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Keep DWP Ahead in Deregulation Race

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Ruth Galanter is chairwoman of the Los Angeles City Council's Commerce, Energy and Natural Resources Committee, which oversees the DWP, the port and airports, and the Ad Hoc Committee on Energy Deregulation

It used to be simple to get your lights turned on. Your local utility company produced the power to generate the electricity, sent electrons over high-tension transmission wires and then brought them into your home or business through the power lines we see along our streets.

Starting next year, it won’t be that simple. The generation part of delivering electricity is about to be deregulated. Is this a good thing? Too soon to tell. (Remember how your telephone service was deregulated?) But does it matter if it is not a good thing? Not really, because the Legislature already has approved deregulation. Now all of the electric utilities are scrambling to rearrange themselves to survive. It is a safe bet that not all of them will survive, at least in anything like their current forms.

For residents of the city of Los Angeles, all this has potential benefits but also the possibility of a double whammy. Private (investor-owned) utilities have customers and shareholders. Guess which group their executives answer to. The Department of Water and Power is responsible to us because it is the people’s utility; we are its customers and we also own it.

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As customers, L.A. residents enjoy electric power rates significantly lower than those paid by the customers of neighboring private utilities. But our residents soon will be barraged with offers of lower electric rates from other utilities. These utilities will offer frequent-flyer miles, low-interest credit cards or merely differences in services or rates.

DWP, like all electric utilities, has been scrambling since 1994 to adjust to the new deregulated environment. Four general managers and several consultants later, we are seeing the beginnings of downsizing, a new respect for the value of customers and other changes in management and thinking. Still, we are a long way from where we need to be by the beginning of 1998.

DWP has very special problems preparing for the new era. Unlike shareholder-owned utilities, a public utility cannot develop its strategy in secret. Also, because of established Civil Service rules, we could not until this year reach outside the department for people with the expertise we will need under deregulation. Most important, DWP has been leaderless since its general manager retired in March.

There are many fine, talented people and many hard-working managers at DWP. But there is no experienced utility leader at the top. For every week that passes without a leader, DWP loses ground in the race to provide the best, most reliable and least expensive electric service in a deregulated world. Nearly every week, a state agency makes a ruling or passes a law that changes the world in which DWP will operate.

Nothing about this transition to a deregulated environment is simple. And just because generation becomes competitive doesn’t mean your bill will go down, since all the utilities have been given the right to charge a “competition transition charge” to pay off their debts, bad investments and other “stranded costs.”

It is urgent that the mayor choose a new DWP chief who will make the changes needed to improve services and to keep up with the times.

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The new manager and the team he or she brings in must be knowledgeable about water and power issues, understand the special responsibilities and opportunities that accompany municipal ownership and make the right decisions quickly and fairly and be able to explain them to the public.

DWP has an admirable record of providing reliable water and power service. To maintain that record will be a limitless challenge, one we should accept and get on with.

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