Electrical Rates to Drop in 5 Years, DWP Chief Says

Department of Water and Power General Manager S. David Freeman said Wednesday that Los Angeles’ domestic electrical rates will decrease in five years, but hinted that water rates will rise.

Freeman, appearing before a City Council committee to update lawmakers on his first--mostly successful--year on the job, said that the DWP is more than ready for the deregulated energy market and that customers who remain with the DWP will like what they see.

Residential electric rates could decrease by 15% and commercial customers could have a 20% decrease by 2003.

“We’re talking about bringing the price of electrical rates down to Midwestern rates, if I can put it that way,” Freeman said.

But he indicated in an interview that city residents should be prepared for an “inevitable” rise in water rates. But he said that would come later.

While Freeman declined to say how much that increase could be, he said it probably would not be a double-digit hike.

“I think people need to realize that water doesn’t just come out of the faucet,” Freeman said. “It’s a long, expensive journey.”

The blunt official was brought in a year ago by city officials worried about the survival of the nation’s largest municipal utility. They wondered how could this bloated bureaucracy, saddled with a $4-billion debt, compete in the deregulated energy market?

They turned to Freeman, the colorful, down-home utility industry veteran selected to make the department a more profitable--read more businesslike--enterprise.

Freeman succeeded somewhat to the surprise of even his supporters.

In a rosy, one-year progress report released to the City Council on Wednesday, Freeman said the municipal utility still has a hard road ahead, but that it is much better prepared to compete in the open energy market.

In the year since Freeman took over, the DWP has reduced its work force by more than 2,000 employees, reduced its debt by $500 million and helped end a 20-year dispute with the Owens Valley by reaching a historic air quality settlement. The department is even involved in producing a new electric leaf blower for gardeners restricted by law from using gasoline-powered machines.

“A year ago, I was asked in the interview if this utility can survive,” Freeman said. “That was the issue. I’m not saying we haven’t made some mistakes . . . but I feel like we’ve broken the ice and we’re on the right track.”

Most council members praised Freeman, who typically shows up for meetings in cowboy hats and boots, for intelligently turning around a utility beset by serious financial and management problems.

“I think it’s wonderful we’ve settled the Owens Valley” air pollution problem, said Councilwoman Ruth Galanter, who heads a council committee devoted to the DWP and deregulation. “I think it’s wonderful we have some cash to pay down the debt. . . . I agree we have a lot of work ahead of us.”

But not everyone agreed with the high praise. Freeman has been sharply criticized by Councilmen Joel Wachs and Nate Holden for offering what they viewed as excessive buyouts, and employees’ unions targeted for layoffs have complained about a lack of trust for the folksy general manager.

“As far as we’re concerned, we still have some problems,” said Bob Duncan, director of the Architects and Engineers Assn. “I think you’ve got a real trust problem here.”

Although Freeman said he would lay off about 2,000 employees, in the end, all left voluntarily with generous council-backed buyouts.

Still at issue are about 100 engineers targeted for layoffs. Freeman says he believes he could strike a deal with the union, but the union disagrees.