LA WATCHDOG - When Mayor Eric Garcetti discussed having all of the General Managers of the City’s departments reapply for their jobs, he said he would “look particularly hard at the leadership of the Department of Water and Power.”
But the controversy surrounding DWP is not the fault of General Manager Ron Nichols or his management team who have done an excellent job over the last thirty months developing a relationship with the cantankerous Ratepayers, the City Council, the general public, and the ever important rating agencies.
Over the last two years, Nichols and his team have increased water and power rates without generating furious opposition which was the case in 2005 with the proposed 18% increase in water rates and in 2008 with the 15% and 22% increases in water and power rates. Nor did we experience another controversy like the “ECAF Fiasco” in the spring of 2010 when David Freeman and Raman Raj lied to the City Council. However, this stunt led to the creation of the Ratepayers Advocate that was approved by 78% of the voters in March of 2011.
Rather than trying to jam rate increases down the throats of Ratepayers, Nichols and his management team spent inordinate amounts of time educating the Ratepayers why rates needed to be increased, providing us with detailed operating and financial information and, at the same time, earning our trust.
DWP even separated the water rate increase from the bump in power rates, where the water increase was a onetime shot needed to finance capital expenditures required by the Clean Water Act. The power rate increase was limited to two years, in part based on the recommendation of the Ratepayers Advocate.
Furthermore, the morale at DWP has improved considerably now that Department employees have an accessible General Manager who knows the utility business and, unlike many of his predecessors, the difference between a kilowatt hour and a megawatt, an amp from an ohm, an acre foot from a HCF (our billing unit), and a balance sheet from an income statement.
DWP’s problem is one of governance, starting with former Mayor Villaraigosa and his ever changing, not very well thought out, rush-rush priorities and his appointment of less than qualified commissioners who were a rubber stamp for his policies, refusing to protect the Ratepayers’ wallets despite the advice of the Ratepayers Advocate regarding Feed in Tariffs and the early phase out of coal at the Intermountain Power Plant. This was compounded by the interfering members of the Herb Wesson led City Council who are more concerned about their pet projects and employment for their cronies to say nothing of the influence of campaign funding IBEW Union Bo$$ d’Arcy.
This lack of respect for the Ratepayers and their wallets is epitomized by the over $1 billion* a year that City Hall and its cronies (including IBEW Union Bo$$ d’Arcy) extracted from DWP last year.
Ironically, the looting of DWP and the extreme distrust of IBEW Union Bo$$ d’Arcy and his attempt to buy City Hall (as he did with Villaraigosa) resulted in Valley and moderate voters turning out for Eric on May 21, propelling him to a 34,000 vote victory.
Rather than sacking Nichols and creating a crisis with the Ratepayers, voters, the investment community, and the rating agencies, it is time for Eric to focus on the governance issues involving DWP and let the well qualified management operate the nation’s largest municipal utility in an efficient and rational manner.
As a first step, Eric needs to appoint commissioners who have a demonstrated level of management, technical, and financial experience and expertise that that will allow them to understand and oversee the operation of this highly leveraged, $25 billion utility with 9,000 employees, $5 billion in revenues, and a $12 billion capital expenditure program over the next five years.
At the same time, management, the new commissioners, the City Council, and Eric need to recognize that the Ratepayers are not made of money. This would involve calling a halt to all pet projects, reducing the legally questionable 8% Transfer fee/tax, and creating a process that would eliminate the indiscriminate interference by the City Hall meddlers in the affairs of DWP.
The Board of Commissioners would also be instructed to seriously consider the views of the Ratepayers Advocate, such as those relating to the $300 million overpayment for Feed in Tariffs and the $500 million cost to eliminate coal at the Intermountain Power Plant two years earlier than required.
For example, if the above market subsidies for Feed in Tariffs were eliminated, for the same amount of money, we would have twice the amount of solar power and create twice as many jobs, much to the chagrin of the solar lobby, real estate developers, and financial engineers.
Finally, and to help gain the trust and confidence of the Ratepayers and the voters, all labor negotiations must be conducted in an open and transparent manner, not behind closed doors, where the Ratepayers Advocate, Ratepayers, and voters are given ample time to review and analyze any new labor agreements.
DWP is an excellent opportunity for Eric to reward the Ratepayers for their support, to recognize the excellent work of Ron Nichols and his management team, and to create a more efficient, goal oriented operation that will better serve all the citizens of Los Angeles.
Eric, don’t blow this precious opportunity.
(* The over $1 billion rip off consists of the legally questionable $250 million transfer fee/tax from the Power System to City’s General Fund; the $300 million from the 10% City Utility Tax; the $250 million IBEW Labor Premium (not including the impact of restrictive work rules); pet projects such as Griffith and Elysian Parks and the Silver Lake Reservoir; and the dumping of surplus City employees (and their unfunded pension liabilities) on DWP.)
(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee, the Ratepayer Advocate for the Greater Wilshire Neighborhood Council, and a Neighborhood Council Budget Advocate. Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at: [email protected]. Hear Jack every Tuesday morning at 6:20 on McIntyre in the Morning, KABC Radio 790.)
Vol 11 Issue 57
Pub: July 16, 2013