DWP TAPS INTO IRRITATION BIG-SPENDING AGENCY CHALLENGED ON HIKING WATER RATES $50 A YEAR.

Byline: James Nash Staff Writer

Despite Mayor James Hahn's support, the city's Department of Water and Power faces a tough sell in seeking 18 percent in water-rate increases over two years because the agency wastes millions of dollars, several City Council members say.

Last year, City Controller Laura Chick faulted the DWP for spending millions of dollars on fancy parties, lavish entertainment and events such as a $180-per-person bash in February 2002 to promote ``green'' power.

The DWP came under fire again in September 2002 for approving a $3 million contract with the politically connected public-relations firm of Fleishman-Hillard even though the city-owned utility has its own in-house publicists.

Within the past month, the DWP board voted to spend as much as $175,000 for a float in the Pasadena Tournament of Roses Parade on New Year's Day and $750,000 for a Sacramento lobbyist for the next year.

``They haven't submitted any information to me that warrants an increase,'' said Northeast San Fernando Valley Councilman Tony Cardenas, chairman of the council's Energy, Commerce and Natural Resources Committee.

``I look forward to questioning them in full view of the public as to what justifies that increase. Whether it's a 1 percent increase or an 18 percent increase, it has to be justified.''

Cardenas is not alone in challenging the DWP.

Chick said she isn't done looking at the DWP's books. Councilman Greig Smith has a long list of complaints, and homeowner groups and neighborhood councils are unlikely to look favorably on surcharges that would add $50 a year to the average residential bill.

DWP officials have called the proposed surcharges - 11 percent in January and 7 percent in 2005 - necessary to protect the municipal water system from terrorist threats. The department is spending $132 million over five years to double its security force, increase testing of its water, buy helicopters and reinforce facilities.

The surcharges are expected to generate $24 million next year and $65 million in 2005.

DWP officials did not respond to requests for comment about overspending or their argument for the surcharge, but instead released a joint printed statement: ``The Department of Water and Power does not take lightly its obligation to keep both water and power rates as low as possible. Our water rates will still be among the lowest of all major cities in the state, even after the surcharge takes effect.

``The fact is our service, reliability and quality has never been better for both power and water, and our customers are telling us so in every survey we have seen.''

When DWP officials announced the proposed rate hikes last Monday, they noted that water rates haven't risen in 11 years and that the money was needed for measures to improve security and water quality.

The increases still need the approval of the Board of Water and Power Commissioners and the City Council. Mayor James Hahn supports the rate increases to ``ensure the reliability that has been the hallmark of our water system for more than 100 years,'' according to a printed statement he released.

But some council members are skeptical.

``This is not going to be an easy slam-dunk for them by any means,'' said Smith, who represents the northwest San Fernando Valley.

Smith noted that 5,000 of the DWP's 8,000 employees received raises of 4 to 6 percent last year, while many private-sector employees settled for raises of 2 percent.

``As long as you allow these excessive pay increases, their expenses will continue to go up, and they'll have to charge more,'' Smith said. ``The answer is quit doing that.''

In March 2002, Chick criticized the DWP for maintaining 56 separate accounts - officially called ``trust funds'' - to pay for parties and other events with little public scrutiny.

Chick released an audit in August 2002 that rapped DWP officials for spending too much on public relations and marketing while making few gains in new sources of renewable energy.

Chick also criticized spending $1 million to design an electric leaf blower that has yet to be produced. DWP officials said the leaf blower would be a quieter and more energy-efficient alternative to gasoline-powered models.

The DWP came under criticism again early this year for floating a high-risk loan of nearly $2 million to a Hawaiian company that wants to develop electric scooters. Cardenas' predecessor on the council, Ruth Galanter, said the DWP hadn't adequately documented the potential risks or reasons for the loan.

DWP officials said at the time that while the loan was risky, it carried the potential payoff of environmentally ``clean'' transportation.

On Friday, Chick said that her office is finishing a follow-up report that will likely be released next month.

``The DWP is far from done with implementing all the improvements and changes that are needed,'' she said, declining to disclose details of the follow-up report before it is made public.

``But they're definitely on their way.''

Critics said the DWP has been allowed to function too long as a pseudo-private corporation rather than a public utility. Along with the Port of Los Angeles and Los Angeles World Airport, the DWP is one of three ``proprietary'' departments of the city.

``I believe that the City Council, the mayor and especially the controller need to examine the finances of the DWP to determine if their rate increases are justified,'' said Richard Close, president of the Sherman Oaks Homeowners Association. ``Are they wasting money? Are they inefficient?''

Profits from the DWP benefit the city's general budget. In 2002-03, the DWP transferred $213 million to the general fund, while this year the agency is projected to transfer $179 million. The transfers account for nearly 4 percent of city revenues.

Cardenas, who also sits on the council's Budget and Finance Committee, said city officials need to look at the pass-through to the general fund. But he noted that city coffers could not easily part with the money now during a difficult budget year.

James Nash, [phone]

james.nash(at)dailynews.com