Mayor Antonio Villaraigosa on Monday proposed a carbon reduction surcharge that would eventually add about $2.50 a month to the bills of residential Department of Water and Power customers while hiking rates for some businesses by about 20 percent.

Villaraigosa projected the money would help fast-track the city's switch from coal to renewable energy while creating about 18,000 green jobs over a decade.

"For Los Angeles to be the cleanest, greenest city, we need participation from every Angeleno,'' Villaraigosa said at a news conference at the Convention Center.

"By investing in renewables and energy efficiency, we are building the foundation for an emerging industry that will attract good paying green-collar jobs to Los Angeles.''

Sarah Hamilton, a spokeswoman for the Villaraigosa, said the surcharge is expected to increase the bills of average ratepayers -- or 60 percent of DWP customers -- by about $2.50 a month.

Businesses, however, could pay considerably more.

"It is true that all businesses in Los Angeles will see increases between 20-26 percent if they fail to take advantage of the energy efficiency programs we are providing,'' Hamilton said.

"For small businesses, this would mean a monthly increase of approximately $54, or 20 percent,'' she said. "Medium and large businesses will see increases of approximately 23 percent and 26 percent, respectively.

"However, the objective of this initiative is not to charge more, it is to use less,'' Hamilton said. "That is why we are dedicating 100 percent of the surcharge to renewable energy and energy efficiency. Small businesses, for example, will qualify for up to $2,500 in free energy-efficiency lighting upgrades which could lower energy costs by up to 25 percent.''

Villaraigosa said the surcharge would be deposited into a a Renewable Energy and Efficiency Trust Fund and used for two specific programs.

The first program would teach Angelenos how to conduct green audits and how to retrofit homes and businesses to make them more energy-efficient.

The DWP would recruit entry-level workers and train them through the Community College District, Community Development Department and Joint Training Institute.

The other program is called the solar feed-in tariff or FiT, which would allow owners of businesses with rooftop solar panels to sell electricity to the DWP at a guaranteed price over 20 years.

"In most cases, businesses can dramatically reduce or even eliminate their power bills,'' Hamilton said. "In some instances, businesses can use the FiT to make money.''

According to a statement from the mayor's office, "FiT will create jobs in both the public and private sector in manufacturing solar equipment, installation and maintenance while also reducing electricity use during peak hours, reducing transmission congestion and accelerating deployment of renewable energy sources.''

Villaraigosa said the surcharge "empowers every person in this city to play a role in building our green future and placing Los Angeles at the forefront of the green revolution.''

The plan includes having a ratepayer advocate to ensure the surcharge is being spent as intended.

The Board of Water and Power Commissioners will discuss the surcharge -- part of the Energy Cost Adjustment Factor adjustment -- this week.

Los Angeles Business Council President Mary Leslie expressed support for the plan's solar component, saying "a well-designed FiT program would unleash a major source of clean, locally generated energy to meet Los Angeles' renewable goals, providing incentives and cost-savings for businesses, public institutions and residences to produce solar energy and sell it back to our utility.''

Jim Gonzales, chairman of the Renewable Energy Accountability Project, also supports the plan.

"Every penny DWP invested in solar, wind, and geothermal technologies is money invested in American jobs, national security and clean energy independence,'' he said.

A recent study by PA Consulting revealed the Energy Cost Adjustment Factor is not bringing in enough money to help Villaraigosa realize his goal of ending the city's reliance on coal by 2020.

Currently, the DWP can raise the Adjustment Factor quarterly, but only up to 0.1 cent per kilowatt-hour. The study recommended gradually raising the cap to 2.7 cents per kWh over the course of a year, starting next month.

At present, the Adjustment Factor is 5.09 cents per kWh, according to the Los Angeles Times.

If the proposal is adopted, the surcharge would end up being 7.79 cents per kWh. That would result in the average residential customer's monthly payments increasing $11 to $14 over the course of a year under the current rate structure -- a 16-21 percent hike in the current average bill, according to the study.

The average low-income customer's monthly payments would go up $7 to $9 over a year, a 20-27 percent increase. But Lifeline customers, who receive a discounted rate, would pay $8 to $11, or 25-35 percent more.

Rates for commercial customers would go up 15 percent to 20 percent, the study found.

The DWP intends to revise the current rate structure at some point, with the goal of  "reducing the price for residential customers who use small amounts of power and increase the price for large users,'' according to the study.

The City Council has the option of either approving or rejecting -- but not amending -- the proposal to raise the Adjustment Factor.

Councilwoman Jan Perry, who chairs the City Council's Committee on Energy and the Environment, said the issue will be taken up on Tuesday.

The committee last discussed the Adjustment Factor in October, shortly after the appointment of S. David Freeman as interim general manager of the DWP.

Freeman agreed to postpone the proposed increase but stressed it was necessary to meet  Villaraigosa's goal of making renewable energy 20 percent of the DWP portfolio by 2010, 40 percent by 2020.

"You can't go from coal, which costs 4 cents, to solar and wind that costs 8, 9 or 11 cents without the costs going up -- it's just simple plain math,'' he said.

A recent survey commissioned by the mayor's office showed 64 percent of respondents were willing pay an extra $2.50 a month to help the DWP transition to renewable energy sources.