DWP Pushes Plan to Spin Off Utility From L.A.’s Control

Seizing the initiative Monday on an issue that could redefine one of Los Angeles’ most important city agencies, the general manager of the Department of Water and Power proposed tat it break free of the city so it can compete in a rapidly changing marketplace.

The proposal by DWP chief S. David Freeman to an elected charter reform commission met with generally warm but slightly wary reaction. Several commissioners agreed with Freeman that the DWP faces a new environment and needs new tools to compete, but others worried about the implications of his recommendation.

After long discussion, the panel voted to refer the matter to its staff and then take it up later for a formal vote.

Essentially, Freeman asked the commission to give the City Council the power to create an independent board of directors for the DWP. In theory, that board could hire and fire the general manager and set policy for the department, much as a board of postal commissioners appointed by Congress and the president oversees the U.S. Postal Service.

The DWP would continue to guarantee the city a certain percentage of its revenue--Freeman recommended no less than 5% annually--but the city government would otherwise not play a role in the department’s management.

“This is not just another part of city government,” Freeman said. “It is a business [in which] the city happens to own all the stock.”

Without such reform, Freeman warned, the DWP might itself unable to keep pace with competitors, once California completes its planned energy deregulation. Those competitors then will be free to make deals with local customers and take them away from the city agency. The threat to residents, Freeman and others said, is that if private groups succeed in snagging key industrial energy customers, residential users will face higher rates to make up the difference.

Freeman said he hopes to create a sleeker management system at the DWP that would free his hands, and those of his successors, to cut quick deals with industrial users and keep them in the fold. That, he argued, would make the DWP more competitive and ultimately protect residential power users.

Erwin Chemerinsky, chairman of the commission charged with overhauling the city’s charter, joined with other commissioners in applauding Freeman’s effort. But Chemerinsky also worried about potential downsides, such as creating a quasi-private entity that could ignore residents’ rights in cutting off their power or that would be exempt from city work rules. Faced with such questions, the commission tabled the idea for now.

Any move to spin off the DWP would have potentially huge consequences for the city’s future and would surely inspire reflections on its past. The DWP and its legendary chief engineer, William Mulholland, stealthily secured the city’s water rights from the Owens Valley in the early 1900s, a move that earned that valley’s undying enmity but that also made possible the construction of modern Los Angeles.

Reverberating through its session Monday night were the comments last week of City Administrative Officer Keith Comrie, who, in an interview with The Times, challenged the commission’s approach and the mayor’s charter reform role.

Chemerinsky, who did not name Comrie but referred to him as a respected senior city official, began the meeting by urging all sides in the debate to cool their rhetoric and cease personal attacks.

“If there’s going to be charter reform,” Chemerinsky said, “it’s going to have to be an intelligent debate, focused on the issues.”