DOUGLAS YOUNG Staff Reporter
L.A.’s Department of Water and Power will spend up to $600,000 to hire a high-level consultant for the next two years.
David Wiggs, former chief executive officer of El Paso Electric Co., is being brought on to help reduce debt and enact other cost-saving measures at the DWP.
It’s the latest in a series of efforts to prepare the government-owned DWP for power deregulation in California, which is set to begin next year.
Wiggs’ hiring reflects two major changes that analysts say the DWP must make in order to be competitive when its market opens to outside utilities: Bringing in professional management from the private-sector power industry, and paying them competitive wages.
The hiring of Wiggs, a former CEO of an investor-owned utility, marks the DWP’s second major move in recent weeks to reform itself before deregulation. Early last month, the utility announced its intent to form a three-year strategic alliance with Duke/Louis Dreyfus for the wholesale and retail marketing of DWP power.
Under the contract, Duke/Louis Dreyfus will be paid a commission if it implements programs that increase revenues and profits for the DWP. The deal marks the DWP’s first major performance-based contract.
Likewise, as much as $100,000 of the $600,000 set aside for Wiggs could also be tied to performance-based incentives, meaning he would make the extra money only by achieving certain goals, according to Chris O’Donnell, director of budget and strategic planning for L.A. Mayor Richard Riordan.
Specifically, Wiggs will be evaluated on his ability to renegotiate some of the DWP’s coal contracts, find ways to pay down some of the $7.9 billion in long-term debt, and implement a strategic business plan to cut costs and prepare for deregulation.
If his performance is not up to snuff, the city has the option to terminate Wiggs’ contract after six months.
Riordan believes higher base pay, bonuses and performance-based employment are critical elements for top DWP managers, O’Donnell said. In resigning from the DWP, outgoing General Manager Bill McCarley cited the relatively low salary.
To narrow the gap between public- and private-sector pay, DWP Commissioner Rick Caruso is leading a movement to raise other DWP management salaries to levels closer to those being offered to Wiggs.
“One of my No. 1 priorities is to get pay scales increased for top management,” Caruso said. “In terms of a general manager, somebody needs to do something to attract people with commensurate experience (to managers of private-sector utilities).”
City officials first became acquainted with Wiggs late last year, when he was recommended as a possible interim replacement for McCarley.
After inheriting a financially troubled firm in 1988, Wiggs took El Paso Electric into bankruptcy in 1992, then worked with El Paso city officials and the company’s creditors to emerge from Chapter 11 in 1996.
Wiggs earned general praise for his work in El Paso and gained a reputation as a capable turnaround man in the electric utility industry, which led Riordan’s office to approach him about a similar role at the DWP.