DWP'S PAYS FOR BIGGER SPIN UTILITY RAISES PR BUDGET $1 MILLION WHILE SEEKING WATER-RATE HIKE.

Byline: James Nash Staff Writer

Even as it seeks an 18 percent hike in water rates, the Los Angeles Department of Water and Power has expanded its costly public-relations budget - fueling criticism the municipal utility has failed to rein in unnecessary spending.

The DWP budgeted $13.3 million to its corporate communications office in 2003-04, a $1 million increase. The budget includes the cost of 23 DWP employees paid from $41,154 to $108,242 a year, and a $3 million contract with the politically connected public relations firm of Fleishman-Hillard.

Department officials said they expect to hold public relations spending to less than $10 million this fiscal year but critics say the DWP is a monopoly that could save millions of dollars by cutting back on public relations, sponsorships of professional sports teams, funding of community group and other unneeded expenditures.

``This is a public agency with a captive audience,'' said City Controller Laura Chick, who has performed several audits critical of DWP spending. ``If they just fulfilled their core mission of providing quality, reliable water and power at a reasonable price, they wouldn't need that kind of spin-doctoring.''

The DWP wants to raise about $65 million more per year in a two-step rate hike that would add an average of $50 a year to residential water bills.

Officials said much of their public relations budget has gone toward defeating the federal government's attempt to take over power transmission lines and to defuse allegations of price-gouging during the state's energy crisis.

``At the federal level, we still have control of our transmission system,'' said DWP Chief Administrative Officer Frank Salas. ``We were exonerated of any wrongdoing and price-gouging by (the Federal Energy Regulatory Commission) and others. In my opinion, it is money well-spent.''

Critics frequently focus on the DWP's $3 million annual contract with Fleishman-Hillard, Los Angeles' largest public relations firm, which gets a large chunk of its revenue from various contracts with the city and other public agencies. The DWP also has a $2.4 million contract with the Lee Andrews Group, a public-relations consultant tasked with promoting the DWP's recycling programs and outreach to businesses owned by minorities and women.

``We function as the outside corporate communications consultant to a multibillion dollar corporation,'' said Doug Dowie, head of the firm's Los Angeles office, who is paid $425 an hour as a DWP consultant.

``It's everything from providing videos that they use internally to working with them on the energy crisis, water quality and security. It's exactly the kind of service we would provide General Motors if they were our client.''

But unlike General Motors, the DWP has a monopoly on providing water and power to businesses and residents in Los Angeles. And some residents say they see little or no tangible benefit from the DWP's public-relations efforts.

``I don't feel I've benefited from the DWP's PR,'' said Robert Harvilla of Sun Valley. ``It's a large organization and I'm sure they have a need for some public relations. I don't see why they need an outside agency to do what - I don't know.''

Fleishman-Hillard Senior Vice President John Stodder, whose work for DWP is billed at $315 an hour, said that as the largest municipal utility in California, the DWP needs consultants to look out for its interests in a variety of issues. He cited initiatives to deregulate energy markets and to require the DWP to use more renewable energy sources such as solar and wind power.

``Its objectives and its positions on different issues need to be understood by decision-makers including businesses and elected leaders in the community - everyone who has an interest in what they do,'' Stodder said.

Of the DWP's in-house corporate communication staff, eight of the 23 employees are assigned to government and legislative affairs. Those staffers include the DWP's highest-paid corporate communications employee, who is paid $108,242 a year. DWP officials released salaries for corporate communications staff under California's public-records law but did not release employee names.

The former top official in the DWP's corporate communications office, Randy Howard, was paid between $149,104 and $185,427 a year before he took a new assignment within the DWP. The department released the salary range for Howard's former position as executive assistant to the general manager but not his exact salary.

Salas said the DWP hasn't filled Howard's old job since he was reassigned last October but may eventually do so. He said the DWP is cutting costs in its public-relations office, limiting travel and reducing sponsorships of community groups.

``To the extent there's an opportunity to scale back in corporate communications, we will,'' Salas said. ``The overall fancy and glitzy marketing, I think, is being replaced with grass-roots marketing.''

Some City Council members - who ultimately have authority over the DWP's proposed 18 percent water rate hike - questioned the utility's spending on public relations.

Councilman Tony Cardenas, whose Energy, Commerce and Natural Resources Committee will consider the rate increase next week, said he will ask the DWP to justify its public relations costs.

``Are they being effective and responsible with that money?'' Cardenas asked. ``The verdict is not in, from my perspective.''

James Nash, [phone]

james.nash(at)dailynews.com