The Greening of a Utility: Nichols Seeks Innovation, Conservation from DWP

Mary, you've now been confirmed as a member and chair of the L.A. Department of Water and Power Board of Commissioners. Why don't we begin by you giving us a sense of what priorities you'd like to see emerge on the commission's agenda in the year to come?

The Mayor has given his marching orders: Accelerate the transition to renewable energy and make Los Angeles the greenest big city in the world. The first thing we need to do is look at how we can diversify our electricity mix and improve the overall reliability and environmental performance of the system. We need to update the integrated resources plan for electricity. We need to see why we continue to have some problems with some older parts of the system, and finish the re-powering of our older gas-fired plants. It's really a matter of going back to basics and seeing what's working and what needs to be fixed. But we certainly know that other utilities in the state moved out quite sharply on renewables, and I don't think we want to be left behind. I think the city could stand to benefit greatly if we develop some really good projects that take advantage of our location and our strong financial position. We could end up with some competitive advantages within the state and within the entire Southwest if we play our cards right. But it will require care, and it will require making sure that we've communicated effectively with our rate-payers, with the city council, and all our other stakeholders so we can get the necessary consensus on making some investments.

You've dwelled on the power side of DWP's responsibilities. By coincidence, we do this MIR interview on a day (September 12) in which there's a major power outage in Los Angeles. So while you may wish to focus on the long-term conservation issues and green energy opportunities available to DWP, what's the department's obligation to provide affordable and reliable power to a metropolis that relies on both?

The city's economic future is predicated on affordable and very reliable power, and overall the department's track record relative to other utilities has been excellent in that regard. You never like to have power outages, but I think we do know that we're vulnerable to things that happen outside of our system because we are tied in with the rest of the state, and we also have the occasional glitch in technology that requires some kind of backup system. I think if nothing else the recent meltdown of civil authority and civil society after Hurricane Katrina reminds us all that municipal governments have a responsibility to have backup plans even for contingencies that may seem very remote. So that is definitely an area that we're going to be working on and are working on right now.

Does one have to chose between the objectives of conservation and greener energy sources and DWP's mandate to provide reliable power supply to this metropolis. In MIR's interview in July with Bob Foster of Southern California Edison, he said "a few years ago the demand for electricity was increasing at 1 to 1 1/2 percent a year. We are now experiencing annual increase in electricity demands over 4 percent a year." I doubt the city of L.A. has any less demand than the county. With DWP interested in selling off its coal power plants and looking at alternative energy supplies, does DWP also have a gameplan for meeting the growing demand for electricity?

As of now, we are well positioned to serve current demand and our immediately anticipated demand for the future, but we need to be looking further out than the next year or two. It's important to stress – I did this in my confirmation hearing and I do it everywhere I go – that the most effective, cleanest source of energy is the electricity that you don't generate. We could achieve a substantial amount of very affordable and very accessible conservation if we had programs in place to achieve it. Our obligation is to look at conservation as part of the overall supply mix, not just as something nice that you do separately from your supply planning operation. So the first and most immediate task is to reassess and reinvigorate what we're doing to help our customers save energy so that they don't use energy that they don't really need and then don't have to pay for it. That's also going to include revising our rate structure – not increasing rates, but changing the structure so that we reward conservation. Right now, we do that on the water side, but our electric rates are the last electric rates that I know of in the state that still have not de-coupled the amount of usage from the amount that you pay. So the department in effect needs to sell more electricity in order to meet its revenue requirements. That's wrong. We shouldn't be in that business.

Mary, since the Riordan administration DWP has had a number of general managers and commissioners that have promoted conservation and alternative forms of energy, including David Freeman who is now the chair of L.A.'s Port Commission. The Department has entered into multi-million dollar contracts for public relations to promote green energy. Why do you say that now is the time to confront this issue? Hasn't that message already been understood?

No, it hasn't. Actually the whole unit that used to do conservation – when I was on the board during the Bradley era and when we first actually began to integrate major efforts at working with our customers to help them find ways to conserve energy cost effectively – was dismantled. The program has been pulled and tugged in various different directions for motivations that may or may not have anything to do with the long-term reliability of the system. We've got to get back, as I said before, to making conservation a part of our business. It's not a PR job. It's an actual service that we provide our customers and it has to be integrated into the rates and the services that we provide.

But for someone from the business community reading this interview, someone who always thought that the priorities of the DWP are the provision of affordable and reliable energy, are you suggesting that DWP now has higher priorities?

No, I'm saying that to have affordable and reliable energy we need an integrated resource plan that adequately captures what the resources are and does it in a way that is as thoughtful as it can be about what our overall obligations to our customers are. We should be in the business of providing energy service, not just electrons.

Beyond the DWP's power agenda, what else is likely to be on your commission's agenda and the new mayor's administration regarding water and power?

Customer service across the board, and that includes treating our sister agencies and departments as customers. We have an obligation, I think, to work more proactively with other parts of the city, particularly with the Board of Public Works, to bring water reclamation back on to the front burner again. This is an old topic that we've completely failed at getting the investments that we've made in water reclamation put into the system. We don't have the reclaimed water that we should because years ago we invested money in a structure that would allow us to use treated, safe reclaimed water and then got cold feet and didn't turn on the switch. We're going to have to find a way to get back to the community and our partners, and convince them that the time has come to turn the switch.

Please expand on the water issues. You come to DWP with a significant background in water issues, most recently as State Sec. of Resources. What are the substantive water issues that are likely to surface during your tenure at DWP?

We have opportunities and challenges when it comes to storing water so that we can reuse it. We have an obligation to look at our aquifers and see where we can create storage that can tide us over in times of drought and that will allow us to operate our water system in a way that takes advantage of reclaimed water and the ability of our land to filter water. Proposition O gave us a good start with money we can use for these purposes, but we have to put projects together and they have to be multi-purpose, multi-use projects that improve water quality because that's the overriding objective of Proposition O. We also need to play a role with the city, both through the Metropolitan Water District and on our own, in the Bay Delta discussions. As it's been pointed out recently by Senator Feinstein and others, we're one major earthquake in the Delta away from losing a third of our water supply. A levee break would be a disaster for the city's water, and – even more than that we depend on electricity to keep our economy moving forward – we depend on water to stay alive in this climate, so we have to be paying serious attention to the health of the overall system.

Mary, you used the word "system." You have served in federal government, state government, and city government. You're knowledgeable about the issues that will come before your commission. What then are the obstacles to DWP thinking systematically and working systematically across bureaucratic and jurisdictional lines to offer proactive solutions that actually are capable of being implemented successfully?

My experience in trying to bring departments and agencies together and to craft sustainable solutions to very long term and difficult resource problems is that you don't get people to the table without political leadership, and if the political leadership isn't followed by money, even leadership alone isn't enough. So we need two things: We need to take advantage of the Mayor's leadership. He has started out very strong and very clear about what he expects of the city, and has already started working together with the state and federal governments to make the city successful. We need to stay focused on implementing the green vision that he has given us. And then we need to utilize funds that are available to us, wherever they may come from – whether they're designated as water monies or as park monies or as infrastructure monies of other kinds – to put together projects and programs that will serve multiple objectives. That was the goal of the CalFed program. The CalFed program could still deliver on its 30-year promise if the federal government and the state government would get back to the business of carrying it out.

Los Angeles doesn't have a good history of capturing its fair share of bond monies. New bonds are being worked on even as we speak in the water area, and we need to make sure that we're involved in the writing of those and that we're able then to put together the projects that will get the money. This is an area in which I'm optimistic because when I first met our mayor he was the Speaker of the State Assembly and I was a brand-new resources secretary, and we collaborated to put together a park bond and shape a water bond to make them more responsive to the needs of urban areas, more accessible to our population than any state financing that had ever been before and then had the opportunity with projects such as the Cornfield in Taylor Yards to actually see the fruits of those political efforts come home to the benefit of Los Angeles. We need more of those kinds of projects.

In interviews before with the Metro Investment Report, you have been one of the more eloquent spokespersons for the notion that artificial city and county boundaries are often irrelevant to the environmental challenges that arise, whether from watersheds or air basins. As you now assume leadership of the City of L.A.'s Department of Water and Power, how do you plan on grappling with the region's environmental challenges in a proactive and intelligent way?

We have a number of opportunities. One, of course, is our membership in the Metropolitan Water District, where the city has four seats on the board. The mayor has made it clear that he expects his appointees to play a very active role. The city is not going to sit back and wait for decisions to be made by other parts of the region. We need to be engaging in a positive and constructive way in making sure that our needs are being addressed as well as the needs of others and that we can really develop some win-win solutions. Perhaps it's a little less obvious on the electricity side, but we do have a number of areas where we collaborate with other publicly owned utilities. We also have many projects that we work on as co-owners, co-developers of with our largest neighbor, Southern California Edison, and I'm hoping that as we look at future opportunities in the area of transmission and generation that we'll be able to find projects that are advantageous for both of these big systems to work on together.

Let's close with you giving us a brief status report on your work at UCLA.

I've been at UCLA almost two years now and during the course of that time, we've grown from being a little-known research unit into a more active resource for the campus, with an expanded teaching mission. We have developed a joint major with the departments of earth and space sciences, biology, oceanic and atmospheric sciences, geography, and the school of public health which will offer undergraduates at UCLA an unparalleled opportunity to study environmental science. It leads very nicely into opportunities either to get into the world of environmental management or into a number of different multidisciplinary graduate programs. I'm very excited about that. We're looking for research opportunities that directly address issues that are relevant to policymakers and policymakers here in the Los Angeles region.

One other thing about that which is that I've become very interested in sustainability, and I know that's a word that some people don't approve of. The UC Regents adopted a resolution requiring all campuses to be working on issues of sustainability, and we've taken that charge very seriously. The chancellor has chartered a committee of faculty, students, and administrators to look at our entire operation – not just the buildings and grounds, where the water comes from or what we do with our toxic waste, but also our teaching programs and our research from an overall sustainability perspective. I'm the co-director of that effort, and I'm very excited about some of the energy and some of the new ideas. If we could be a model for sustainability within our city, maybe we could also help to pioneer some solutions that will work for the city and the world.