DWP MANAGER PROPOSES RATE FREEZE, STAFFING CUTS.

Byline: Rick Orlov Daily News Staff Writer

Electrical rates for Los Angeles residents would be frozen at current levels for five years and reduced 5 percent in 2003 under a plan by the Department of Water and Power to compete in a deregulated power market.

Commercial and industrial rates, meanwhile, would have to be slashed to allow the city-run agency to compete with other energy firms, DWP General Manager David Freeman said Tuesday in outlining his deregulation plan.

``If we are being run as I think we will, our customers should get the benefit of that,'' he said.

To accomplish his goals, Freeman would eliminate 2,000 of the utility's 9,000 jobs - with layoffs if necessary - sell off various assets such as land and cars used by agency executives and halt consultant contracts that amount to $50 million a year.

The cuts would save up to $400 million a year that could be used to accelerate the repayment of $4 billion in debt the agency amassed over the past several decades.

``I don't want to criticize the decisions of the past, but we are locked into some contracts where our costs of generating electricity are way too high - double what the industry standard is,'' Freeman said. ``I have been telling people, `Debt-free by '03.' ''

Freeman's proposals were embraced by city leaders and the main union representing workers, the International Brotherhood of Electrical Workers, Local 18. Sixty percent of the positions to be eliminated would come from the ranks of managers and engineers.

``This is not a slash-and-burn approach,'' said Brian D'Arcy, business manager of the union. ``He's doing what has to be done, and that's make severe cuts in management and engineers. He's just got the guts to do it and he's showing vision of what's possible.

``At one time, people were talking about raising residential rates, and he's shown you don't have to do that.''

Mayor Richard Riordan said Freeman will have to make some tough choices to deal with deregulation.

``The mayor believes that Dave Freeman has come up with a winning plan that, if needed, can be changed to reflect changes in deregulation,'' said spokeswoman Noelia Rodriguez.

Electric deregulation is scheduled to start in January 1998, but provisions in it allow public utilities such as the DWP to phase it in over four years without opening their markets to outside competition.

By completely the streamlining of the department sooner, Freeman believes the extensive and profitable Los Angeles market could open to competition in about two years.

Freeman, who was hired in September to prepare the agency for deregulation, is planning to hold a series of forums to explain his proposals to residents and get their feedback before he formally presents it to the Board of Water and Power Commissioners and the City Council.

The first meeting is scheduled for 6 p.m. today at Westwood Charter Elementary School, 2050 S. Selby Ave., Los Angeles. Other sessions are scheduled for the San Fernando Valley, Harbor, East Los Angeles and South Central Los Angeles.

``Our priority has to be with our customers,'' Freeman said. ``We want to get their views before we go further. I believe a public agency has to be accountable to the public.''

At the same time, Freeman said he wants the DWP freed of some of the constraints now imposed on the agency when it will deal with commercial customers.

``I want to be able to negotiate without having so many people looking over our shoulder,'' he said. ``If we are going to compete in a deregulated market, we have to be deregulated.''

At stake, Freeman said, is the future of the agency.

``We can survive and thrive, or we can go into a death spiral where we lose our commercial customers, but we still have the debt that will have to be paid by taxpayers,'' he said. ``If we do these things, I think we can be the most efficient utility and kick butt on our competitors.''

Freeman said he also is looking at savings by closing some offices and getting rid of the agency's helicopter fleet, which has generated controversy in the past over its use by executives.