Valley Bills Will Rise if It Secedes, DWP Chief Says

If the San Fernando Valley secedes from the rest of Los Angeles, residents in that region will pay higher water and electric bills, the general manager of the Los Angeles Department of Water and Power said Wednesday.

“We’re not going to cut your water off,” DWP chief S. David Freeman said in response to a question after a speech to Los Angeles Town Hall. “But it’s the city’s water. . . . There’s a serious question about what the price would be.”

Freeman’s comments drew immediate and angry reaction from some Valley proponents of studying secession. One called it a threat and said it would not hold up if challenged in court.

Although previous legal opinions have offered conflicting views on the possibility of differing rates for Los Angeles and San Fernando Valley customers, Freeman’s comments are the most definitive and daunting to date for secession advocates.

Those who support studying the municipal breakup have long argued that they should be entitled to the same low rates as Los Angeles customers even if they break away from the city and its municipal utility, the largest such agency in the nation.

Under their argument, that would only be fair, given that Valley residents also have contributed their taxes to the construction of the DWP and its vast water and power network.

Freeman, however, warned that if the Valley seceded, it would lose its claim to those systems, and the Los Angeles City Council would then have the right to charge Valley residents a different rate from water and power users inside the city limits. Many council members share that view.

And though Freeman stressed that he was not endorsing higher rates for Valley customers, he said secessionists should not assume that they would get light treatment from the Los Angeles City Council.

“They have the legal authority to charge a higher rate to people outside the city,” Freeman said. “Human nature being what it is, I think you have to assume the worst.”

Valley VOTE President Jeff Brain said he was offended by Freeman’s remarks, arguing that such statements amounted to threats of retribution against Valley residents. Valley VOTE is the leading organization calling for a study of secession.

“It’s precisely this kind of attitude, ‘We’re going to gouge the Valley,’ that has Valley residents so incensed,” he said. “That they would threaten to charge us excessively for water and power to intimidate residents into opposing secession is outrageous. I think Mr. Freeman owes the Valley an apology.”

Attorneys’ Arguments

Based in part on a preliminary legal opinion by the city attorney’s office as well as the research of their own attorneys, leaders of the secession movement contend that they are entitled to a share of DWP services at the same rate as the rest of Los Angeles.

The city attorney’s opinion that forms some of the basis for that view, however, is ambiguous on the key point of how much Los Angeles would be allowed to charge. Instead, it emphasizes that the city would retain its water rights but would be precluded from using that power to allow Valley residents to go thirsty.

“While the city of Los Angeles may not be divested of its ownership interests in water obtained via the Los Angeles Aqueduct, the Department of Water and Power may be required to continue to provide water to existing customers, including those who may secede from the city of Los Angeles,” Assistant City Atty. David Hotchkiss concluded in a Feb. 5 opinion.

A county analysis of the same issues seemed to favor the secessionist position more strongly, concluding that under state law, the Valley was entitled to water from the DWP at market rates.

“New cities springing from existing ones served by a municipal utility possess the option to continue to be served on the same basis as any other customer of the utility,” that opinion found.

Brain said those documents as well as other research reinforced his organization’s view that Freeman’s interpretation is wrong.

“Our interpretation of what the city attorney said is that [DWP] must charge us at the same rates as everyone else,” Brain said. “We are residents of the same city. We are the people of L.A., and when we leave, we can take our share of assets. This is a divorce.”

Controversial Water History

The issue of the city’s water rights is particularly touchy because of the long and controversial history of water in Southern California. Los Angeles initially obtained much of its water supply from the eastern Sierra precisely so that it could develop the Valley.

That acquisition, immortalized in the movie “Chinatown,” was accomplished by stealth and left seething resentment, periodically erupting in gun battles, in the Owens Valley, which saw its water diverted for Los Angeles’ growth.

The issues between the Valley and the rest of Los Angeles are less historically volatile but also have aroused passions and resentment, some around the issue of controlling water.

Valley VOTE has submitted 202,000 signatures to break away from Los Angeles--far more than the 134,000 needed to kick-start the secession process. But the group experienced a major setback when a random sample of the petitions found an unusually high rate of duplicate signatures, forcing county election officials to validate every signature. The full check is expected to be completed this month.

Freeman’s warning to the Valley came as part of an overall upbeat assessment of the city’s municipal utility.

He boasted that the DWP is on track to pay off its debt in time for the state’s scheduled energy deregulation. That debt once topped out at about $4 billion, an overwhelming sum that Freeman and others warned would cripple the DWP’s ability to compete against private companies when California completes energy deregulation in 2003.

But thanks to an aggressive series of cutbacks--the DWP today is 2,000 employees smaller than it was just a few years ago--the debt has dropped by more than $1 billion, Freeman said. As of today, the DWP is on track to meet its debt payment goals, he added.

The result of that campaign to pare the agency’s debt, he said, should be a substantial benefit to local customers. According to Freeman, Los Angeles residents can expect to see electric rates drop by 15% to 25% once the debt is paid off and the utility is operating under deregulation.

Whether Valley residents would join in that benefit, and how much they would be required to join in paying down the debt, are open questions.

Meanwhile, Freeman said he is focusing on the remaining challenges in making the DWP ready to compete with private companies in 2003. Today’s city bureaucracy is so cumbersome, Freeman said, that he has little authority to hire and fire his own employees, much less make quick decisions in a competitive marketplace.

“I can’t hire a lawyer. I can’t hire a lobbyist,” Freeman said. “It’s unbelievable to me that the city government even functions under these rules.”

Instead, Freeman is proposing to re-create the DWP as a corporation with a public board--with the city owning all its stock and receiving a regular dividend. Under Freeman’s plan, the city would set rules for the utility’s operations, encouraging such things as renewable energy sources, but the agency would otherwise operate largely independent of the bureaucracy.

Freeman said he hopes to commission an outside study of that idea--one similar to the organizing structures of the Tennessee Valley Authority and the U.S. Postal Service--and present voters with a plan as early as next year.

Audio of S. David Freeman’s entire speech and comments at the Town Hall Los Angeles luncheon is available on The Times’ Web site at: https://www.latimes.com/townhall