02 Sep 2011
- Written by Rick Orlov
CITY HALL - Blocked from pursuing new rate increases, the Los Angeles Department of Water and Power warned Tuesday that it may have to start making cuts in service while planning for even sharper fee hikes in the future.
The DWP had hoped to get rate increases in July of 2.5 percent for water and 3.8 percent for power, but the City Council stopped the effort until a new ratepayer advocate could be hired for the agency, which is expected to take several months.
DWP General Manager Ron Nichols said if the utility has to wait until November, it would seek hikes of 4.2 percent for water and 5.9 percent for power.
"It has taken longer than we expected to see the ratepayer advocate appointed," Nichols said during a public presentation to DWP customers at the utility's headquarters regarding the proposed rate increases.
As a result, he said his staff has prepared a plan for what the utility needs to do if it receives no rate increase over the coming months.
One possibility, he noted, is a slower response to customer calls for problems with their water and power service. He is also looking at using long-term debt to help pay some short-term costs, digging into financial reserves and stepping up bill collections.
Other areas being studied include cuts in operation and maintenance costs and reducing spending on capital projects.
But those maneuvers could lower the DWP's credit rating and make it more expensive to borrow money.
Without rate increases, Nichols warned the power side would have to reduce spending by $107 million and the water side by $111 million.
The power fund brings in about $3.1 billion a year - and transfers more than $220 million to the city general fund to make up for lost property taxes. The water fund brings in $805 million a year, but none is transferred to the city.
Following a rate hike fight with the City Council last year, voters in March approved the creation of an Office of Public Accountability, and a five-member citizen commission that will hire the executive director.
However, because of delays in authorizing an ordinance to be drafted and other matters, that citizen commission was named only two weeks ago.
Further delays are expected as the new citizen panel selected to hire the OPA executive director is not expected to meet until the third week of September. Also, a number of new ordinances will need to be drafted to allow the new office to do its work.
That likely means the earliest someone could be hired is by mid to late October.
Neighborhood Council Voices
But two influential members of the DWP Neighborhood Council Oversight Committee said they believe the utility should be given an emergency increase of 7.5 percent for power and 5 percent for water rates, rather than wait for the creation of the Office of Public Accountability.
"It is too important for the future of the DWP and ratepayers to be rushed," said Jack Humphreville, who heads the political activities or the committee.
And, Tony Wilkinson, chair of the oversight committee, said he believes the city needs to send a signal to Nichols that his work is appreciated.
"We finally have a professional in charge over there and we shouldn't limit his ability to do his job," Wilkinson said. "The mayor has been pushing for 20 percent renewables, but the DWP has paid for it on a credit card. That is something we should let the people decide on how much renewable energy we can afford.
"That's why we say give them a one-year increase, do a good job in hiring the ratepayer advocate and be honest with the ratepayers on the cost."
City Hall Sees It Differently
Nichols said he does not believe such an emergency measure will work.
"We feel bound to work within City Council parameters at present and we are looking at the range of timing of the efforts by the city to bring the ratepayer advocate on board," Nichols said.
Mayor Antonio Villaraigosa is waiting to get specifics from the department.
"The mayor believes we need to invest to maintain reliability and comply with state and federal mandates, but any rate adjustment must first be studied by the ratepayer advocate," spokeswoman Sarah Sheahan said.
"That is why he has urged the citizens committee to expedite the process for selecting a ratepayer advocate.
"In the meantime, it is prudent for the department to move forward with a budget, and requisite cuts, that assume no new rate increases."
Council President Eric Garcetti said no rate increase should be approved until the Office of Public Accountability is staffed.
"We don't think there should be any action related to rates until the ratepayer advocate has weighed in," Garcetti spokesman Yusef Robb said.
Nichols held a series of meetings across the city on the rate increase proposal, as well as the utility's needs and costs to comply with state and federal requirements.
Tags: DWP, DWP rate increases, Ron Nichols, Mayor Villaraigosa, Jack Humphreville, Tony Wilkinson, Neighborhood Council Oversight Committee, oversight, Eric Garcetti
Vol 9 Issue 70
Pub: Sept 2, 2011