LA WATCHDOG--Our Department of Water and Power is planning to have its proposed $1.4 billion increase in our water and power rates to be effective as of January 1, 2016. But this timing is unlikely because of the many questions involving the Department’s operations and finances and its dysfunctional and financially draining relationship with City Hall.
Over the next five years, DWP is proposing to increase our electricity rates by about 5% a year, or 25% to 30% over the next five years. While the Department anticipates that we will cut our consumption of electricity by 2%, Power System revenues will increase 23%, or almost $900 million, to $4.4 billion. This will trigger an additional $180 million in tax revenue for the City.
Water rates are more complicated as the five year, 50% increase in the base rate (8.5% a year) is masked by the anticipated savings of more than $200 million resulting from purchasing less high priced water from the Metropolitan Water District. This assumes average rainfall and an end to the drought.
Overall, Water System revenues are projected to increase by about $250 million, or 22%, to $1.4 billion, even though consumption dips by 6%.
Before the City Council approves the five year rate increases, it will need to consider the opinion of the Ratepayers Advocate and its independent consultant as well as the findings of the charter mandated Industrial, Administrative, and Economic Survey. But it is unlikely that these necessary documents will be ready within the next two to three months.
There are also many questions about the operations and finances of the Department. For example, very little is known about Joint Services and its cost structure and efficiency, despite the fact that it responsible for more than a third of DWP’s employees.
The Department is also considering a multibillion investment in Utility Built Solar facilities. But does it make sense for DWP to construct these local sources of solar power when previous DWP installations at the Port of Los Angeles resulted in power costing 60 cents per kilowatt, four times the retail rate that we pay and even more compared to large scale solar facilities? And is there a deal with the IBEW to install local solar power even though its work crews are significantly more expensive than outside contractors?
There is also a general lack of knowledge about the Departments $1.6 billion unfunded pension liability (based on market values and including other postemployment benefits) and the impact on rates.
As part of the process of reviewing the five year, $1.4 billion rate hike, we need to begin the process of reforming the relationship between DWP and City Hall. As it is, the Ratepayers are being hit up for over $1 billion a year, including over $650 million in cash through the City Utility Tax and the 8% Transfer Fee. There are also the expenses associated with the IBEW Labor Premium and its overly restrictive work rules, City Hall’s numerous pet projects, and the surplus employees (and their unfunded pension liability) that were dumped on the Department during the Villaraigosa era.
The first step is to freeze cash payments of $650 million from DWP to City Hall and devote the incremental funds to improving the Department’s infrastructure. At the same time, the City needs to plan for the elimination of the 8% Transfer Fee ($266 million last year) because there is a high likelihood that it will be declared illegal pursuant to several class action lawsuits alleging that the Transfer Fee is in violation of Proposition 26.
We also need an independent and experienced Board of Commissioners (no undated letters of resignation) that will respect our wallets. In its August meeting, the Commissioners blessed pet projects for the $40 million La Kretz Innovation Campus and El Pueblo. It also approved a Stormwater Capture Master Plan where the financial metrics are flawed. At the same time, DWP becomes the deep pocket for projects that are the responsibility of other City departments.
We also need a system that prevents the City Hall from meddling in the affairs of the Department by requiring that communications be restricted to predetermined channels and that these communications be documented and posted on the internet within 24 hours.
Labor negotiations should also be reformed by relying on benchmarking studies that outlined the efficiency of the Department’s management and employees. Furthermore, all labor negotiations should be open and transparent and not conducted behind closed doors between politicians and campaign funding labor leaders.
There are many other improvements and reforms that should be considered. But this will take time and political will. Of course, the Herb Wesson City Council and Mayor Garcetti may ignore the idea of reform, similar to what they did to the recommendations of the LA 2020 Commission.
On the other hand, Wesson and Garcetti do so at their own peril as Ratepayers, especially homeowners that are the target of these substantial rate increases, are high propensity voters and will remember these slights in November of 2016 when the voters will be assaulted with numerous State, County, and City measures to increase our taxes.
(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and a member of the Greater Wilshire Neighborhood Council. Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at: [email protected])
-cw
CityWatch
Vol 13 Issue 71
Pub: Aug 31, 2015
