On a 10 to 4 vote, the council approved the Department of Water and Power rate increases, which are expected to generate $321 million by June 2014.
DWP customer service workers make 29% more than their counterparts at other utilities, the analysis found, with meter readers earning 46% more.
"DWP does not have an income problem," Vicki Micciche, 45, of San Pedro told the council. "It has a spending problem."
DWP officials downplayed the pay comparison, saying cuts to employee salaries would do little to reduce the size of future rate hikes. Only 3% of DWP jobs had been examined, they added.
Nevertheless, Councilman Mitchell Englander said the pay issue contributed to his vote against the increases.
"This was just one of many issues that need to be dealt with and not glossed over," he said. Also opposing the increases were council members Jan Perry, Bernard C. Parks and Dennis Zine.
Tuesday's increases may be just the beginning. Independent ratepayer advocate Fred Pickel told the council that the DWP's financial plan called for possible increases of 7.8% in 2014, 7.6% in 2015 and 6% in 2016.
Pickel said he would work to decrease those numbers.
DWP General Manager Ron Nichols said those future increases are "nowhere near as well vetted" as the rate hikes planned for the next two years.
Despite complaints, the vote went far smoother than the last rate increase.
Two years ago, the council and the DWP engaged in a brutal back-and-forth over the size and number of increases sought by Mayor Antonio Villaraigosa to support cleaner-burning energy.
By comparison, the increases approved Tuesday had broad support from business leaders, environmentalists, labor activists and backers of a new energy efficiency program.
Councilman Tony Cardenas, a longtime DWP critic, said the utility had emerged from "the dark years" by discussing its finances more openly.
Nichols said proceeds from the increases tentatively approved Tuesday will help the DWP move to more renewable energy sources, such as solar and wind energy, and reduce pollution of seawater caused by DWP plants near the ocean.
The new revenue will also help pay for energy efficiency initiatives, including weatherproofing of homes and rebates for new appliances.
That program's budget grew from $50 million in 2011-2012 to $126 million this fiscal year.