4 Local Agencies Claim DWP Overcharges of $200 Million

Four government agencies, including Los Angeles County and the Los Angeles Unified School District, have joined in a $600-million complaint against the Los Angeles Department of Water and Power alleging that the public utility deliberately inflated the electric bills of government agencies operating in the city.

According to the Superior Court complaint, made public Monday, the DWP overcharged the local government agencies for the past 10 years by levying special assessments for capital improvement projects. The DWP, in turn, gave rate breaks to residential customers, an attorney for the agencies said in an interview.

In addition to the county and school district, the Metropolitan Transportation Authority and the Los Angeles County Community College District have joined the suit. The state, which filed a similar claim against the DWP two weeks ago, is expected to sign onto the litigation later this month.

DWP officials, who have also come under fire from City Controller Laura Chick for spending too much money on parties and perks, deny any wrongdoing.

“All our rates are fair and equitable,” said Frank Salas, the DWP’s chief operating officer. “We have had our rates reviewed by experts. We are not overcharging anybody.... It’s amazing how everyone seems to be picking on us.”

The lawsuit was initiated by energy consultant Sam Barakat under the state whistle-blower law known as the California False Claims Act. According to the lead attorney on the case, Barakat came across the alleged irregularities when he obtained an internal DWP report while working as an energy consultant for another school district in the Los Angeles area.

“He knew people at the DWP and he started asking questions,” said San Francisco attorney Eric R. Havian, who represents several of the entities bringing the suit.

Barakat filed a complaint in San Francisco Superior Court in June 2000. It was filed under seal to give the governmental agencies time to determine whether the allegations had merit. The suit became public on Monday, after the four agencies agreed to join the case.

“We did an independent investigation,” said Bob Cartwright, a senior deputy Los Angeles County counsel. “DWP’s own records show they were charging in excess. Given that it has been a long-standing practice, we determined that we needed to take action.”

According to the suit, the DWP deliberately disregarded a state law that prohibits publicly owned utilities from charging schools and other governmental customers more than their share for capital costs. For example, Havian said, if a state agency uses 5% of the power generated by an electrical facility, it should be charged no more than 5% of the facility’s capital costs.

The government agencies believe they have been charged up to 60% more than their legitimate share of capital costs, topping $200 million in overcharges, Havian said. The agencies are seeking $600 million in damages from the DWP.

The DWP has been coming under increased scrutiny in recent months. During the energy crisis, the utility increased its generation and sold excess power. But some consumer groups and government officials have alleged that the utility took excessive profits.

On March 22, Atty. Gen. Bill Lockyer filed a claim against the DWP alleging that the municipal agency inflated the bills paid by state government entities located in the city, ranging from the Ronald Reagan Office Building to Department of Motor Vehicles offices. The claim, a required step before the state can join the lawsuit with the other government agencies, is seeking total damages of $180 million.