Buyouts at DWP Win Final Approval

Meeting behind closed doors Wednesday, the Los Angeles City Council gave final approval to the last element of a $360-million buyout and severance package designed to avert sweeping layoffs at the Department of Water and Power.

The council’s 12-2 decision came despite concerns that the cost of the package of cash severance payments and enhanced retirement benefits had increased by $14 million since its last public airing.

Councilman Joel Wachs opposed the deal, saying it demonstrates that his council colleagues cannot say no to the unions representing the DWP’s workers. “The unions know exactly how the game is played,” he said. “They know the council keeps giving.”

But DWP General Manager S. David Freeman said the alternative of widespread layoffs would be far worse for the utility, threatening less senior employees, particularly women and minorities, with the loss of their jobs.

Although it took five months to accomplish, Freeman was ecstatic that the council had agreed to reduce the DWP’s work force, since a lower payroll is a cornerstone of his plan to prepare the nation’s largest municipal utility for competition in the newly deregulated electric power industry.

“It is my impression that I’ve got a done deal now,” Freeman said. “This long nightmare is over.”

While no one can predict how many of the DWP’s employees will accept the buyout and severance package offer, Freeman expressed confidence that the odds are “better than a riverboat gamble” that widespread layoffs will be avoided.

“The layoffs will be few and far between,” he said.

Younger workers at the utility will be eligible to receive severance payments of $25,000 to $50,000 if they leave their jobs voluntarily. Middle-aged workers not yet eligible for retirement could have five years added to their service to qualify them for pension benefits. The most senior workers could have an additional three years added to their pensions.

Freeman said he believes that by midsummer, close to 2,000 of the utility’s 9,000 workers will have left the DWP. Most of the cost of the buyout and severance package will be covered by the recent run-up in the stock market, which has dramatically boosted the market value of the DWP pension fund.

The council, in public session, also gave its final blessing to two ordinances designed to make the utility more competitive.

In a bid to keep the DWP’s biggest customers from signing up with other power providers, the council approved a four-year freeze on electric rates. And it gave Freeman unprecedented authority to negotiate contracts with customers large and small. As an incentive to signing a 10-year contract with the city, customers will be offered a 5% discount.

Most of the portion of the state served by Southern California Edison, Pacific Gas & Electric and San Diego Gas & Electric will be opened to competition at the end of this month. But the DWP is not expected to open its service area to competing power providers for four years.

Councilman Nate Holden was the lone dissenter on approval of the ordinances, telling his colleagues that “this is opening the door to deregulation” that ultimately could lead to the sale of the city utility. “A trap is being set for you and you don’t understand it,” Holden said.

Councilwoman Ruth Galanter, who chairs the council’s Special Committee on Utility Deregulation, said later that the buyout and severance package, coupled with the authority to negotiate to keep customers, is crucial to the DWP’s ability to compete in the new power market.

“We are looking at a situation in the next few years of competing with all of the electric utilities, which are poised like vultures to snatch away our customers, particularly those who use a lot of electricity,” she said. “In order to keep them in our system, we want to be able to offer them deals, as every other utility is going to offer them deals.”