UCLA Luskin Center for Innovation

In March 2021, the National Renewable Energy Laboratory (NREL) released the Los Angeles 100% Renewable Energy Study (LA100), a milestone analysis laying out pathways for the Los Angeles Department of Water and Power (LADWP, or DWP) to transition to 100% renewable energy by 2045. Among the options presented by the study, the Board of Water and Power Commissioners (the Board) selected the most ambitious: a scenario in which the 100% clean energy goal is met ten years earlier, in 2035, without reliance on biofuels (the Early & No Biofuels scenario). Although a boon for the City of LA’s environmental goals, fulfilling this plan entails significant investments in infrastructure, renewable generating capacity, and cutting-edge technological solutions, all of which have cost and downstream affordability impacts.

Affordability refers to customers’ ability to pay their bills. The costs of the transition to 100% renewable electricity by 2035 are considerable, but necessary to combat climate change. Because home heating and transportation expenditures will be folded into electric bills as these services become electrified, increasing electricity costs are a particular equity concern for LADWP, as well as for LA residents and small businesses. Changing costs will directly influence energy burden and indirectly affect broader affordability for LADWP customers.  

Generally, public utilities, such as LADWP, must directly recover costs through revenue increases — including the cost of transitioning to renewable energy. This primarily means increasing rates and fees assessed on customers. Since many low- and moderate-income LA residents already struggle with the burden of their LADWP bills and general cost of living, cost and revenue increases at the utility scale have equity- and economic justice-related ramifications that must be directly addressed by policy. It is thus a delicate balancing act to complete the transition to 100% clean energy without creating untenable financial burdens on the Angelenos least able to absorb them, while also ensuring that the broader benefits of the transition are equitably distributed. This task is also made more challenging by the considerable uncertainty about the exact level and timing of costs associated with the utility’s 100% renewable investments. 

To that end, LADWP commissioned the UCLA Luskin Center for Innovation (LCI) and School of Law to conduct an Energy Affordability and Policy Solutions analysis as part of the broader LA100 Equity Strategies effort. This work builds on LCI’s past work and ongoing engagement on utility affordability and broader equity issues in both Los Angeles and California. Our work on affordability in LA100 Equity Strategies complements NREL’s affordability-focused rate structure and on-bill financing modeling. Consequently, our research goes beyond rate (re)design to focus on implementable, robust, and long-term structural solutions. Specifically, this entails data, analysis, and strategy architecture that will comprehensively address affordability, building on ongoing efforts.  This work also complements the UCLA Center for Neighborhood Knowledge’s analysis of ethnic small business energy equity issues, including affordability.