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DWP Calling: Your Money or Your Life (Or Why We Need to Know Where Our Money Goes)

Editor’s Note: The City Council, after a lengthy debate about Google vs. Microsoft email products, unanimously approved both the water and power bond plans of DWP without debate, setting the stage for further rate increases. Google email won unanimous approval to be City Hall’s email.

I’m not very careful about money but I have become quite observant about what’s going on at the Department of Water and Power which regards OPM (other people’s money) as so much water over the aqueduct.

But I took an interest when my wife pointed out that the DWP bill that arrived last week was huge even though we cut our water use in half. The problem was on the electricity side of the bill

where I was startled to see that there was a 10 percent utility tax for power. Who knew?

That means that the city is getting the utility tax plus sweeping 8 percent more (up from 5 percent in 2005 when this mayor took office) out of the power side and using it in the general fund to pay its bills — 80 percent of which goes for salaries and benefits.

That’s a pretty heavy tax on electricity — 18 percent — and comes with a 7 percent sweep of water revenue.

Today, the council is set to approve measure that will insure my DWP bills — and yours — go even higher.

The DWP is seeking approval to borrow $980 million to fund $1.17 billion in upgrades to the water system and $1.57 billion this year and next to help fund a five-year, $5.8 billion capital improvements program for the power system. Together, they will cost more than $150 million dollars for 30 years to pay off.

The power system bonds are the more controversial.

“The Department intends to pay the costs of the distribution system projects, transmission system projects, and generation system projects with internally generated funds and through the issuance of revenue bonds,” according to the ordinance documents.

Projections for the five-year period show the DWP expects to increase power evenue by 50 percent from $2.9 billion this year to $4.4 billion in 2014. I can only assume that most of that increase is supposed to come by raising rates by roughly the same 50 percent which will make my DWP bill about equal to my mortgage payment.

Here’s the numbers in millions of dollars:
                          2009            2010            2011            2012           2013        2014
Revenue            $ 2.900         $3.242        $3.591          $3.873        $4.143       $4,405
Net Income        $ 407            $ 405          $ 428           $ 512           $ 593        $ 744
  
The revenue increase of $1.5 billion a year will also provide a bonanza to the general fund because of the 10 percent utility tax and the 8 percent donation of power funds.

Where that money goes is an even greater concern.

Thanks to the clout of union bully boy Brian D’Arcy, DWP workers got 5.9 percent pay raises in recent years and is set to do well in the next few years with terms of a new contract being finalized and expected to take effect this week.

Although there’s deflation in LA of nearly 2 percent, DWP workers are looking at 2 percent raises this year and from 2 to 4 percent raises the following three years depending on inflation plus some sort of cash payment for renegotiating the 3.25 raises due them this under the final year of the contract the mayor rewarded them with for the D’Arcy’s help in getting elected.

At the same time, the DWP payroll is being padded with what I presume is hundreds of workers being transferred from other city jobs as part of the plan to fill the general fund’s $400 million hole.

Additionally, tens of millions of dollars of city costs — like $3 million for new irrigation systems in parks — are being paid by the DWP. And political retreads like Wally Knox — the former Assembly member, DWP commissioner and Harbor consultant –  are being put on the payroll for something like $200,000 a year to work with community groups where he has zero credibility.

But I digress from the issue of borrowing the $1.57 billion that goes before the council today.

The DWP wants to negotiate privately for the sale of those bonds at a cost of $12 million to underwriters rather than throwing it open to competition for the best rates. This allows them to channel the bonds to favored private investment banks and to provide “meaningful opportunities for local and regional Minority/Women/Small Business Enterprises” — a noble if not cost-conscious goal. The same private sale is being used for the water bonds.

According to the documents, the $5.8 billion capital improvement program breaks down this way:

» Infrastructure and Power Reliability – $2.568 Billion
o Temporary Circuits Restoration
o Power Pole Replacement
o Cable Replacement; and
o Various Generating Station Improvements
» Renewable Portfolio Standard (RPS) – $0.954 Billion
o Major Transmission Systems (Pine Tree; Barren Ridge-Castaic; Green Path North;
and the Southern Transmission System Upgrade)
o Existing Resources (aqueduct; Hyperion digestion; Lopez Canyon microturbines;
solar rooftops; landfill gas projects; and the Wyoming Wind project)
o Planned Resources (Wind, Geothermal; Biomass; and Large Scale Solar projects);
and,
o Various Southern California Public Power Authority (SCPPA) projects
» Integrated Resources Plan (IRP) – $1.084 Billion
o Generating Station Repowering projects (Haynes; Scattergood; and Castaic
modernization)
» Generation and Infrastructure Improvements – $543 Million
o Repair as well as replacement of aging and inefficient equipment

In other words, $5 billion of the nearly $6 billion goes to fixing the infrastructure that the DWP has allowed to deteriorate or become obsolete because it really has been running a jobs program offering spectacular salaries and benefits and not operating as a municipal utility providing power and water.

That’s why LA has the least clean energy in the state and the most electricity from dirty coal-burning power plants.

Some projects in the renewable energy list are already online like Pine Tree windmill farm and some like Green Path North are already abandoned.

So the list of projects has no meaning at all. It simply represents a blank check for clean energy without any ability of the public to make sure it’s getting what it wants at the best price.

This goes to why so many activists are demanding creation of an independent Rate Payer Advocate’s office.

It’s why Neighborhood Councils should be able to name one of the five DWP commissioners.

And most of all it’s why the bond sale should not be approved, why no rate increases should be approved, until there is a full accounting of where DWP’s billions of dollars in revenue has gone and how i
ts rate increases and tiered-rate structures are impacting homeowners, apartment dwellers, different businesses, government agencies and various regions of the city.

The problem with the DWP is there is no transparency, no accountability and thus no credibility.

Fix those things and we can talk about how to fix the rotting infrastructure and actually pay for and get clean power.










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27 Responses to DWP Calling: Your Money or Your Life (Or Why We Need to Know Where Our Money Goes)

  1. Walter Moore says:

    Ron — As your copy editor, let me suggest you close the parentheses in the title.

  2. Anonymous says:

    Just got my property tax. Itis up,but the market is down. Does that make sense to anyone?
    At the end of the year I am going to add up all
    the money I have paid out to support the present
    regime including the unions. As a senior widow,
    I know I cannot afford any of them anymore.
    Why are we waiting so long to overcome this?
    How much more can we take? We need a tea party right here in Los Angeles. Mr. “Nuch” is it legal to steal now?

  3. Anonymous says:

    Is there anything the ethics commission can do when these criminal city council members behave so badly and unethical? Can a voter file a complaint at their behavior? The men all act like bullies speaking to women and the city attorney allows them to go on as if its a domestic violence issue they have in their backgrouds. Men who are mature, educated and secure within themselves do not treat anyone so poorly as these fools

  4. Anonymous says:

    Only one answer that makes sense. The public must pay for campaigns. otherwise whoever has the most money ( labor, AEG) will win. Will the public support it? Will the posters on this somewhat libertarian blog support it? If not, stop whining about the council and mayor being beholden to special interests. if you dont change the system, nothing will change.

  5. anonymous says:

    I heard that, recently, DWP canceled all their outside (outsourced) contracts (that cost less) and brought the work back to the unions (that costs triple). Can anyone confirm this?

  6. James McCuen says:

    To;anonymous on October 27, 2009 4:51 PM
    I don’t know the answer, but just call DWP and ask the question 1-800-DIAL DWP.
    This a public agency, there should be no secrets (with emphasis on should)
    PS: Who told you, who did you hear it from? Are they a reliable source?

  7. Anonymous says:

    to Anonymous on October 27, 2009 4:02 PM:
    I assume that from a Libertarian point of view, you wouldn’t want Public financing of campaigns. Let the “free market” prevail and have no regulations on campaign finance.
    But even with public financing which would eliminate the need to seek private sources, wealthy corporations would still try to influence officeholders with promises of outside employement or other “pushing the limits of ethics laws” tactics.

  8. Anonymous says:

    There was no discussion on this issue today in council. The idiots simply pressed their YES buttons. David Freeman sat there and smiled. I want to know which council members will attend the Michael Jackson movie premiere as VIP’s after the vote on Friday? I hope reporters include that fact in their story tomorrow

  9. Anonymous says:

    “There was no discussion on this issue today in council. The idiots simply pressed their YES buttons. David Freeman sat there and smiled.”
    Pretty comfortable aren’t they?
    Someone hurry up with a way to rain on their
    parade.

  10. Anonymous says:

    “There was no discussion on this issue today in council. The idiots simply pressed their YES buttons. David Freeman sat there and smiled.”
    Pretty comfortable aren’t they?
    Someone hurry up with a way to rain on their
    parade.

  11. Anonymous says:

    “There was no discussion on this issue today in council. The idiots simply pressed their YES buttons. David Freeman sat there and smiled.
    Is there a way to rain on their parade?
    I wish I knew but I am not a lawyer, I am just a
    victem of this terrible place I used to love to call home.

  12. Anonymous says:

    “There was no discussion on this issue today in council. The idiots simply pressed their YES buttons. David Freeman sat there and smiled.
    Is there a way to rain on their parade?
    I wish I knew but I am not a lawyer, I am just a
    victem of this terrible place I used to love to call home.

  13. anonymous says:

    Hi Mr James McCuen-
    My source is extremely reliable. However, it never hurts to confirm. Unfortunately,I cannot reveal the source. I realize that might render our credibility as useless or inaccurate. Perhaps, in time, the name will be known. For now, I am trying to gather as much info as possible.
    I’m trying to prove that the water rate increases are for more than just a means to conserve usage, or for covering the costs of services rendered. This is an important point and I need to be able to prove this is an illegal tax.

  14. James McCuen says:

    To: anonymous on October 27, 2009 6:19 PM
    I understand and respect your position. As we saw with the recent contract with Mr. Nahai, the President of the DWP Commission acted in a Orwellian manner and stated that the process is transparent, but at that very moment, but could not name the specific person who signed off on the Nahai contract. It turned out to be the “CEO” Ramon Raj.
    Despite, this, DWP has a duty to answer the public’s question such as the confirmation you seek. If the answer isn’t satisfactory such as the handling of the Nahai contract, you have a right to follow up until you get a satisfactory answer.
    As a public agency, they really SHOULD have no secrets except those related to negotiations and lawsuits.

  15. anonymous says:

    Hi Mr. McCuen-
    Thank you for the advice. You are right.
    Do you know if they are obliged to also provide copies of their union contracts? I’d like to ask for that as well.

  16. James McCuen says:

    To anonymous on October 27, 2009 11:11 PM:
    Yes, its all public information. Again, no secrets.

  17. Anonymous says:

    To 12:32 p.m. These are not the kinds of issues the ethics commission deals with. Sadly, other than making a big public embarrassing stink or voting folks out of office, there’s no place for citizens to go to enforce ethical behavior.

  18. Chris Rowe says:

    For LADWP – on their website, I filed a comment about my water bill a while back. The comment ended up on one of their committee agendas. I was not informed of that fact. But I happened to read the agenda – and I showed up and commented.
    It would be good if some new blood showed up at the LADWP Commissioner meetings. Please understand that parking is not free – they may ask you to park blocks away.
    You can file a Public Records request. But you have to be specific about what you want, and there is no guarantee that they have to give it to you. Then the question becomes – are you able to interpret the documents?
    I went into Tier 3 on electric last month. I now have to make a spread sheet of the last few year’s bills, and figure out how much energy I went up to get into Level 3. And I don’t recall being there before. I actually use my A/C less than most.
    I agree – we need a “Rate Payer’s Advocate” or “Inspector General” that is independent of the LADWP. But the terms of that position must be locked down before the position is authorized.
    What exactly was Wally Knox brought back to do? He is the one who quit the Board of Commissioners.
    There should be a moratorium on any new hires in management at the LADWP while the City is in this financial condition.

  19. Chris Rowe says:

    For LADWP – on their website, I filed a comment about my water bill a while back. The comment ended up on one of their committee agendas. I was not informed of that fact. But I happened to read the agenda – and I showed up and commented.
    It would be good if some new blood showed up at the LADWP Commissioner meetings. Please understand that parking is not free – they may ask you to park blocks away.
    You can file a Public Records request. But you have to be specific about what you want, and there is no guarantee that they have to give it to you. Then the question becomes – are you able to interpret the documents?
    I went into Tier 3 on electric last month. I now have to make a spread sheet of the last few year’s bills, and figure out how much energy I went up to get into Level 3. And I don’t recall being there before. I actually use my A/C less than most.
    I agree – we need a “Rate Payer’s Advocate” or “Inspector General” that is independent of the LADWP. But the terms of that position must be locked down before the position is authorized.
    What exactly was Wally Knox brought back to do? He is the one who quit the Board of Commissioners.
    There should be a moratorium on any new hires in management at the LADWP while the City is in this financial condition.

  20. There-You-Go-Again says:

    Chris Rowe on October 28, 2009 2:13 AM:
    When you ask about Wally Knox, that seems to be a pure political payoff (no attempt to hide it).
    http://www.dailybreeze.com/news/ci_13611009
    As you remember, Knox originally had the non-paid DWP Commissioner seat.
    Then he was “handed” a new $205k year “PR” job at the port of Los Angeles. Even the free-spending City Council didn’t feel comfortable with that one and objected. Then they City Attorney raised conflict of interest issues because of Knox’s wife’s position as an attorney for longshore Union.
    So the Mayor moved Knox over to the DWP now as PR person with roughly the same pay as the Harbor Dept position.

  21. There-You-Go-Again says:

    Chris Rowe on October 28, 2009 2:13 AM:
    When you ask about Wally Knox, that seems to be a pure political payoff (no attempt to hide it).
    http://www.dailybreeze.com/news/ci_13611009
    As you remember, Knox originally had the non-paid DWP Commissioner seat.
    Then the Mayor “handed” Knox a new $205k year “PR” job at the port of Los Angeles. Even the free-spending City Council didn’t feel comfortable with that one and objected. Then they City Attorney raised conflict of interest issues because of Knox’s wife’s position as an attorney for longshore Union.
    So the Mayor moved Knox over to the DWP now as PR person with roughly the same pay as the Harbor Dept position.

  22. Rate Shock!
    Pretty soon, your DWP bill will be larger than your mortgage payment.
    And do not expect any relief. The new solar plan for 400 megawatts of in basin solar (Son of Measure B aka the “SOB”) grants inexperienced DWP management and its notoriously inefficient construction work crews an exclusive on all the work. This will cost $1 to $2 billion EXTRA compared to using bonded private contractors using skilled members of the Building Trades.
    Overall, the IBEW Labor Premium and the IBEW Solar Premium will cost Rate Payers about $400 to $500 million a year. Add the 8% Power Transfer Fee and the 10% Utility Tax and the total IBEW Premium is close to $600 million a year.
    Have a nice day!

  23. Anonymous says:

    Sorry but I read this and had to post in light of all the discussions on the incompetence of city council. This is what Garcetti said to the media referring to next chief, “It’s going to be important for each one of these individuals to illustrate their cultural fluency,” Garcetti said. “I’m sure there are those who will be disappointed that this was not a more racially or gender-wise more diverse group, and that’s a fair criticism.”
    WHAT AN IDIOT!!! Even John Mack is saying this is a new age of race not playing an issue in this selection process. Its not about RACE moron. AND NO….No one is disappointed. These are outstanding selections. Its shameful council members who are the most irresponsible will grandstand and pretend they are somebody questioning each candidate. When is someone going to audit them and give them a job performance review?????

  24. Anonymous says:

    So why is Mack on the Police Commission?

  25. sheila says:

    For each billion dollars wasted on wilderness-killing, water-wasting Big Solar and Big Transmission, 50,000 homes could be fitted with full solar systems on an AB 811 loan basis, which would produce 200 MW of clean power for the city. FREE.
    All 50,000 homes would zero out their electric bills (based on 4 kW systems), which would zero out the cost of their PV system, which is amortized over 20 years and the loan stays with the property when you sell it. So, it’s also free to the solar producers.
    Multiply this process several times, and since the loans are fully guaranteed because the City gets first lien on the property, voila! We have FULL RPS FOR FREE, fast, clean and democratic.
    Start paying people who produce more clean energy than they consume, and bam! you will see CRAZY uptake of that program. We all want solar rooftops, we just don’t want to go bankrupt to have them. And there is NO reason to – clearly DWP has cash flow available for RPS, so why spend it when they can loan it with guaranteed payback, then re-loan it and re-loan it?? The whole city will be churning out clean, green power all day – for FREE!
    This is not some whacko idea – this is shovel ready. All we have to do is demand AB 811 loans and feed in tariffs and we can be the recipients of our own money…

  26. James McCuen says:

    To; sheila on October 29, 2009 5:53 PM
    Nothing is free – There are no free lunches.
    Who is the opposition to AB 811?
    OPPOSITION: The Howard Jarvis Taxpayers Association
    That being said, I do agree with your points about having centralized solar and relying on new transmission and/or distribution systems which hurt the environment.
    Caution:
    1. When someone says something is FREE!
    2. Solar is a panacea.

  27. Well, you can always call me and perhaps I can lower your DWP bill a little bit…

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