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$681 million in unpaid DWP bills: Audit cites botched billing system

$681-million revenue shortfall @LADWP -- utility will 'aborb or pass on to its customers'

The botched rollout of a new billing system at the Los Angeles Department of Water and Power disrupted the utility's ability to collect unpaid bills, helping to drive the total to $681 million late last year, a state audit of the system has found.

Customer confusion over late and estimated bills after a new "Customer Care & Billing" system went live in September 2013 produced a flood of calls to DWP's customer service lines. As officials diverted the workforce to answering phone calls and issuing corrected bills, collections fell further behind, the audit found.

Before the system went live, the DWP carried about $436 million in uncollected bills. The billing problem added another $245 million to the debt. The total shortfall includes both residential and commercial billings.

The audit, requested a year ago by former state Assemblyman Raul Bocanegra (D-Pacomia), in some ways echoed earlier analyses of the billing debacle in finding that DWP managers ignored warnings that the system wasn't ready to go live.

Officials at the nation's largest municipal utility spent three years to integrate and test a new computer system that provided billing and customer service functions for 3.8 million customers. It replaced a 40-year-old system that was outdated.

The audit found that implementation costs climbed from an initial $87 million more than $181 million over time. But a hidden cost of the rollout is receivables that will never be collected, auditors said.

"The department's poor decision making and poor communications with its board ... may unncessarily cost it millions of dollars from unpaid customer bills -- costs that it will ultimately need to either absorb or pass on to its customers in the form of rate increases,'' the audit found.

Despite the bungled billing, auditors found that the DWP overall appeared to be in sound financial shape. Utility spokesman Joseph Ramallo said the $681-million figure cited in the state report included unpaid bills that accrued before the new system went live.

DWP officials, in a response to the audit, said it agreed with a recommendation that the DWP's governing board form a committee to oversee significant technology projects and to develop standards for managers to report when projects go over budget or increase in scope.

But the board said it disagreed that it was misled by DWP managers, blaming instead PricewaterhouseCoopers, the vendor hired to help implement the new billing system.

City Atty. Mike Feuer last week filed a lawsuit alleging that PricewaterhouseCoopers intentionally misled DWP managers about its ability to help the utility implement the system. The global accounting firm responded that it did its job well and that the DWP was trying to make the vendor a scapegoat.

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Copyright © 2016, Los Angeles Times

UPDATE

1:28 p.m.: Further details and explanation on customer billing problems.

10:41 a.m.: This story was updated with additional detail.

It was first published at 10:12 a.m.

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