LOCAL VIEW: DWP'S FUTURE IN HANDS OF L.A. CITY COUNCIL, MAYOR.

Byline: Richard Nemec

A learned political scientist from academia could probably write several chapters, if not a full book, on the historic shift in local government using the ongoing saga of the Los Angeles Department of Water and Power and the city elected officials who oversee its operations.

However, this academician would need an eagle eye and a cast-iron stomach to observe and write about L.A.'s realpolitik now unfolding in downtown's once-dormant civic center.

All of the elements of a late 20th-century political treatise are in place. The only question is the outcome. Will we see progress or regression? Bold new public policy, or political expediency as usual at the DWP?

Although even the city's first disciple of local government transformation, Mayor Richard Riordan, has not actually fostered a lot of change, local government generally has been busy in the 1990s ``reinventing'' itself. On some fronts, Los Angeles is no exception. More recently a combination of global economic and domestic political forces has required the DWP, the nation's largest government-run utility, to radically reorganize and redefine itself in a competitive utility world that is taking shape, first in the state, and further down the road, nationally.

In response, the DWP faces the uncomfortable choice of shrinking in size to make itself more competitive, or face a slow slide to extinction clinging to the status quo.

Three years ago, Riordan's hand-picked general manager for DWP, Bill McCarley, a career city employee, mostly in the political arena of City Hall, began casting about in various directions to reorganize and reorient the large municipal utility. His efforts included a 20 percent work force reduction through attrition and early retirement packages, but he left early in 1997 with an unimplemented strategic plan crafted as part of a two-year, $27 million consultant's effort.

Since then, a nationwide search for a new GM turned up S. David Freeman, 71, a veteran public power leader who has advised a U.S. president and headed some of the nation's largest government-run utilities during his more than four decades of work as an engineer-lawyer from Tennessee.

Freeman has written yet another DWP strategic plan - not all that different than what had been developed earlier - and this one is being unfolded in a developing ``crisis mentality'' that often emerges when tough political issues are at stake. If you believe the reports, the DWP and the city are potentially on the verge of bankruptcy under the weight of $7.3 billion in long-term debt, much of it paying for uneconomic out-of-state power supplies and major transmission lines to bring electricity into the L.A. Basin.

Nevertheless, bankruptcy is not really imminent, and I think L.A.'s political leaders and Freeman know better. (And that is not to say if the situation with the DWP was left to fester much longer that you could not find the utility, and the city, in some deep financial straits.) Within the utility and financial industries, the recognition of the DWP's debt problem is not new, and the proposed solutions do not have to carry Armageddon-like connotations.

Political hyperbole aside, the City Council and mayor now have the resources to put in place a plan addressing the transformation of the DWP over the next three to five years.

The sticking point is there is a human and political price to be paid. It will require eliminating up to 2,000 more jobs - mostly white-collar professional/technical jobs.

While it will take a lot of caring, committed programs to make sure anyone forced to leave the DWP can do so ``with their heads held high, knowing they did nothing wrong,'' as DWP commission Chairman Rick Caruso said in overseeing the five-member governing board's approval of Freeman's plan, the cold facts are that it makes good public-policy sense to transform a $2 billion-plus municipal utility at a time when the entire utility world is being turned upside down, not unlike other industries experienced in telecommunications, banking and airlines over the past 10 to 15 years.

Making the DWP more competitive for the next century is the only way to assure L.A. residents and businesses will have more choices and competitively priced power as customers served by private sector power companies will begin enjoying as early as Jan. 1, 1998.

The problem with the DWP situation is that its policy-making and oversight often are cumbersome and politicized. Ultimately, one of its critical needs in a competitive world is quicker decision-making. At present, the department serves three masters: a five-member governing board, the Water and Power Commission; the Mayor's Office; and the City Council, which acts as a regulatory commission and a board of directors.

Traditionally, policies that make good business and economic sense for the DWP often are either badly diluted or rejected on political grounds. Part of the department's uncompetitive rates for large business customers is the result of this politics-as-usual approach that has prevailed for too long in City Hall.

In late 1997, however, even the City Council, I think, realizes the DWP and city are at a critical juncture. Bitter political medicine must be swallowed.

There is a lot going for the DWP as a sophisticated energy and water transporter-distributor. Rates are competitive to the mass of customers. Deregulation promises more savings from consumers over the long term.

It's a classic sociopolitical debate: good policy or political gamesmanship? Only the 15-member City Council, not known for its political courage in recent years, can settle the debate. They need courage; the voters need patience with their political leaders. Combined, the DWP and its customers will be better served as a result.