Here’s one way to quantify the impact of deregulation on the Los Angeles Department of Water and Power:
600 sedans before, 50 after.
The cars, largely Ford Tempos and Chryslers, have been used by DWP managers and other workers for getting around during the day and driving home at night effectively serving as “company cars.” They have been maintained by nine full-time department mechanics.
But no more. DWP General Manager S. David Freeman plans to sell off up to 550 of the 600 sedans as part of a wide-ranging plan to make the utility more competitive in the new era of deregulation.
“There had been a pattern of a lot of people having a sedan that they drove home at night,” Freeman said last week.
“In the era of monopoly, perhaps that was a perk that made sense. But in a competitive environment, this didn’t meet the test of what we need to keep the lights on,” he said.
Starting Jan. 1, DWP customers will have the option of buying power from other utilities a prospect that has forced the city utility to cut its expenses.
In addition to sales of cars and other property, Freeman has proposed eliminating 2,000 DWP positions. Workers are now negotiating with city officials over severance packages.
Jerry Pfefferman, president of the Management Employees Association, said the DWP will need to negotiate with employees who still need to drive as part of their job.
“There’s nothing under their contract to work here that says they have to provide a vehicle. They just have to be able to drive a vehicle,” Pfefferman said.
Freeman said he will keep between 50 and 105 cars for department employees who must use them for DWP business. Cars will rarely be taken home, and will not be assigned to individual employees.
Freeman said that several million dollars could be saved each year by eliminating the workers and garages needed to maintain the cars.
In addition to the fleet of sedans, Freeman plans to sell parcels of land throughout the city, along with several helicopters and a San Fernando Valley office building.
He said much of the property was acquired at a time when the DWP was not motivated to act efficiently. The department was able to acquire unneeded assets then pass the cost on to customers.
“In a competitive business, if you pass everything on to the customer, they go somewhere else,” he said.
The department currently is in negotiations with several real estate firms, and plans to select one of them to assess the DWP’s land holdings. The firm will also help identify which parcels need to be kept, which are being used by other city departments, and which can be sold.
Freeman said he does not yet know how much land the department owns because his time has been primarily occupied by the layoff issue. In identifying what land can be sold, Freeman said, he will have to decide whether it would make sense to sell excess land now, or wait until the recovering real estate market further improves.
“This is a rising economy here,” he said.
Among the DWP’s land holdings, Freeman said, is a piece of property in Malibu where the department once planned to build a nuclear power plant. The plan was later dropped.
“We do own a valuable piece of property in Malibu that I do think fronts on the beach, and I’m having my people look into it to see if we can act like a business and get some money out of it,” Freeman said.
Adrian Moore, director of economic studies at the Reason Public Policy Institute, said he was not surprised by the large amount of property the DWP plans to sell.
“The DWP has never had the incentive to make the real smart purchasing decisions, or to outsource the things they should outsource,” Moore said.
Moore said the DWP’s lack of competition has allowed it to be careless with its money.
“No private firm could run up that kind of debt simply because they wouldn’t be allowed to,” Moore said. “In a commercially operating entity, they would have to keep the debt down and allow some revenue overhang.”
The DWP also has six helicopters that primarily are used for patrolling power lines that run as far north as the California-Oregon border. Freeman expects that one or two helicopters will be sold.
Freeman said that dispensing of the sedans and other non-labor savings will garner about $9 million a year over the next four years for the DWP. That money can be used for reducing the department’s debt estimated at about $7 billion.
“The real goal is to find ways to accelerate the reduction in debt, because it is the debt that is overwhelming us,” said Councilwoman Ruth Galanter, who chairs the council’s Commerce, Energy and Natural Resources Committee.