It was no surprise that Los Angeles City Attorney Mike Feuer filed a big and highly publicized lawsuit against the high-powered accounting firm of PricewaterhouseCoopers.
The issue this time is that the accounting firm badly fumbled the ball in giving horrible advice to the Department of Water and Power on how to implement its messy billing and late-notice system. The alleged flub cost the DWP $88 million in commercial billings.
PricewaterhouseCoopers, through its equally pricey, high-powered legal firm of Gibson, Dunn & Crutcher, quickly denied that it botched anything and produced a letter from the DWP thanking the firm for its commendable service. The lawsuit will take months if not years to sort out who did or didn’t do what.
But that’s less important than the fact that the DWP is again on the public hot seat for its alleged fumbles, stumbles and questionable dealings. It started with the big knock that the DWP’s top brass rake in gargantuan salaries while running the agency as a personal fiefdom with little or no meaningful public oversight.
Then there was the charge that the DWP had failed to keep any records on the nearly $40 million of ratepayer funds ladled out to two nonprofit trusts managed by the DWP and its labor union during more than a decade for “training” programs.
That ignited a furor at City Hall and set City Controller Ron Galperin on the warpath against the DWP. He charged it with cronyism, secrecy, and arrogance. Galperin and Mayor Eric Garcetti demanded that the DWP show exactly how the money was spent, who got it, and just exactly what ratepayers got for the millions of their dollars the department spent. Coincidence or not, the day after the revelation of gross, unaccounted for spending by the DWP, the then head of the DWP resigned.
The DWP eventually kind of, sort of, agreed to an audit. Then it proceeded to foot drag on it. The audit was halted within days after it got started.
City officials charged that the DWP refused to cooperate. Even if the DWP did everything by the legal book, the audit would still likely take months and there is little assurance that it would uncover anything other than that the DWP spent the money exactly the way it vaguely claimed it spent it on.
This would still leave the question dangling whether it needed to be spent in the first place and who really benefited from the “training” programs. The audit will cost taxpayers an additional $150,000.
The billing snafu is another matter. For an agency to mangle nearly $100 million is cause for deep concern. Thousands of ratepayers had to pay a steep price for it in lost billings, threats of service cutoffs, and the stress and aggravation of endless waits on phone lines trying to get their billings straight.
This will cost the taxpayers added dollars in the overhaul of the billing system, dozens of new hires that had to be made to fix the service problems, and the massive legal fees that will be incurred in the court wrangle over the lawsuit’s allegation.
That may not be the worst part of the DWP’s maddening saga. Reports are that the DWP will ask for yet another big jump in water and power rates over not one, two, but five years. The rumored rate jump could be as high as 8 percent.
That’s much greater than the current rate of inflation. The tab for ratepayers would be a whopping $1 to $2 billion dollars. If the DWP does indeed ask for a substantial hike in rates, it will ignite a storm of protest from ratepayers, renewed demands for new and tougher oversight controls over the DWP, and even more intense scrutiny of how the DWP does business and in whose interests it really serves.
The issue is not simply whether the DWP is an agency that does what it wants, the way it wants and routinely thumbs its nose at ratepayers and city officials. The DWP is a public trust. That means just that, trust.
It strikes to the heart of credibility and the trust that city officials and the public have in it to be fair, honest, and open in its business dealings.
During and after his election campaign Mayor Garcetti repeatedly demanded an overhaul of the DWP. The reforms that Garcetti talked about have been floated for years. One is a review of the unanimous recommendation of the LA 2020 Commission to establish a Los Angeles Utility Rate Commission that would establish rates and appoint the general manager with a goal of limiting political interference from City Hall.
Another is the appointment of a ratepayers advocate with additional funding and increased job protection so that it can provide ratepayers, the media and City Hall with a comprehensive analysis of DWP’s operations, policies, and finances.
There’s also the proposal for a.detailed review of the efficiency of DWP’s operations and its labor relations, the development of long term financial plans, and allowing voters to approve any rate increases that exceed the rate of inflation plus 2 percent.
The big question is who at City Hall will make these long and much talked about reforms a point of more than talk, but action? Absent that, the woes of the DWP, and in the end, the city’s millions of ratepayers, will never end.
Earl Ofari Hutchinson is an author, political analyst and a weekly co-host of the Al Sharpton Show on American Urban Radio Network. He is also the host of the weekly Hutchinson Report Newsmaker Hour heard weekly on the nationally network broadcast Hutchinson Newsmaker Network. Follow him on Twitter at http://twitter.com/earlhutchinson.