By DOUGLAS YOUNG
A quiet revolution has begun at the Los Angeles Department of Water and Power, which could significantly raise the pay of the agency’s workers in response to power deregulation.
DWP commissioners recently authorized the agency to conduct an industry study which, they say, will highlight the need for pay increases if the DWP expects to compete with investor-owned utilities such as Southern California Edison.
Regardless of the study’s findings, expected to be out in the next 30 to 60 days, the pitch for higher pay could be tough to sell to the L.A. City Council, which must approve any salary increases.
The recent study was initiated by DWP commissioner Rick Caruso, who instructed the DWP staff three weeks ago to compare the agency’s pay scale with those of private-sector utilities. The move is a first step in what could ultimately become a push to raise salaries for top- and middle-level managers at the DWP, said Caruso.
“It’s a pretty straightforward argument you have the department that has to compete with private industry. You’re not going to attract skilled people if you’re paying them considerably less,” he said.
As a follow-up to authorizing the study, DWP commissioners also drafted a letter to inform the Council of what it is doing, though the letter was not expected to reach council members until early this week.
The current gap between DWP employees and their private-sector counterparts is considerable, especially at the uppermost echelons.
For example, DWP General Manager Harry Sizemore earns an annual salary of $175,932, while his counterpart at Southern California Edison, Chief Operating Officer Stephen Frank, earns a base salary of $520,000, not counting various incentives.
Such discrepancies contributed to former DWP General Manager Bill McCarley resigning his position last month. McCarley had asked the Council for a 10 percent pay raise, which it did not approve.
Like Caruso, McCarley believes higher compensation for mid- and upper-level DWP managers is critical to keeping the department viable in the coming age of energy deregulation.
“Already the department is losing a lot of people. A lot of the really good middle-management talent the young people have left for private companies,” said McCarley.
McCarley said Council members acknowledge privately that changes need to be made at the DWP both in its pay structure and management structure for the agency to compete effectively with private-sector utilities. But he added that political sensitivity could effectively tie the Council’s hands.
“It’s going to be politicized no matter what,” he said. “It’s very difficult for the Council, because people tend not to understand. It’s hard for (Council members) to stand up to public perception.”
Councilwoman Ruth Galanter who chairs an ad-hoc committee on energy deregulation said she is skeptical that higher salaries are critical for the DWP to compete with private-sector utilities.
“What we need to be competing over is the ability to deliver electricity reliably and at a good price. It’s not immediately clear to me that you need higher salaries” to do that, Galanter said.
She also disagreed with the study’s methodology, saying it should include comparisons with both public- and private-sector utilities rather than just private-sector utilities. She also doubted whether higher salaries necessarily translate to better talent.
“We need smart people, not expensive people. That’s the problem. People are saying if you aren’t worth millions of dollars, you’re stupid,” she said. “If there are competent people out there who don’t need to be paid $1.5 million, I think we need to look at them.”
Councilwoman Jackie Goldberg, who also sits on the energy deregulation committee, was also skeptical about the need for higher salaries.
“I don’t think they’ll ever get the Council to support private-sector salaries, because this isn’t the private sector,” she said.
In fact, both Galanter and Goldberg said they are open to specific salary increases for certain positions if strong cases can be made for those raises. Still, they added, it’s unlikely that increases at the uppermost echelons will ever approach compensation levels of the private sector.
“To get my support, they’re going to have to show that paying those salaries is going to produce the kinds of goals the Council wants to see,” Goldberg said.
Among those goals are maintaining low rates and high levels of customer service, she added.