DWP'S RATE-CUT FAILURE THE REAL INJUSTICE UTILITY HIDING BEHIND GENERATION, TRANSMISSION DEBTS, OTHER PLANS.

Byline: Richard Nemec Local View

IF ever there was a footprint for the politicized practice of law characterizing some of the most shoddy aspects of California's response to last year's electricity crisis that lingers in this, a gubernatorial election year, it is the recent class-action lawsuit against Los Angeles' deep-pockets municipal utility, the Department of Water and Power.

A ``whistle-blower'' who isn't, four Los Angeles-based local government jurisdictions and the state attorney general, eventually, are joining forces to claim that the DWP overcharged government facilities collectively more than $260 million, and they want restitutions in the neighborhood of $800 million. A slick class-action lawyer is making some arcane legal arguments.

In the other corner is an equally fast-talking, knowledgeable attorney for the DWP, Ed Schlotman, who cuts to the chase about his adversaries: ``They filed this lawsuit to collect money, not to fight any alleged injustice.''

As with most of the offshoots of our 2-year-old electricity follies, what appears on the surface is not necessarily what lurks behind all the legal babble.

In this case, a narrow, little-cited state law designed to regulate the appropriateness of one government entity's capital-improvement charges against other government jurisdictions is being applied to local municipal utility monthly charges, which cover a variety of operating and capital costs.

From this basis, attorneys and consumer activists have leaped to ``Chinatown,'' the movie, analogies and the need to rein in the DWP as a rogue extension of local government.

The facts when looked at dispassionately paint a different picture:

The DWP's rate structure was approved in late 1992 and implemented in January the next year without protests or legal challenges; and rates have been frozen since October 1997. Other legal cases have banned collecting refunds for charges that were not challenged on a timely basis closer to when they became effective.

The law used as the basis for the ``overcharges'' applies to capital assessment fees, and the utility's monthly charges cannot be construed as a capital assessment fee, which typically is assessed for public improvements already made.

Two of the local entities - Los Angeles County and the Los Angeles Unified School District - have long-term deals (30- and 10-year pacts, respectively) with the DWP, and, in fact, last year they were trying to get state legislation passed that would allow them to have the DWP, rather than the neighboring Southern California Edison Co., serve their facilities outside of the city.

The original class-action suit filed in mid-2000 by a whistle-blower, a former energy consultant to school districts, the DWP itself, and other governmental agencies, prompted the Superior Court judge to seal the lawsuit to traditionally give time for the institution to assess the basis of the charges and decide whether it wanted to settle and avoid embarrassing publicity, something the plaintiff counts on happening in these types of cases.

The DWP had discussions with the plaintiff and his attorney last year. The utility says it isn't about to settle because there is nothing wrong with the DWP's charges.

The plaintiff's attorney convinced the local government jurisdictions to join the legal action, and he says the breadth of the lawsuit ``makes it clear this isn't a political move.''

I don't know about other people, but when a class-action attorney tells me something isn't political, I start to think just the opposite.

At a time when the current state political leaders have been increasingly critical of the DWP's actions in making millions selling excess power to the state in the 2000-01 crisis, the state attorney general files a claim for similar ``overcharges,'' in a case that normally the state's top law enforcement officer would be defending the DWP. Does this have a political ring to it?

While generating more controversy and headlines swirling around the DWP, I don't think the arcane lawsuit will reveal any wrongdoing on the local utility's part. I tend to agree with the DWP that it lacks merit and has the smell of ambulance chasing.

To me, a more poignant issue - and one the DWP quietly pushed aside in the past year - is the hundreds of millions of dollars of rate decreases that city resident/ratepayers have been deprived of in the name of accelerating the paying off of $4 billion in generation and transmission debt over the past five years, and more recently the use of the money to accelerate the cleaning up and repowering of the city's fleet of older, natural-gas-fired power plants ringing the Los Angeles Basin.

Two years ago, I watched the then-DWP General Manager S. David Freeman, now hiding in Sacramento as the state's energy guru, tell news media and ratepayers that there would be a 5 percent rate cut this year and a 10 percent cut next year as part of the department's ``debt-free-in-'03'' and integrated-resources campaigns.

Instead, the $100 million or so that could be going back into the pockets of the consumers is being diverted to clean up more power plants quicker, and the department's rate-setting executive told me recently that it will be two or three years before a rate decrease is brought back on the table.

Where are all the attorneys when we need them? Can't they spot a real injustice when it hits them in the face, without a political punch?