The clash of wills between the Los Angeles City Council and the Department of Water and Power (DWP) this month has led one city councilman to propose a plan that would put the utility company under the council’s purview.
At the April 7th council meeeting, City Councilman Greig Smith recommended a change to the city’s charter that would allow the council to take control over DWP’s budget and limit Mayor Antonio Villaraigosa’s power to appoint DWP’ board of directors.
Smith’s proposal came two days after a Del Rey homeowner suggested taking away the embattled utility firm’s power to influence the city’s fiscal stability.
Mark Redick, the outgoing president of the Del Rey Neighborhood Council, told The Argonaut in an April 5th interview that because of the utility company’s refusal to release $73.5 million in anticipated funding, he would like to see a charter referendum in the near future that would restructure how DWP’s board of directors is appointed.
Redick said that having a ballot initiative was one of the only ways to change the direction of how the DWP board functions.
“The board is too insulated,” he said. “It’s time that the residents see some transparency on this board.”
DWP announced earlier this month that it would not transfer the $73.5 million to the city’s general fund after the council rejected a rate increase that the public utility company requested last month. City Controller Wendy Greuel told the council that without that transfer of funds, the city would not be able to pay its employees without using money from its emergency revenue fund.
The refusal to deposit the anticipated funds in the general fund drew outrage from the council and the public and prompted Greuel to initiate an audit of the utility company.
“I want to take the politics out of this process and provide an independent review of the DWP’s finances. I want to ensure that there is proper oversight and transparency for how the DWP spends the ratepayers’ money and verify the department’s claim that they could not complete the Power Revenue Transfer,” Greuel said in a statement. “Although I had already begun a separate audit of the DWP’s renewable energy portfolio, I thought this financial audit regarding the Power Revenue transfer was critically important to do.”
Among Smith’s recommendations include putting charter reform measures on the ballot to enable the City Council to remove any DWP commissioner or general manager with a two-thirds majority vote. In addition, the authority to appoint the utility company’s board of directors would be divided among the mayor, the City Council and neighborhood councils.
Currently, only the mayor has the power to appoint commissioners to the DWP board.
Villaraigosa, who has backtracked on an earlier threat to close general-funded city departments two days a week, now says he believes the water and power company will transfer at least $20 million to the city’s coffers.
City Councilman Bill Rosendahl thinks his colleague’s proposal has merit.
“I think that Greig Smith is moving in the right direction,” the councilman said. “We don’t have enough accountability and appreciation of a monopoly energy source for our constituents.”
Former DWP Interim General Manager David Freeman also feels that the current animosity between DWP and the council will be resolved soon.
“The mayor and the council are talking, and I’m hoping that in the real near future we’ll work something out,” Freeman, who resigned Tuesday, April 13th, told The Argonaut in an April 9th interview. “(The council) knows that we need a rate increase.”
Freeman said he thought the council could have handled the situation with the water and power company differently.
“They kind of went about it the hard way,” he said. “But I think that all of the fuss is over with now and I think that an agreement will be made that is satisfactory for everybody concerned.”
Rosendahl said the council was caught off guard by the proposal to raise water and energy rates during an economic downturn.
“This came out of nowhere,” he said. “It wasn’t vetted through the communities or the council, so that we could understand why the urgency existed right now that they were suggesting we do.”
DWP requested approval for a 5.7-percent rate increase but the council rejected that proposal and offered a 4.5-percent hike.
Freeman said that once a rate hike is approved, DWP would deposit some of the anticipated revenue into the general fund.
“Then we’ll be very happy to send the city the money in lieu of taxes that we ordinarily pay,” Freeman stated. “We just need to have it in order to send it.”
Rosendahl said the council would likely approve a rate increase, but smaller than what DWP has requested.
“What we’ll probably do as a city is approve one quarter at five percent and we’ll watch over a three to four month period what they do with that money,” the councilman said. “At the same time, Smith’s motion and others about more transparency, more openness and more involvement by community groups and neighborhood councils will continue to be discussed.”
When asked if releasing the funds was contingent upon a rate increase for DWP customers, Freeman responded that DWP pays eight percent of the revenue it collects to the city treasury, provided it has a surplus.
“We were counting on this rate increase. When it was suddenly turned down, we didn’t have a flow of money coming in to declare a surplus,” the former interim director explained.
Later in the interview, Freeman hinted that DWP might even consider transferring more than the expected $73.5 million, providing the council voted in favor of the rate hike.
“We’ll be delighted to write the check that they want for $73 million. We might even give a little bit more, because we care about the city,” he said.
Redick, a hotel executive, likes the idea of having neighborhood council representation, but wanted more details as to who would appoint the representative.
“The question is who would select the neighborhood council member, and how would they be chosen,” he said.
Rosendahl also likes the idea of having a neighborhood council representative on a future DWP board.
“(Neighborhood councils) have taken a deep interest in this and I’m very sympathetic to neighborhood councils having a role in this,” the councilman said.
Regarding the audit, Freeman appeared unconcerned.
“They can audit us until Kingdom come. We’re not afraid of an audit,” he asserted. “Bring on the auditors.”
The audit seeks to verify the reported revenue and expenses of the Power Revenue Fund — including transfers or allocations to other funds for the purpose of debt service, capital improvements, or other reserves — which were reported in the DWP’s financial statements. According to Ben Golombek, Greuel’s communications director, the investigation will take approximately a month.
Freeman said he understands that DWP customers have publicly expressed disapproval of a rate increase, but he pointed out that the utility company’s rates are lower than the Edison Company, which serves Santa Monica, among other municipalities.
“But has there ever been a rate increase in the history of the world that a customer was in favor of?” he asked.
Villaraigosa announced that he was appointing Eric Holoman, president of Magic Johnson Enterprises, to Freeman’s former position April 13th.
Rosendahl said that he is asked frequently by constituents about a rate hike to their utility bill and whether or not it is inevitable.
“We need a better understanding and appreciation of how DWP functions as a business,” Rosendahl reiterated. “We’re the ones who write the checks, and we’re the stockholders. (DWP’s) credibility is at an all-time low.”