Opinions Split on Raising DWP Rates

Ollie McWilliams has been living on a fixed income since she retired as a nurse in the 1990s. News that the Los Angeles Department of Water and Power is trying to increase its rates has her thinking about returning to the old-fashioned way of lighting her home.

“I’m going to have to go back to oil lamps and candles,” said the 81-year-old South Los Angeles resident, who noted that her expenses were rising. “Everything counts. I don’t have no money to waste or throw away.”

Many neighborhood councils are likely to oppose the water-rate increase and a fluctuating surcharge on electricity proposed by the nation’s largest municipal utility. But business advocacy groups support them.

DWP managers want to raise water rates by 3.9% starting July 1 and 3.5% more a year later -- and reinstate a long-frozen surcharge on electricity bills that would ask customers to pick up some of the rising cost of natural gas. The revenue, DWP officials said, would go toward upgrading the utility’s aging equipment.

The DWP board will hold public meetings Monday and Tuesday to review the budget proposal for 2006-07.

“If you are a homeowner or an apartment owner, you are under attack from every angle,” said Jim Alger, president of the Northridge West Neighborhood Council, citing soaring gasoline prices and higher trash fees. “People can’t swing this.”

But Carol Schatz, president and chief executive of the Central City Assn. of Los Angeles, says the DWP proposal seems fair. “I hope the neighborhood councils can look at what’s best for the city as a whole,” she said. “I don’t think rate increases have kept up with running the agency.”

The association voted Thursday to support the electricity rate increase.

On Saturday, the Los Angeles City Council’s Energy and Environment Committee discussed at public hearings in Van Nuys and South Los Angeles a study that endorses the rate hikes.

Neighborhood councils, a growing political force, have until June 30 to respond to the proposal. But some representatives are already voicing opposition.

“The Neighborhood Council is not going to take this lying down,” said Julian Rogers, chairman of the Empowerment Congress Southeast Area Neighborhood Council. He said many area residents were on fixed incomes and would have trouble paying the increase. But he added that, if the rate hikes could be justified, the Neighborhood Council would not oppose them.

The DWP has come under attack for its spending. A contract approved last year raises most employees’ pay by at least 19% over five years, and the utility has paid for lobbyists and a fitness center.

Robert Rozanski, chief administrative officer of the DWP, says he understands the criticism but insists that the forces behind the proposed increase in rates are circumstantial.

“We have a highly skilled workforce and we’re competing with others to attract and retain employees,” Rozanski said. “I don’t think anybody wants their taxes or rates to go up. But there are certain things beyond our control -- like the price of natural gas.”

The proposal is the latest attempt by the DWP to increase rates. In 2004, the City Council reduced a proposed 18% water rate increase to 11% after 30 neighborhood councils voted to oppose it. A rate hike set to take effect at the start of this year was stalled by the City Council, which requested an independent review.

The Barrington-Wellesley Group’s audit supported the proposals but questioned DWP’s spending. The audit identified $140 million in potential savings -- including $20 million in the water system -- which some say makes the proposed 3.9% rate increase in July unnecessary.

Mayor Antonio Villaraigosa wrote a letter to DWP board President Mary Nichols outlining cost-cutting steps that he thought should be discussed before rates were increased. He asked the board to consider having private contractors perform some services, to limit nonessential hiring and to determine whether it can sell some of its vast land holdings.

Yet Russell “Rusty” Hammer, past president and chief executive of the Los Angeles Area Chamber of Commerce, did not think those actions would be enough. “I’m not convinced cost-cutting alone is liable to make up for the revenue that these rate increases will fund,” he said.

Hammer pointed out that the DWP offers the most favorable rates in the state -- even if the increases are approved. He acknowledged that any increased costs to businesses produce challenges but said businesses “by and large understand they’re getting a bargain.”

The DWP board has stated that it isn’t sure it really wants to increase rates.

“We will not approve the rate hike until we’re absolutely sure it’s necessary,” said H. David Nahai, vice president of the commission, explaining that other solutions should be sought first. “If we’re going to go to the ratepayers, we want to go to them with a clear conscience.”

Mike Cohen, the Reseda Neighborhood Council’s liaison to the DWP, says some findings in the report that shed light on the flaws of the operation -- an outdated accounting system, uncompetitive support services and an inefficient management structure -- bolster the argument for not increasing the rates. “We think they can be more efficient without a rate hike,” he said.

He compared the DWP’s proposals to a person who has fallen into credit card debt asking his employer for a raise to recover. That, he said, should fall on the DWP, not the ratepayer.

Some neighborhood council representatives support rate increases.

Jerry Schneider, an environmental representative for the Arroyo Seco Neighborhood Council, said the attempted 18% increase in 2004 was “too much, too fast,” but “these increases seem to be more in keeping with what people can take. And as far as budgets go, when you look at the utility’s operation and the costs that are being incurred, it’s justified.”

Schneider, who retired from the DWP in 1995 after 28 years as a civil engineer, says his opinion is not biased but informed.

“I think the DWP operates fairly effectively. There are areas you can point your finger at and say there is room for improvement,” he said. “But when you put it into perspective ... and compare it to the other utilities in Southern California, the ratepayers have nothing to complain about.”