COMMISSIONER TO DWP: FREEZE SPENDING FIRST RATE HIKE MAY BE RETHOUGHT.

Byline: Dan Laidman Staff Writer

The Department of Water and Power should freeze tens of millions of dollars in spending as it considers whether a proposed 3.8 percent water rate hike is needed, a DWP commissioner said Tuesday.

The suggestion came as Mayor Antonio Villaraigosa's new Board of Water and Power commissioners continued to set an aggressive tone as they settle in as the citizen oversight body for the nation's largest municipal utility.

The panel started the day with an ``urgent'' call for more renewable energy as it reviewed the DWP's power system amid three recent blackouts that have roiled parts of the city. Then it moved to another focus area: financial accountability.

Commissioner Nick Patsaouras questioned DWP's budget of about $40 million for economic development at the same that it considers a water-rate hike that would generate about $25 million.

``How are you going to enhance the image of the district by raising the rates and then you're spending $40 million?'' he said.

The economic development money goes to utility infrastructure loans for private businesses as well as training, beautification and international trade programs, among other things.

General Manager Ron Deaton - who was appointed to lead the DWP in late 2004 and said he would return to the commission's next meeting with more information on the spending - pointed out that the money is part of the power system budget, and the rate increase would be on the water side.

Any possible rate hike would be preceded by opportunities for public input, Patsaouras said.

``We're going to go out to San Pedro and Chatsworth and make a case,'' he said. ``We're not going to tell them, 'Here it is.' ''

The commissioners also pushed for stronger oversight of contracts, including regular audits and a system for tracking change orders.

DWP contracts became a source of controversy in recent years, leading to a highly critical audit by the city controller and the indictment of officials at one firm in connection with its DWP contracts.

Deaton backed the calls for reform but said that in some cases the DWP's troubles may be a matter of perception.

After three recent power outages, including one in September that affected half the city, Villaraigosa called for an independent review of DWP's power infrastructure and maintenance.

Deaton said he looks forward to any information the review turns up but doubts there is an underlying system problem.

``We've gone through an unusual series of events,'' he said. ``I could argue, and would argue, that they're random and not related.''

While reviewing the scope of the city's power system - with its 19,840 miles of transmission and distribution lines and 1.4 million electric meters - commissioners repeatedly returned to the goal of increased use of environmentally sound energy sources.

Currently, about 5 percent of energy consumed by DWP customers is considered renewable. The state has pressed for 20 percent renewable use by 2017, while Villaraigosa wants to reach the goal by 2010.

With a diversified portfolio of coal, gas, hydroelectric and nuclear sources, the DWP now generates enough power to sell excess to other utilities.

Commission Vice President David Nahai said he understood how that situation may breed ``complacency and inertia,'' but said that when it comes to adding renewables, the panel would ``like to be more ambitious than 2017, to put it mildly.''

The panel scheduled a November workshop to discuss adding environmentally friendly energy sources, at which it plans to invite officials to talk about such programs in other regions, as well as renewable energy firms that have felt previous DWP bid requirements were too restrictive.

Dan Laidman, [phone]

dan.laidman(at)dailynews.com