City OKs DWP Plan for Layoffs, Rate Incentives

The Los Angeles City Council took a number of steps Wednesday toward preparing its municipal utility for coming deregulation of the electrical market, including reducing the Department of Water and Power’s work force and granting rate freezes and discounts.

But while the council action included approval for what has been called the largest layoff in city history--2,000 employees--potential settlements with its unions probably will diminish the need for that many mandatory dismissals.

The council’s action came the morning after DWP general manager S. David Freeman reached a tentative agreement with the Engineers and Architects Assn. on a buyout and severance package.

Freeman accepted union demands to redeploy younger workers whose jobs were scheduled to be eliminated, while the union agreed to drop a charge of unfair labor practice against the department. The agreement must be approved by the council’s Employee Relations Committee, which meets today, as well as by the full council and union members.

Still, Wednesday’s council action was viewed as highly significant for the DWP, which will soon compete for customers with private investor-owned utility companies.

“What we’re trying to set in place here is the ability to position ourselves for the way the world will change in 2002,” said Councilwoman Ruth Galanter, who has led the council on the DWP deregulation issues. “It’s really important that we show the world we are serious.”

But several council members raised concerns about the DWP proposals, including the layoffs. Councilman Mark Ridley-Thomas, for example, said he could not support the package without knowing the demographics of the employees targeted for firing.

“The gains that women and people of color have made could be deeply eroded,” Ridley-Thomas said after the vote. “It’s inexcusable to be asked to do this without this information.” Ridley-Thomas, who had introduced a council motion in November seeking that information, received a letter from Freeman a month later acknowledging the potential for a “disproportionate impact” on women and minorities.

But Freeman told the council on Wednesday that he is confident the financial incentives being offered will entice more senior employees to leave voluntarily. If that happens, Freeman said, women and minorities hired more recently could keep their jobs.

Under the city’s Civil Service rules, more senior employees have so-called bumping rights so they would keep their jobs while newer employees would be forced to leave.

In the agreement approved late Tuesday, union officials said that 517 employees are targeted for layoffs but that the union, too, expects voluntary retirements and resignations.

“We’re not out of the layoffs,” said Bob Duncan, executive director of the Engineers and Architects Assn. But he added that the probability of them has been substantially reduced.

In the end, the union’s leadership agreed to the same basic package of financial incentives already accepted by the largest and most powerful DWP union, the International Brotherhood of Electrical Workers, as well as the group representing DWP managers.

Younger employees would be eligible to receive cash payments of $25,000 to a maximum of $50,000 to voluntarily leave their jobs. Other workers not yet eligible to retire could receive up to five years credit to qualify. And employees who can retire could receive three years extra credit toward their pensions.

The breakthrough came when Freeman agreed to the engineers and architects’ demand that workers who might lose their jobs be placed in a redeployment pool for other positions at the DWP or elsewhere in city government. If the employees are unable to find other work, they will receive severance pay.

The DWP chief also pledged not to transfer the work of the engineers group to other unions, particularly the electrical workers.

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Freeman has said the layoffs were necessary to help pay off the utility’s $4-billion debt. The layoffs have been generally endorsed by the council, but the engineers and architects group has protested and unsuccessfully sued the city to prevent the massive firings.

“These aren’t easy changes for either DWP or the city,” said Councilwoman Jackie Goldberg, typically organized labor’s best ally on the council. But she said that the layoffs are necessary and that she hopes most of the departures will be voluntary.

“These ordinances today will position us to be extremely competitive--if not the most competitive agency in Southern California,” Goldberg said.

Councilman Joel Wachs, however, complained about the high cost of the financial incentives being offered to DWP employees. “That’s money you won’t have for police officers and the Fire Department,” Wachs said.

On a 12-2 vote, with Ridley-Thomas and Councilman Nate Holden dissenting, the council agreed to the various steps aimed at downsizing the department and its debt, as well as preparing the utility to compete with the privately owned investor electrical companies. The ordinances will be formally adopted at the council meeting next week, a pro forma move.

Though state legislation mandated the deregulation of those companies, it did not apply to city-owned utilities. The city needs to be competitive as those companies attempt to draw clients from city residents and businesses.

To encourage customers to remain with the DWP, the council agreed to freeze rates for four years and approved a 5% rate discount for individual customers beginning in 2002. That decrease would be equivalent to 0.5% each year for a maximum of 10 years.

The council granted Freeman the authority to negotiate 7- to 10-year contracts with major residential and commercial customers.

But Holden objected, saying private companies will offer potentially larger discounts and that Freeman’s strategy is “flawed.”

“Strategy is essential in a case like this,” Holden said. “We might be able to be more competitive, save more money.”

But Freeman and other city officials said the 5% savings is adequate and that other discounts being offered are misleading.