DWP Needs Hike in Water Rate to Stay Afloat, Official Says : Revenues: The department’s board seems likely to accede to his request for an 11% increase. But opposition is building among City Council members, who also must give approval.

A top Los Angeles water official Thursday said his department is in “an extreme financial crisis . . . and it is getting worse.”

Jim Wickser, assistant general manager of the Department of Water and Power, told agency commissioners that even the proposed 11% rate increase “will not cut it, it’s not enough” to keep his department functioning at its current level of service.

After hearing the grim report, DWP Commission President Mike Gage said: “Up until today, I thought there would be some room to cut back the increase. I don’t think we can do that now.” In fact, Gage said, it is now virtually certain that the board will recommend adoption of the full 11% rate hike when it meets again on Sept. 3.

“Even the best-case scenario hurts, hurts deeply,” Wickser told the commissioners at the final public hearing on the proposed rate increase. Since the agency submitted its budget in the spring, Wickser said, “I’m saddened to say things have gotten . . . worse than I have seen them in 30 years with the department.”

With a continuing drought, water has become more expensive to provide and customers are conserving at record levels. With conservation running at nearly 30% citywide, DWP water revenues are expected to be down by $70 million, or nearly twice the anticipated level, Wickser reported. At the same time, the agency spent $10 million over budget on conservation programs.

Wickser warned the board that if the department’s revenues are not increased, it could lose its high AA bond rating and the city would be forced to pay tens of millions of dollars in higher interest charges.

At least one in a crowd of about 50 ratepayers who attended the hearing called the dire report “all lies.”

But Wickser’s emotional testimony persuaded commission members that the department’s conditions are grim. Gage asked that a vote on the measure be put off until Sept. 3 to allow further study. A rate increase would also require the City Council’s approval.

“I’ve heard a substantial amount of new information that causes me concern,” Gage said.

Gage also left the door open to a possibly higher rate hike. “There is a small likelihood that we would go over that (proposed) amount,” Gage said after the meeting.

The commission president also indicated that the department could come back for an additional increase in a few months or stop funding pet city projects, such as expensive water reclamation developments, and then seek additional funding or rate hikes from the City Council.

Gage also hinted that the DWP’s annual transfer of surplus funds--typically 5% of its gross revenues--to the city’s general coffers could also be in question. He said that in the drought years of 1977-1978, the water system did not transfer any funds to the city.

The transfers, almost like a dividend, are allowed under the City Charter, but are not required, said Stephen Wong, assistant city administrative officer.Last year, the DWP transferred $110 million to the city, with about $16 million of that coming from the water system and the rest from the power side of the agency.

While the commission was warming up to the rate hike, City Council opposition was building. On the eve of the rate hearings, several council members announced their opposition to rate increases and called for the agency to slash its budget by 6% to 10%.

But at the rate hearings Thursday, agency officials insisted that they have consistently cut staff and improved productivity over the last decade.

The DWP’s power operation is seeking a 7% rate increase. Eldon Cotton, assistant general manager for power, explained that the general level of inflation has risen by 17.7% since his department last got a rate increase in 1988.

And, he said, the power system has eliminated 564 positions during the last four years--nearly a 10% decline--while the number of customers has risen dramatically.

Wickser said he has made $45 million in cuts in his 1991-92 budget, much of which are deferments in capital improvement projects and other major expenses. Wickser said he eliminated more than 100 positions in the last three years, even while adding new programs mandated by regulators and the City Council.