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Rate hike standoff reveals L.A. City Council's distrust of DWP

Some lawmakers support three-month increase, but are reluctant to prolong it.

April 10, 2010|By David Zahniser and Maeve Reston

The 10-day standoff over electric rates in Los Angeles, and the budget crisis it provoked, has boiled down to a single problem: Too many members of the City Council don't trust the Department of Water and Power.

As they continued their struggle over a proposed rate increase, Mayor Antonio Villaraigosa and the City Council on Friday failed to find the breakthrough that would deliver additional money to the DWP, which would in turn prompt the utility to send $73.5 million to the struggling general fund budget.

Council President Eric Garcetti said he doesn't trust the DWP enough to give it the longer-term increase sought by the mayor.

"We have been lied to directly as policymakers and the overseers on behalf of the people," he said. "They have changed their tune so many times in the last three months and have pretty boldly and baldly said things that we know not to be true."

A handful of council members said Friday that they would be willing to vote again in favor of a single three-month rate increase that narrowly got eight votes two weeks ago. But they resisted Villaraigosa's demand that the increase last longer, saying that DWP officials first need to be more forthcoming about the agency's finances and its environmental programs.

If the proposed increase becomes permanent, the council will no longer have the leverage to force the changes it wants out of the DWP, Garcetti said. Utility officials counter that the City Charter already allows the council to exert control over any future rate increase approved by the board before it goes into effect.

Villaraigosa contends that a longer-term rate increase is critical to prevent the utility's bond rating from being downgraded -- a move that would increase the interest rate and cost of borrowing.

The mayor's team was vague, however, on Villaraigosa's bargaining position with the council.

"His bottom line is there needs to be an increase sufficient to right the financial ship" at the DWP "which also commits the department to renewable energy," said Matt Szabo, Villaraigosa's deputy chief of staff. "He's willing to consider any proposal that meets those two standards."

The DWP's refusal to provide money to the budget has dramatically increased the size of the city's deficit, expanding it to $222.4 million for the fiscal year that ends June 30, city budget officials said Friday. Next week, Villaraigosa is expected to announce his list of planned layoffs for the fiscal year that starts July 1.

The threat to the city's bond rating and the possibility that the lack of a DWP transfer could bring the need for more layoffs to get the budget in balance have been enough for some council members to seek a compromise.

Earlier this week Councilwoman Janice Hahn floated a proposal to allow the council's proposed rate increase to last more than three months. She withdrew it after failing to get enough support.

"It seems to me we should put the fighting aside and see what we can agree on that works," Hahn said.

As the stalemate drags on, Councilman Herb Wesson has repeatedly met with Villaraigosa in an attempt to persuade him to support the lower increase backed by the council, an additional 0.6 of a cent per kilowatt-hour. Villaraigosa's appointees on the DWP board favored 0.7 of a cent, while the mayor originally sought 0.8 of a cent.

Wesson said he persuaded the mayor to support the lowest of the three figures. That would occur, however, only if the increase was in effect for a whole year, Wesson said. "I think we're close and we just have to keep talking," he said.

Asked about the agency's trustworthiness, DWP spokesman Joe Ramallo said it doesn't serve any purpose for the council to "use the DWP as a punching bag."

"We really do want to work in a more constructive way with members of the City Council," he said.

Part of the distrust stems from the fact that the additional money sought by the mayor would go toward new renewable energy programs. Council members have said they don't want to give a longer-term increase until the DWP finishes its plan for securing more renewable energy, which is expected this summer.

Garcetti and Councilman Dennis Zine have complained that too many of the utility's renewable energy contracts -- particularly wind -- come from as far away as Oregon and Wyoming. Both said more of them should be within California to create more jobs.

Villaraigosa's promise that the money will go into a "lockbox" has not provided reassurance. "They don't trust the concept," Councilwoman Jan Perry said. "They need to know how the money that's generated for it would be spent."

The DWP lost credibility with some members after it threatened to withhold the promised general fund money if the mayor's rate increase was rejected. Two months ago, interim General Manager S. David Freeman told the council -- and The Times -- that the payment would be made regardless of whether a rate increase was approved.

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