of power system planning and development. "We were not getting the credit for the value of putting that money out there. We've seen that too in our solar incentive programs." Contractors would blame the utility whenever a problem or delay occurred, regardless of the true cause, he said.

"We don't want to create a ‘green jobs' hiring bubble that has a start and a finish," said Benyamin. About 50 people have been in the program for a year and the utility is hiring another 25 to 50 workers to staff construction of a 10-MW utility solar generating plant adjacent to its Adelanto converter station.

Benyamin is pleased with the effort, especially the work force development elements. The program was launched using federal economic recovery grant monies, but once that money is gone, LADWP will keep the program in place.  "It is a great fit for us," he said.  "We go to our customers and recruit from the community. We have 24 months to work with this employee—see where strengths are and where we can place them.  We have a better sense of each individual when we place them in an apprenticeship program."

Recruits like the opportunity to sample different aspects of utility operations during the mentoring period, he said.

The utility's staffing challenges are not limited to entry-level positions. Ron Nichols has been general manager of the utility only since January 2011. He is the fifth person to hold the post in as many years. Although he would have preferred otherwise, he spent countless hours during his first year engaged in a high-profile public outreach effort to explain the challenges confronting both the power system and the water system and educating customers about the need to raise rates for both services for three successive years.

Capital investment needs to support the overhaul of power supply resources are enormous.  On top of that, the utility must upgrade its aged transmission and distribution infrastructure. "We are spending between $700 million and $825 million a year every year to replace poles, cables and transformers," Nichols said. Roughly 700,000 feet of the city's water mains are more than 100 years old and must be replaced.  New mandates require the water system to cover its reservoirs, convert from chlorine to chloramine for water treatment, and require 20 percent conservation and recycling by 2020. Meeting the revenue requirements to support capital and operation and maintenance expenses over the next several years means power rates must increase by an average of 5.6 percent for each of the next three years and water rates must increase by 5.1 percent annually over that same period.  A failure to raise rates could lower the utility's credit rating, which would increase financing costs. The infrastructure improvements are not optional.

Nichols personally attended nearly three dozen community meetings over the course of 100 days between June and September last year to talk to customers about the utility's investment needs and explain why the rate increases are necessary. During that outreach effort, LADWP solicited customer opinions, using surveys and focus groups, to get input on investment mea-sures that are optional.

General Manager Ron Nichols personally attended nearly three dozen community meetings between June and September 2011 to explain LADWP's capital expansion needs and answer questions about proposed water and power rate increases. Photo courtesy LADWP.

New Man in Charge

Ron Nichols came to the Los Angeles Department of Water and Power a year ago as its new general manager, the fifth person to hold the utility's top job in as many years. Although he's a newcomer to Los Angeles, he is no stranger to public power. Less than a year into the job, he comfortably talked about the utility's mission and challenges in the first person. He has taken ownership the of utility's agenda and is tackling it with confidence.

Nichols was a co-founder of Resource Management International, a utility consulting firm well known to public power utilities that was sold to Navigant Consulting in 1997. He worked for Navigant until he was tapped to head LADWP. A widely recognized expert in finance and public-private partnerships, he's been immersed in some of the public power industry's biggest developments over the last two decades. During the 1990s, he led a team in New York state to help transition Long Island Lighting Co. into the Long Island Power Authority, creating, in 1998, a new public power utility that serves more than a million customers. He was part of LIPA's senior team that hired and prepared management staff to run the new utility.

In 2007, he was part of a team assembled by the California Energy Commission that evaluated the effects of alternative levels of energy efficiency and renewable energy on carbon levels and electricity costs in California and the western United States.

He also played a key role in helping to arrange for more than 10,000 MW of power supply contracts in the aftermath of the California energy crisis caused by gaming in the then-new wholesale power market in 2000-2001.

Nichols's embrace of LADWP's mission is rooted in pride in what the utility accomplished in the years prior to his arrival. 

"Our accomplishments are many," he said.  "We achieved getting to 20 percent renewable energy by 2020—not just signed contracts that might get us there, but with hard, verified numbers. We got there at a really quick rate; we turned the clock back about seven or eight years." He also points with price to the utility's substantial investment to date in its transmission and distribution infrastructure to improve the utility's reliability. 

"I wanted to differentiate between the things over which we have no choice, because it's the law, and the things we need to do to have a financially viable entity," Nichols said. "We laid those things out.  There's a threshold of basic business needs.  There are other things incrementally that we believe we should do, but we don't absolutely have to: for example, more investment in energy efficiency, a little higher investment in replacing our aging T&D infrastructure, thinking a little differently about how we might invest in how we meet that 33 per-cent renewable resource requirement. We laid that out and brought it back to our customers in terms of ‘this is what it would mean to you per month on your bill.' We said ‘we want your input.'

"We explained the cost of renewables, of hardware in the ground versus contracts for renewable energy," he said. "We got some good input back on that.  Generally, the response we got back is 'I like all of those things.  These things are all important and I think the level of cost on that is something I'm willing to pay.'"

The customers who attend a public meeting held to discuss utility rate increases are a self-selected group. "You can't ever be comfortable that you've got a statistically valid cross-section of your customers in doing that," Nichols said. "When you are serving a city of 4 million people, with more than a million [meters], reaching out to all of them is always a challenge. People don't come in and say ‘please raise my utility bill.'  But, if they know what's behind it and they know that you are going about it in a reasonable and fiscally responsible way, it's easier to write that check."

LADWP worked through the city's 91 neighborhood councils, which are subunits of 15 City Council districts to organize the meetings, Nichols said. The utility also reached out to nonprofit organizations that serve low-income residents, environmental groups, faith-based groups and the business community.

LA has an 800-MW stake in the Intermountain Power Plant in Utah, but must stop taking power from the coal-fired plant by 2027. Photo courtesy LADWP.

"Outreach is always a challenge. Every utility deals with that. As a municipally owned utility, our customers are our shareholders, so reaching out to them is a higher calling."

Nichols said he was shocked by the number of people at the meetings who do not understand LADWP's ownership model.  "More times than I can count in these meetings, I have the very vocal person or two or three in the audience who starts shouting ‘I'm tired of you big companies you big corporate entities trying to dig into my pocket. Don't you understand the economy?  Why don't you take your customers and your ratepayers into account instead of your shareholders?'

"And I respond: ‘You are our shareholders. We are nonprofit. There is no profit paid to this organization. We are significantly lower cost than our surrounding in-vestor-owned utilities.'  It's surprising that a number of people don't recognize that we're not an investor-owned utility. We're probably not doing a good enough job of communicating that, but that differentia-tion is important."

Once people realize the difference between IOUs and public power, their view changes, Nichols said.

Making Wind Behave Like a Baseload Resource

The sun does not always shine and the wind does not always blow. The variability of renewable resources presents a challenge to reliable delivery of electricity. With a power supply portfolio that today is 20 percent renewable energy, and the need to ramp that up to 33 percent over the next eight years, the Los Angeles Department of Water and Power is focused on capturing energy produced by wind turbines and delivering it to customers.

LADWP owns two direct-current high-voltage transmission lines, which enable the utility to transport energy hundreds of miles with minimal losses.  Wind farms built to serve the utility's load are strategically positioned near those power lines.
The utility is a joint owner of the southern end of the 780-mile Pacific Intertie, a DC line built in the 1970s to facilitate seasonal energy exchanges between summer-peaking California and the winter-peaking Pacific Northwest. Bonneville Power Administration owns the northern portion of the Pacific Intertie.  LADWP also owns a 580-mile DC line that transports power from the Intermountain Power Project in Utah to Los Angeles.

In the Pacific Northwest, L.A. has four operating wind projects, two on the Washington side of Columbia Gorge and two on the Oregon side, said Randy Howard, director of power system planning and development.  L.A. relies on hydro resources in the Northwest to firm and shape wind energy output.

"As the wind blows and produces energy, we have other parties taking that energy directly and using it in real time and then, we are taking it as it is put through.  Eventually we will use more of it as it is produced."

Planned upgrades to converter stations on the Pacific Intertie will enable LA to use wind energy as it is produced.

In Utah, LADWP owns 300 MW of wind generation located just south of the Intermountain Power Project, a coal-fired plant.

"We initially were using coal units there to ramp up and down to balance some of the wind as it was coming in," said Howard.  "That takes a lot of effort on the part of operators.  Coal units aren't designed for that."

New controllers installed on the converter station at the origin of the Utah-to-L.A. transmission line respond better to the variability of the wind. The equipment replaced 20-year-old technology that was not designed with wind in mind.
Transport capacity on the Utah-to-L.A. line initially was 1,920 MW.  The utility invested $100 million on upgrades at the converter station and boosted the line's capacity to 2,400 MW.

Aram Benyamin, LADWP senior assistant general manager-power system, is thrilled with the results of that $100 million investment.  "We had a 480-MW increase in volume without touching the physical towers and without touching the line itself," he said.  "The only work that was done was at the entry and exit substations." Installation of new lines to obtain a comparable capacity upgrade would have cost $5 million per mile, he said.
The new controllers on the Utah transmission system enable LADWP to transmit wind-generated power across the long-distance DC line, where losses are miniscule compared to those on an alternating current line. On an AC line, losses are typically 20 percent, but only 5 percent on a DC line, said Benyamin.

Wind energy accounts for 10 percent of LADWP's power supply portfolio today. The utility uses its 1,200-MW Castaic pumped storage hydro project to firm wind generated at other projects and it is building a 600-MW quick-start gas-fired peaking plant to respond to the variability of other wind resources. The utility's historic aqueducts, the century-old water and power infrastructure that launched LADWP, are also used to firm renewable resources.

Eventually, the utility expects to use the smart grid for demand response, Howard said. "So we'll integrate by being able to fluctuate some of the demand components from our customers, based on our variability of the renewables."
Beyond the lower losses, direct current or alternating current lines are not the critical difference, said Howard. "We are using existing transmission to be able to add new [wind] projects."

If the Utah-to-L.A. transmission line was not available, LADWP might have to wheel wind power over systems owned by two or three separate entities, said Benyamin.  On that journey, the wind energy would encounter multiple forms of firming, shaping and integrating, thus adding a secondary carbon cost before consumers use the electricity, he said.

"What we are trying to do is optimize that system to be responsive to these renewables that have some variability," said Howard. "That entails looking at where we need to upgrade all the controls and instead of having an operator flip a switch when you need it, or crank your wheel, they're doing it more at our big operations center and they're able to more quickly ramp up and down."

"We're also building a lot of tools to predict how much wind we can expect, how better to forecast it," he said.


Average Rating:

Please Sign in to rate this.


  Sign in to add a comment

January-February 2012
Digital Edition

Members of the American Public Power Association receive Public Power magazine as part of their annual dues payments.  The subscription rate for non-members without the annual directory is $100 per year in the United States and $130 per year outside of the United States. A subscription that includes the annual directory is $200.  The annual directory alone can be purchased for $150.

Public Power is published eight times a year by the American Public Power Association. Opinions expressed in single articles are not necessarily policies of the association.

APPA works with IPA Publishing Services of Lancaster, Pa., which sells reprints of Public Power magazine articles.  It has come to APPA's attention that from time to time other companies approach APPA members to sell plaques and other merchandise to memorialize APPA awards or articles in APPA publications. These other vendors are not affiliated with, or endorsed by, APPA.

David L. Blaylock

Senior Vice President, Publishing
Jeanne Wickline LaBella

Art Director
Robert Thomas III