SHORT CIRCUITS; CITY, DWP HAVE YET TO ACT POSITIVELY, COOPERATIVELY TO PREPARE FOR COMPETITIVE ENERGY WORLD.

Byline: Richard Nemec Local View

IF the pundit's refrain that ``all politics is local'' is as irrefutable as it sounds, Lord help us here in Los Angeles 

I say that having spent part of the past three years watching ``socioeconomic sausage'' being made here by our local leaders in an attempt to catch up with the deregulation of the electric industry.

California sits on the brink of an electricity revolution that is being held up nationally as a model for other states to follow, but the L.A. City Council and Department of Water and Power remain mired in their respective torpor. Since mid-1996, more than 18 months has passed and the DWP is still talking about getting ready for a whole new competitive energy world.

While much of the state and nation is in some way changing to deal with electricity that is going to be bought and sold hourly like soybeans, hog bellies and other commodities, our city elected leaders and the nation's largest government-run utility, which is a $2 billion-plus annual cash cow, are yet to do anything positively and cooperatively.

It remains to be seen what, if any, adverse dollar impact their inaction will have on L.A.'s 3.5 million residents and tens of thousands of businesses in the city, all of whom are served by the DWP. So far, they have paid millions up front with little or no return. In 1995-97, the department, which is a semiautonomous, proprietary arm of local government, paid $27 million to Ross Perot's international consulting unit to make some basic changes in the DWP's bureaucratic utility operations and develop a longer term strategic plan.

Part of that plan involved a deal with a private sector energy company to form an ``alliance'' to help the DWP enter the upcoming competition for both wholesale and retail power sales and unregulated energy services that traditionally have been the exclusive purview of utilities - both public and private sector ones. The deal, which originally was agreed to a year ago by the DWP's five-member oversight board, is now dead - unofficially, if not officially, for lack of action by both the City Council and the new utility leadership.

In fairness to the DWP employees and consultants who did the two-year, multimillion-dollar consulting work, positive actions in some cases were taken in some areas. A few are still in effect that have greatly reduced the DWP's previously bloated work force, streamlined its customer service and administrative operations and offered breaks to over-charged large businesses that occasionally leave the city because electric rates for large industrial commercial operations are so uncompetitive. But a number of the initiatives in the marketing, cost-reduction and rate-setting areas have been discontinued or reversed.

When the previous general manager for the DWP, a career civil servant with years of being a political insider, left somewhat abruptly in March 1997, the momentum for change at the DWP stopped just as fast. Mayor Richard Riordan and others launched a nationwide search for an outsider in the electric industry to come in to lead the DWP through the upcoming transition to a more competitive electric business. What was going to take weeks turned out taking half a year.

And when the new leader was fingered it turned out that L.A.'s apostle-from-the-private-sector mayor named a nationally recognized career executive from the public sector, S. David Freeman, 71. He didn't get on board until just after Labor Day and then declared no initiatives at the DWP would move until he had taken 60 days to put together a strategic plan. In late October, Freeman delivered that plan; it has moved through the first approval level of the Board of Water and Power Commissioners, but it has gotten no further because an intense level of opposition has been created among the DWP's top and middle-management professionals who belong to separate unions.

Field workers - the bulk of the DWP work force - support the new strategy because it does not target a proposed downsizing of those jobs. Instead, one part of the plan concentrates on eliminating 1,500 to 2,000 management, technical and engineering positions (middle management). Negotiations, which Freeman had personally headed up in January, have gotten a tentative OK from the top managers' group, but the engineers/architects/administrators group has gone to court challenging Freeman's and the DWP's authority to declare a layoff, early retirement and severance packages without negotiating with the unions of the workers affected.

A judge in Superior Court on Jan. 29 took the union's suit under advisement, saying he would rule by March 2, which now is the earliest day by which DWP layoffs could begin. Engineers and architects union negotiators hope to reach an agreement on a separation package before March.

In the meantime, Freeman, himself, has asked the City Council to withhold action on his department's pending request for at least five new ordinances designed to give the DWP more flexibility and authority to prepare for the upcoming competitive electricity world. As a result, nothing of substance is happening to prepare the sprawling city utility for new competitive challenges.

Both DWP operating costs and its massive debt on expensive out-of-state coal and nuclear power plants that made economic sense when the deals were cut in the energy-short late 1970s/early 1980s, need a lot of creative financial reworking in the upcoming competitive world to greatly accelerate their payoff. Delays add to the costs.

Unfortunately, this is a time of global economic change and local charter reform for a city whose political infrastructure is lagging far behind its economic engines. Politics-as-usual is making the DWP's job all the more difficult in trying to keep pace in an electronic world that is passing us by daily. Someone needs to wake up and smell the electrons.

They are burning a bigger hole in City Hall than the earthquake retrofit construction crews.