Trade-off to lower DWP bills

Los Angeles Times - - OPINION - Os An­ge­les

LDepart­ment of Wa­ter and Power ratepay­ers could soon see their elec­tric­ity bills trimmed un­der a pro­posed set­tle­ment that would limit the pay­ment the DWP is re­quired to make to the city each year. But don’t cel­e­brate just yet — this may be a case where the win­ners and the losers are the same peo­ple.

The $200 mil­lion-plus trans­fer has been a peren­nial fight in Los An­ge­les pol­i­tics. It’s been the sub­ject of protests, au­dits and show­downs over how much the city-owned util­ity and its ratepay­ers should have to sub­si­dize city ser­vices, such as park main­te­nance and pub­lic safety. Of course, the ratepay­ers are also the res­i­dents who rely on those ser­vices.

There is noth­ing in­her­ently wrong with the DWP shar­ing a por­tion of its in­come with the city. As a mu­nic­i­pally owned util­ity, the DWP makes the pay­ment in lieu of the taxes that pri­vately owned util­i­ties pay the state or the div­i­dends they pay in­vestors. The big­gest prob­lems have been the lack of trans­parency and the temp­ta­tion by city of­fi­cials to treat the DWP as a piggy bank.

The City Char­ter al­lows the util­ity to trans­fer a por­tion of “sur­plus” rev­enue to the city’s gen­eral fund. But critics have ar­gued that there isn’t a true sur­plus; if there was, why would the util­ity be so far be­hind on ba­sic in­fra­struc­ture and main­te­nance? Rather, the mayor and City Coun­cil over the years have set elec­tric­ity rates higher than nec­es­sary to cre­ate a “sur­plus” that could then be trans­ferred to the city bud­get. The trans­fer plus a sep­a­rate util­ity user tax gen­er­ate more than $600 mil­lion for the city.

Three law­suits filed against the city ar­gue the trans­fer is a hid­den tax and il­le­gal un­der Propo­si­tion 26, the 2010 bal­lot ini­tia­tive that bars gov­ern­ments from charg­ing more for a ser­vice than it costs to pro­vide it. If the trans­fer is deemed il­le­gal, the city could be forced to pay more than a bil­lion dol­lars in re­funds. The pro­posed set­tle­ment, which still has to be ap­proved by the court, would be sig­nif­i­cantly less painful for city cof­fers while still of­fer­ing a mod­est re­duc­tion in util­ity bills.

Most im­por­tant, the agree­ment re­stricts the size of the trans­fer go­ing for­ward, elim­i­nat­ing the temp­ta­tion to rely on DWP ratepay­ers to plug city bud­get gaps. Yes, that means less money for ser­vices, but the trade­off is more trans­parency.

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