DWP Pays $25,000 to Find Out Why It Failed : Water: City agency hires USC’s crisis management center to evaluate city’s rejection of its rate hike request. Bewildered council members say they’ll explain for nothing.

As disasters go, the recent water rates wrangle between the Los Angeles Department of Water and Power and the City Council did not rank up there with Bhopal or Chernobyl.

Or did it?

The DWP has retained the Center for Crisis Management at USC--which has investigated Bhopal and other high-profile industrial disasters--to study what went wrong in the agency’s humiliating failure to obtain an 11% rate hike from the council.

The cost of the study: $25,000.

Councilman Zev Yaroslavsky says he can explain the problem for nothing: “It’s obvious. It’s because of contracts like this that they are in the trouble they are.”

Yaroslavsky and other council members complain that it was also arrogance, an unwillingness to compromise and indifference to community concern over escalating costs and diminishing supplies that led to the DWP’s debacle before the council. The City Council slashed the agency’s rate request from 11% to 3.6%--requiring the agency to cut more than $175 million from its budget and impose a hiring freeze.

“I can’t understand why they would need a consultant to tell them what went wrong,” said Councilwoman Joy Picus. “Nothing could be plainer: They are headstrong people who thought they could call the shots.”

Picus said all the DWP needs to do is listen to the tapes of council meetings to understand the problem.

Yaroslavsky said he recently met with DWP executives to discuss the agency’s relations with the City Council. “If I had known they are paying $25,000, I would have sent them a bill,” Yaroslavsky said.

In contracting for the study, the DWP has added its rate woes to a host of industrial-consumer disasters that have been examined by the USC crisis center, including the Union Carbide chemical spill in Bhopal, India; the Tylenol product tampering case, the Chernobyl nuclear disaster and the Dow-Corning silicone breast implant debacle, said the center’s director, Ian Mitroff.

Mitroff said the council criticism of the contract is “far too simplistic.” He said about 25% of the center’s business is with government agencies and that it is an appropriate expenditure.

The great DWP rate debate did not leave bodies in the streets, force mass evacuations or lead to product recalls, but Mitroff said it is an example of a “crisis in perception . . . a kind of crisis in morale.”

“We will help them to learn and avoid crisis in the future,” said Mitroff. “This is not to cover over the problem . . . but to (show) how they could have anticipated the furor over rates.”

With water sales down about 30% because of the drought and a mandatory water conservation program, the utility was facing a $98-million deficit in its water operations.

Also, the department faced escalating costs because of new state and federal water quality standards and the need to update an aging infrastructure.

But the department had a tough time making its case with the council. During four months of bitter and politically charged debate, the DWP scaled down its requested water rate hike from 11% to 3.6%, warning that the City Council was taking a shortsighted approach by cutting key capital improvements and maintenance projects.

The reduced rate hike was approved by the minimum margin necessary, only after special personal appeals by Mayor Tom Bradley and Council President John Ferraro.

Backers of the rate hike charged that council opposition was politically motivated. At the time, at least three council members were mulling congressional campaigns and several more were considering mayoral races.

But council opponents said they were concerned about the way the department spent its $3-billion budget.

During the rate hearings, council members criticized the agency for employing high-priced consultants for non-technical assignments, such as public relations.

DWP General Manager Dan Waters said he heard that message loud and clear. “I made a commitment that I would eliminate (consultant contracts) as a sore point,” who nevertheless approved the crisis center contract a short time later.

Still, Waters said he has taken steps to cut back on consultants.

Among the moves he has taken, he said, is to reduce the $150,000-a-year contract of Lloyd Dennis, director of public affairs, to a nine-month $85,000 contract. Dennis’ responsibilities under the new contract include aiding the agency in finding his successor.

Even that has drawn council criticism.

Picus and Yaroslavsky said the reduced contract amount may just be a ploy to avoid City Council review and oversight of the contract. Contracts of $100,000 or more can be reviewed by the council, but smaller amounts can be made by DWP management alone and cannot be reversed by the council.

“It sounds like a way to avoid scrutiny,” said Yaroslavsky. “It’s a way to get around accountability. It’s contemptuous of the council and the people.”

Waters denied that the smaller contract was a ruse to avoid oversight.

As for the crisis contract signed March 23, Waters insisted that it is worthwhile. “We took a lot of criticism,” he said. “I thought we should learn from the experience.”