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The DWP: Powerful misconceptions

The Department of Water and Power's electricity rates need adjusting, all right — upward.

March 28, 2011|Jim Newton

One of the exasperating facts of contemporary Los Angeles politics is that City Hall is beset with problems, but its critics are often as misguided as its culprits. That's certainly true when it comes to the Department of Water and Power.

In the recent City Council elections, a number of challengers — and incumbents — argued that the DWP is a cesspool of overspending and that the utility's excessive electricity rates stiff consumers to prop up a bloated city bureaucracy. Persuaded, city voters approved two measures intended to rein in the DWP, including the creation of a ratepayer advocate.

There's nothing wrong with either of those measures. What is fundamentally misguided, however, is the assumption that Los Angeles residents are getting a raw deal on rates, at least when it comes to electricity. In fact, the DWP's power rates are lower than those charged by Southern California Edison (20% to 30% lower, in fact), not to mention Pacific Gas & Electric or the municipal utilities for San Diego, Pasadena, Burbank or Glendale. The DWP's rates are artificial, all right; they are artificially low.

That's not to say the DWP is a model city department. From its earliest days under William Mulholland, the department has stood apart from the city's government, an essential piece of it but also an entity unto itself, haughty, imperious and defiant. It tried to bamboozle L.A. voters on a solar power initiative a few years back. And most recently, when the department threatened to withhold its payment to the general fund unless its rate hikes were approved, council members were appropriately enraged. Council President Eric Garcetti, echoing the views of his colleagues, said the DWP had misled the council and the city.

The council's outrage was justified, but fury over the DWP's behavior masked the underlying question of whether the city's electrical power was appropriately priced. S. David Freeman, the colorful veteran of American public power who headed the DWP in the Mayor Richard Riordan years and then again briefly under Mayor Antonio Villaraigosa, watched with mounting irritation as the rate hikes got swept up in that controversy.

Freeman's retired now and preparing to leave town. Before he left, though, we reminisced about the agency he once headed and his fears for it today.

The DWP, he observed, is caught between several of the city's most debilitating political problems. Its costs are largely in its workforce, whose salaries are set by the collaboration of a powerful employee union and its elected-official allies. And its rates are subject to shrill inspection by constituents with easy reach to those same officials. The result: Raises are easily granted and rate hikes just as routinely refused.

"We have a City Council that is unashamed to say, 'I'm voting against this because I got 400 emails,' " Freeman said recently, sipping a bowl of soup in The Times' cafeteria. "Janice Hahn once told me her constituents didn't want a rate increase." He paused in mock amazement. "Hello, Sherlock."

So costs go up fast while rates go up slowly. Meanwhile, the DWP is falling further behind the obligations that the city puts on it — for a regular contribution to the general fund, for upkeep of the utility's infrastructure, for conversion to renewable power as a state mandate requires, for upgrading to prepare for electric cars and smarter energy.

A smarter approach, Freeman maintains, would be to commit to a series of small annual electric rate increases, say a half-cent per kilowatt-hour. (The DWP today charges 13.6 cents per kilowatt-hour, meaning the average residential user pays about $56 a month.) Those increases would march steadily upward for nearly a decade, Freeman added, until the DWP could take care of its unmet needs and position itself for the future.

That may sound logical, but it's inconceivable in today's political climate. To that, Freeman also has a proposal: What the agency needs, he says, is an independent board with the power to set rates, analogous to the state's Public Utilities Commission. The members could be selected by the city's political leadership — the council might name a few members, as might the mayor, city attorney and controller — but once named, the board members would be protected from easy removal.

Changes of the type Freeman suggests would take time. They require imagination and negotiation to produce the needed charter changes and, above all, leadership, which is in short supply of late. "I don't think this is going to happen on Antonio's watch," he said. "He's not a lame duck yet, but he's getting there fast."

Reshaping the DWP into the kind of forward-thinking utility Los Angeles needs will require courageous leadership and persistence in educating the electorate. In that vein, Freeman offered one other issue to consider: With or without these investments, Los Angeles electrical users will end up paying more. Either higher rates will go toward building a greener utility company with a more reliable infrastructure, or they will pay state fines for failing to limit greenhouse gases. In one case, higher rates help the environment and stabilize city finances; in the other, the money simply drains away to Sacramento.

That sounds like an easy decision, but L.A. has a way of making such choices harder than they ought to be.

Jim Newton's weekly column has moved from Tuesdays to Mondays.

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