Clean Power, Good Jobs
Realizing the Promise of Energy Efficiency in Los Angeles
February 2012
Clean Power, Good Jobs
Realizing the Promise of Energy Efficiency in Los Angeles
Table of Contents
Foreword
2
By 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
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laane: a new economy for all
Clean Power, Good Jobs
Clean Power, Good Jobs
Realizing the Promise of Energy Efficiency in Los Angeles
Realizing the Promise of Energy Efficiency in Los Angeles
Executive Summary with Recommendations
Foreword
By 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
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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.
Utilities 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.
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.
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.
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.
2
•
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Clean Power, Good Jobs
Clean Power, Good Jobs
Realizing the Promise of Energy Efficiency in Los Angeles
Realizing the Promise of Energy Efficiency in Los Angeles
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
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putting these trainees to work upgrading homes
of low-income customers under the supervision of
highly trained journey level workers.
The Los Angeles Department of Water and Power
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.
4
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 airconditioning) 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
461,921
543,436
687,447
847,760
Avoided CO2 Production
(metric tons)*
*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
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Clean Power, Good Jobs
Clean Power, Good Jobs
Realizing the Promise of Energy Efficiency in Los Angeles
Realizing the Promise of Energy Efficiency in Los Angeles
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.
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.
Our Local Utility: Los Angeles Department of
Water and Power
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
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-forprofit 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.
Los Angeles at Night
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
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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.
In this report we focus on the LADWP’s challenges.
These challenges have often led, directly or
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Clean Power, Good Jobs
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Realizing the Promise of Energy Efficiency in Los Angeles
Realizing the Promise of Energy Efficiency in Los Angeles
Utility Challenges
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.
Aging Infrastructure
Utilities 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.
Jawbone Siphon in the Mojave Desert
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.
Courtesy of Los Angeles Dept. of Water & Power
Table 2
The LADWP is Relatively Reliable and Inexpensive
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%
2010
Rates for the DWP are for 2010/2011
21 22 23 24
,
,
,
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
20%
.
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.
Scattergood Generating Station
Courtesy of Los Angeles Dept. of Water & Power
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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 Infrastructure
In 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 Costs
Almost 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.
laane: a new economy for all
Clean Power, Good Jobs
Clean Power, Good Jobs
Realizing the Promise of Energy Efficiency in Los Angeles
Realizing the Promise of Energy Efficiency in Los Angeles
Environmental Issues
Largely 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 2010
37
The California Global Warming Solutions Act built
on the requirements of Senate Bill 1368 which set
emission standards for baseload generation at
1%
Energy Efficiency
5%
Hydro
10%
Nuclear
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.)
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 century .
1%
Other
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 Consumption
In 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.
43
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.
39%
Coal
20%
Renewables
24%
Natural Gas
Health concerns have also driven government
action on emissions. The widely known negative
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Haynes Generating Station
Courtesy of Los Angeles Dept. of Water & Power
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
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Clean Power, Good Jobs
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Realizing the Promise of Energy Efficiency in Los Angeles
Realizing the Promise of Energy Efficiency in Los Angeles
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.
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.
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.
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
– Jennifer Zajac, Energybiz magazine, writing
about utility jobs
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.
Old, Inefficient Building Stock
Discussions 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.
“The national unemployment rate
is 9.2 percent yet positions remain
unfilled for months because of the
lack of qualified candidates.”
An Aging Workforce Without New
Utility Skills
Utilities 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
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.
“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 Statistics 65
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Realizing the Promise of Energy Efficiency in Los Angeles
Realizing the Promise of Energy Efficiency in Los Angeles
Energy Efficiency
The Advantages of Energy Efficiency
Energy 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 “energysaving opportunities worth more than $130 billion
annually to the U.S. economy can go unrealized”68?
Table 3
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.
Legislation Affects the Way LADWP Produces
Energy and Pursues Energy Efficiency
Legislation
California Senate Bill 1037 (2005)73
“In short, energy efficiency is
California’s cheapest, cleanest,
and fastest resource available to
meet the state’s energy needs.”
California Senate Bill 1368 (The California
Greenhouse Gas Emissions Performance
– Natural Resources Defense Council69
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.
Requirements include:
Utilities must first acquire all cost-effective, reliable, and feasible
energy efficiency measures before investing in other resources74 .
Utilities may not make long-term investments in power plants
Standard Act; 2006)75
that do not meet certain emission standards76 . (This means
investments in coal-fired plants must be reduced.)
California Assembly Bill 32 (The Global
California must reduce its greenhouse gas emissions to 1990 levels
Warming Solutions Act of 2006)77
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 years 80 .
California Assembly Bill 758 (2009) 81
California Senate Bill X 1 2 (2011) 83
The Energy Commission must implement a comprehensive energy
savings program for California’s existing building stock82 .
One-third of the state’s electricity must come from renewable
sources by 2020 84 .
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.
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Clean Power, Good Jobs
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Realizing the Promise of Energy Efficiency in Los Angeles
Realizing the Promise of Energy Efficiency in Los Angeles
Customers Can Save Money with Energy Efficiency Upgrades
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.
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.
Renewables
Local Natural Gas
Baseload (Coal & Nuclear)
Hydro
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.”
5000
4000
3000
2000
– Xotchil Oliveras, Owner
1000
Historic Underinvestment in
Energy Efficiency
10:00 PM
8:00 PM
6:00 PM
4:00 PM
2:00 PM
12:00 PM
10:00 AM
8:00 AM
6:00 AM
4:00 AM
2:00 AM
0
12:00 AM
Electric Use (MW)
Why Reducing Energy Use at Peak Times Saves Utilities Money
Time
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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16
While 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.
17
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.
laane: a new economy for all
Clean Power, Good Jobs
Clean Power, Good Jobs
Realizing the Promise of Energy Efficiency in Los Angeles
Realizing the Promise of Energy Efficiency in Los Angeles
Making Buildings Energy Efficient
Figure 2
Percent Savings Goal Over Ten Years
LADWP and SMUD Energy Efficiency Savings
Goals as a Percentage of Consumption
16
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 .
14
12
10
State Goal
8
15
6
4
8.5
2
0
LAWDP
SMUD
The state goal is a 10% reduction in
electricity consumption over ten years.
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.
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
“The potential for large, costeffective energy savings in
buildings is well documented.”
– National Academy of Sciences106
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 multifamily dwellings as part of a program funded by
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.
Table 4
Energy Efficiency Budget and Expenditures at the LADWP
Fiscal Year
2008–2009 2009–2010
Energy Efficiency Budget
(in millions of dollars)
$90
99
2010–2011
$77
100
2011–2012
$50
101
Energy Efficiency Expenditures
(in millions of dollars) 102
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$68
$44
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.
$50
18
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Realizing the Promise of Energy Efficiency in Los Angeles
Realizing the Promise of Energy Efficiency in Los Angeles
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 staff 109.) 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 Pre-Craft Trainees
Photo Credit: Barbara Grover
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.
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.
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.
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 Services
There 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
laane: a new economy for all
Utility Pre-Craft Trainees
Photo Credit: Barbara Grover
Green Verdugo Reservoir
Courtesy of Los Angeles Dept. of Water & Power
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laane: a new economy for all
Clean Power, Good Jobs
Clean Power, Good Jobs
Realizing the Promise of Energy Efficiency in Los Angeles
Realizing the Promise of Energy Efficiency in Los Angeles
Job Creation and Energy Efficiency
Work in Buildings
Energy 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.
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 inhouse employees, and the recently created Utility
Pre-Craft Trainee classification (UPCT) is an
appropriate position for this kind of work.
Support and Prospects for Energy
Efficiency Work at the LADWP
To 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 nondepartmental 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
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
Utility Pre-Craft Trainees
“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.”
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.
– Ernie Vigil
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.
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Realizing the Promise of Energy Efficiency in Los Angeles
Realizing the Promise of Energy Efficiency in Los Angeles
Recommendations
The Los Angeles Department of Water and Power
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.
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LADWP 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.
laane: a new economy for all
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Clean Power, Good Jobs
Clean Power, Good Jobs
Realizing the Promise of Energy Efficiency in Los Angeles
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