Bureaucratic Bloat a Drag on LA’s Utility,|City Finance Chief Finds

LOS ANGELES (CN) - Massive water leaks, extensive billing errors and infrastructure issues can be partly traced back to the bureaucracy of the Los Angeles Department of Water and Power, according to a report released by LA controller Ron Galperin.

The 578-page report, titled "2015 Industrial, Economic and Administrative Survey of the LADWP," detailed several problems and suggestions for the department, explaining past incidents and solutions for improvement.

The department's issues stem from inefficient management and the increasing politicization of those in charge of governing it - despite supposedly functioning outside of the political process, according to the report.

"LADWP is hindered by its governance structure, which is complicated largely by multiple layers of city authority and opaque accountability," the report said.

Galperin advised the department to centralize internal authority, make its inner workings more cohesive and to be more transparent. The controller's findings were organized and released last month by Navigant Consulting.

Department spokeswoman Kim Hughes said management issues have led to discussions of effectiveness within the department.

"It's something that they're looking at," Hughes said. "We've always been open to working not only with our oversight, but also our neighbors and our ratepayers."

Galperin's report also said the department lacks the proper personnel and infrastructure to effectively run its operations.

"The ability to meet future power and water system needs will depend on clear governance, robust internal controls, transparent and defensible financial processes supporting rates, strong program management in capital projects and other disciplines across the utility," the report said.

The recommendations come after the department has faced questions regarding its management after several well-publicized operational problems.

A transition to a new billing system resulted in overcharges and missing bills in 2014 and 2015. Flooding and water leaks have also been issues, including a catastrophic 2014 water main break that flooded the UCLA campus with 20 million gallons of water - causing $13 million in damage to the school alone.

"The report generally shows that we do need the money to rebuild our infrastructure," Lowell Goodwan, Galperin's communications director, said. "He [Galperin] also acknowledges that that's a short-term fix, and the controller's real interest at this point is long-term reform of the DWP."

The department is funded by water and power usage fees, along with some state funding and grants that are not necessarily consistent year-to-year. Attempts to raise fees to resolve infrastructure issues and develop new projects have been challenging, largely due to fear of the political ramifications.

"The political push to keep rates low has impacted the DWP's ability to set rates at a level where they would be able to make more long-term and strategic investments in their infrastructure," Goodman said. "Doesn't mean we necessarily need to raise rates much higher, may need a better system to reform the oversight of this department."

Fred Pickel, the department's ratepayer advocate, accepted potential rate hikes on Jan. 15 after reviewing the suggested increases for power and water rate.

Besides providing greater financial resources, these fee increases can present an opportunity to review and improve the department's operations.

"It's tough to talk about rates without talking about the governance structure," LA City Councilman Felipe Fuentes said. "Every time we increase rates it gives us an opportunity to say, 'Can we be more efficient?'"

Fuentes, who chairs the city council's energy and environment committee, explained that addressing the problems and suggestions outlined in the report could limit the need to increase water and power rates.

"If the utility were more accountable to some of the observations that previous auditors have recommended - and if we were able to have more direct management over the utility - we probably could save ratepayers a little bit of money, and mitigate how much we have to raise rates," Fuentes said.

Any changes that do result from the study's findings will have to be done by the city government.

"A lot of the structure stems from the city charter," department spokeswoman Hughes said. "Our department can't make those changes, those charter changes would have to flow from the city council."

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