A credit rating service gave an unfavorable review this week to a recently released proposal for reworking oversight of the Los Angeles Department of Water and Power.
Moody’s Investors Service said the Los Angeles 2020 Commission’s recommendation for creating a full-time Los Angeles Utility Rate Commission would be a “credit negative” for the DWP, the nation’s largest municipally owned utility. The change would add “another level of complexity” to the city’s procedure for raising water and electricity rates, the rating service warned.
“If the proposal is implemented, timely rate setting could be impaired due to the more complicated rate-setting process,” Moody’s said in a report issued Thursday.
Moody’s, which regularly assesses the DWP’s credit-worthiness as it issues billions of dollars in debt, said the DWP has established a “solid credit profile” even though its process for hiking rates is “more arduous” than is typical at other utilities.
Rate hikes must be approved by both the five-member DWP board, a volunteer group whose members are chosen by the mayor, and the 15-member City Council.
The 2020 Commission, which included a cross-section of labor officials, lawyers and business leaders, recommended last month that voters replace the DWP Board with a full-time commission that receives a yearly salary and has a 10-member staff. Such a move would allow utility professionals to oversee the DWP and “take the politics out” of the agency, the group said in its report.
“The creation of professional, independent oversight of DWP would also reduce the distraction DWP currently creates in City Hall,” said the 2020 panel’s report, titled “A Time for Action.”
The DWP proposal is one of several offered by the commission, which was convened last year by Council President Herb Wesson. The group also has called for a higher minimum wage and a merger of the L.A. and Long Beach ports, among other things.
Austin Beutner, the 2020 panel’s co-chairman, would not discuss the contents of the Moody’s review, saying he did not know what the analysis was based on. But he questioned whether someone in city government or at the DWP had triggered the damaging review.
“Moody’s doesn’t simply issue these without someone asking them to do so. So the question is, who asked them to do it and why?” he said.
Moody’s spokesman David Jacobson said no one from L.A. city government asked the ratings service to produce a report or suggested that the company do so. Officials at the DWP and in Mayor Eric Garcetti’s office said they had made no such request.
Beutner spent nearly a year as interim general manager of the DWP, running the agency in the wake of a grueling battle over electricity rates between the utility and the council. Before his arrival, the DWP briefly threatened to withhold a payment to the city’s budget unless council members embraced a rate increase favored by then-Mayor Antonio Villaraigosa.
Two other 2020 panelists also have had affiliations with the DWP. Brian D’Arcy is the head of the utility’s largest and most powerful employee union and Thomas Sayles was the DWP commission’s president under Villaraigosa.