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Panel OKs DWP Deregulation Plan

Utilities: Council board approves rate freezes and grants authority to negotiate major contracts with customers.

March 14, 1998|BETH SHUSTER | TIMES STAFF WRITER

Taking important steps toward preparing the municipal utility for the coming free electrical market, a key City Council panel agreed Friday to rate freezes and discounts and to allow the Department of Water and Power broad new power to negotiate major contracts.

"This is big news," said DWP General Manager S. David Freeman, who won at least preliminary approval for some departmental autonomy. "It's extremely significant. . . . [It] is an indication they fully understand the competitive era we're getting into."

Meanwhile, the DWP continued to negotiate Friday with one of its unions, the Engineers and Architects Assn., whose members could be the hardest hit in planned layoffs. The DWP needs to pay off its $4 billion debt in part by eliminating 2,000 jobs.

The council panel on energy restructuring, headed by Councilwoman Ruth Galanter, agreed to the two ordinances--one that sets the rate discount and one that gives the DWP negotiating power and rate freezes--as well as agreeing to the DWP's action plan, which includes the layoffs. The full council is expected to review and ratify the panel's actions next week.

The moves come as the city-owned utility prepares to compete with investor-owned electric companies. Although state legislation mandated the deregulation of those companies, it did not apply to city-owned utilities. Still, the city needs to be competitive, as those companies attempt to draw clients from city residents and businesses.

To help encourage customers to remain with the DWP, the council panel agreed to freeze rates for four years and approved a 5% rate discount for individual customers beginning in 2002. That decrease would be equivalent to 0.5% each year for a maximum of 10 years.

Although some of the other energy companies are offering higher discounts, city officials said those advertisements are misleading and that customers will be forced to pay exit fees and other costs that will add up.

"A lot of what is being sold to the public isn't going to be cheaper," Galanter said. "We're trying to do it honestly."

In granting Freeman the right to negotiate long-term contracts without prior council approval, the panel was also seeking to retain large commercial consumers. Freeman has said the negotiating authority would allow him to more quickly make deals with customers who may be at risk of switching to other utility companies.

Under the ordinance approved by the panel, Freeman could approve seven- to 10-year contracts and the council, mayor and water and power commissioners would receive quarterly reports and updates.

Freeman called this "the key decision," saying that the DWP could even go outside the city limits for new customers. But he declined to say when that would happen, except to say that he expects the other companies to begin seeking the city's customers as soon as they are able.

"Once we're able to quote real hard rates, we'll take 'em on," Freeman said. "We've got to get out there and sell."

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The panel also heard Friday from DWP employees whose jobs have been targeted for elimination, but the council members said they have little choice but to approve the downsizing--the largest in city history.

"We don't know what else to do," Galanter told several of them after the hearing. "I don't want you to think no one cares. We all do."

But Heidi Bass, who works in the DWP's customer account services, told the panel that the past few months of job turmoil have been detrimental to the employees' work.

"How much work can you get done with employees with a hatchet at their throats," she said. "I am begging you to allow negotiations to continue without the threat of layoffs."

Although both sides appeared somewhat optimistic Friday, talks have previously broken down over the size of the severance package that would be offered to employees who leave voluntarily rather than being laid off. The City Council had authorized payments of $25,000 to $50,000 to each employee who was ineligible for enhanced retirement benefits.

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