DWP Misled Public About Finances Says Gruel Audit
"It's hard to look at these numbers and not say that the DWP was trying to extort the City…" said Gruel
NBC LA News
06/10/2010
The Los Angeles Department of Water and Power misled the City Council about its financial picture and its ability to make a $73.5 million transfer to the city's general fund earlier this year, according to an audit released Thursday.
City Controller Wendy Greuel said the audit found that DWP had no basis for withholding the $73.5 million from the city, saying the move smacked of extortion by the utility in its effort to win council approval of an electricity rate hike, or Energy Cost Adjustment Factor.
"It's hard to look at these numbers and not say that the DWP was trying to extort the City Council into passing its proposed ECAF increase," Greuel said. "This audit is clear -- there needs to be greater transparency at the DWP. The insulated culture and the lack of accountability in the department must change."
"The DWP has lost the trust of the public through this debacle and it will require dramatic steps over the coming months and years to rebuild the confidence of the ratepayers," she said.
DWP General Manager Austin Beutner said the agency had just received a draft copy of Greuel's audit Wednesday and it was still being reviewed.
"While we don't wish to engage in an extended debate over the auditor's findings, it appears there may be several errors of fact in the report," Beutner said. "The department will also review the final report when we receive it.
"We are committed to engaging in a constructive dialogue with the mayor, City Council, our customers and the community and we look forward to further opportunities to discuss the steps being taken to improve transparency, reduce costs and improve operations at the Department of Water and Power," he said.
The DWP board agreed on May 4 to make the multimillion-dollar transfer to the city -- one week after the City Council agreed to increase electricity rates by an average of 4.8 percent.
The DWP had traditionally remitted 8 percent of its surplus revenue from its electricity operations to the city every fiscal year. In February, the utility made the first installment of $147 million. But in March, DWP officials said they would not transfer the remaining $73.5 million -- saying it needed a rate hike to ensure its financial stability.
Already faced with a massive budget deficit, City Council members blasted the DWP's move, with Councilwoman Janice Hahn calling it a "low blow" and Councilman Bernard Parks calling it "extortion."
Greuel said her audit confirmed that the DWP had the money available to make the $73.5 million transfer, "and could have done so without putting itself in any financial jeopardy."
"My audit lays out in detail, that none of the reasons given by the DWP for refusing to transfer the money are supported by the facts," Greuel said. "As of April 1, the DWP's Power Revenue Fund had approximately $752 million dollars in it, more than enough money to transfer the $73.5 million to the city."
