People Interview: Power Broker
David Wiggs, L.A. Department of Water & Power’s general manager, presides over a once lauded agency now dogged by overbilling charges.
By HOWARD FINE
Staff Reporter
The L.A. Department of Water & Power rode out the state’s electricity crisis last year relatively unscathed. The utility’s plentiful power supply meant both no blackouts in the City of L.A. and stable power prices. The DWP actually sold excess power to the state.
Leading the department for the past year has been David Wiggs, who was tapped as interim general manager last April. Wiggs, who had been chief adviser to then Assembly Speaker Robert Hertzberg, guided El Paso Electric Co. into and out of bankruptcy in the late 1980s and early 90s, and was confirmed as the permanent DWP general manager last fall.
Lately, the utility has faced a barrage of criticism including charges that DWP overcharged the state during the energy crisis. Also, L.A. County, the L.A. Unified School District, the L.A. Metropolitan Transportation Authority and the state have sued DWP for $260 million ($780 million with treble damages) for alleged overcharging going back several years (and unrelated to the power crisis). And, most recently, L.A. City Controller Laura Chick has questioned the agency for spending hundreds of thousands of dollars on parties, junkets and other community events.
Question: Controller Laura Chick’s findings make it seem like the DWP is a profligate agency. What are you doing to bring these costs under control?
Answer: First, I must point out that we’re talking about $600,000 in bills that have been questioned out of a $3 billion budget. So I would hardly say the DWP is a profligate agency.
That being said, we are looking at ways to control these costs and are working closely with the city controller to come up with a policy. One step we are taking is making sure that every expense over $50,000 first gets signed off by the chief operating officer and the general manager and then gets cleared by the (DWP) Board (of Commissioners). Under current policy, anything over $150,000 goes to the board.
Q: What about the trips that Chick has referred to as “junkets,” in which all the information could be distilled onto 30 minute videotapes without the bus trips and the hotel stays?
A: We’ll have to just disagree on that one. When we take our major customers and local decision-makers on a bus to Owens Dry Lake, it’s not just to tell them what we’re doing. It’s also to give them a feel for the scope of what we’re doing. When you see that dry lake stretching out to the horizon that we’re helping to refill, that’s something you can’t grasp from a videotape. And these are not extremely expensive trips; the guests stay in $80-a-night hotel rooms.
Q: What about all these lawsuits alleging that the DWP has engaged in systematic overcharging?
A: I can’t comment on the specifics of the case. But I can tell you this is not overcharging and it has absolutely nothing to do with the energy crisis. This all stems from a rate structure adopted in the late 1980s. These entities are alleging they were paying more than their share in past years. I have been advised by the City Attorney’s office that their claims are without merit and I’m confident that we’ll be vindicated on this. But if the ruling does go against us, it would simply mean that these entities would be charged less and that residential and business customers would be charged more.
Q: And the charges of price gouging during the energy crisis?
A: Whatever the rhetoric you’ve heard, the key thing is that we have not been added to any lawsuits filed by the state alleging overcharging during the energy crisis. There have been numerous investigations and we’ve sent the state Senate subcommittee investigating the power crisis everything they have asked for. I also had an outside audit performed on our end to investigate this whole overcharging issue. And the findings of that audit showed us to be a good neighbor. There was absolutely no price gouging going on.
Q: What are your main goals for the DWP during your tenure as general manager?
A: Our vision for the next several years is to rededicate ourselves to the basic infrastructure. We’ve got 30-year-old systems that need maintenance and upgrading, both for basic infrastructure and for customer service. On the water side, many of the large trunk lines are decades old and in desperate need of upgrades, if not outright replacing. The reservoirs, the pipes, they all need maintenance.
Q: This all sounds very expensive. Will rates have to rise to cover these costs?
A: Actually, the DWP is in strong financial shape, so there will be no need to raise rates for this work. Thanks to a lot of the money-saving steps we’ve taken over the last several years, we have substantial amounts of cash on hand. I’m not just talking about staff cutbacks; we’ve also refinanced many of our larger outstanding bond packages, which has saved us millions of dollars every year. I anticipate being able to pay for many of these projects in cash. Of course the bigger projects, like the major water trunk lines, we may need to sell bonds. But our bond rating is excellent, so I don’t see much difficulty there.
Q: How did you first get involved in the utility business?
A: It was quite by accident. I set out to become a lawyer. I had just graduated law school and was in my first job at a local law firm. One of their biggest clients was El Paso Electric Co., which had just committed to building the Palo Verde nuclear power plant in Arizona. I was assigned as a junior partner to deal with the regulatory issues involved in getting that plant built. These things, of course, take years, and a year later, the lead partner on the firm left and I suddenly found myself in charge on this case. El Paso became my sole client.
Q: So how did you end up running El Paso Electric a few years later?
A: Well it was all tied to that nuclear power plant. The costs were so enormous that by the mid-1980s, the utility ran into serious trouble. As I had been their lead attorney for so many years, I became very familiar with their operations. So the board of directors came to me in 1988 and asked if I would help out by serving as president and chief operating officer. I agreed.
Then a year later, as the trouble got worse, the CEO resigned and they asked me to take over as CEO. I tried mightily to keep the company from going into bankruptcy for another couple of years, but we couldn’t get the Texas Public Utilities Commission to agree to the higher rates needed to pay the banks for those Palo Verde loans.
Q: Why did you turn down an offer by former Mayor Richard Riordan in 1997 to run the DWP when it was in a financial crisis?
A: I had just struggled for four years to get El Paso Electric out of bankruptcy. Believe me, it was very draining, both emotionally and physically. I was just plain exhausted and didn’t want to work full-time for a while. I came out to California because my wife got an offer out here. And then Riordan’s offer came in. I had just looked at the DWP’s finances as a consultant and saw what a tough road lay ahead. At that point in my life, I just felt I couldn’t stomach another huge turnaround, so I declined his offer.
Q: What changed your mind when he came to you again last year?
A: By that time, the DWP was in much better shape. It had gotten past those really difficult times.
INTERVIEW: David H. Wiggs
Title: General Manager
Organization: City of Los Angeles Department of Water and Power
Born: El Paso, Texas 1947
Education: Bachelor of Science in Finance, Texas Tech University; Juris Doctorate, University of Texas School of Law
Career Turning Point: As young
attorney, being assigned to case for law firm’s client, El Paso Electric Co.
Most Admired Person: Father, who was a decorated World War II veteran.
Personal: Married; five children. Lives in Newport Beach; commutes by electric car and train.
