Debate Escalates Over the Future of the DWP

The struggle over the future of the Los Angeles Department of Water and Power, America’s largest municipal utility, went forward on two fronts Thursday--in a utilitarian downtown courtroom and in the ballroom of a posh waterfront hotel.

In court, an attorney for the Engineers and Architects Union, which represents hundreds of DWP workers targeted for layoffs, squared off against city attorneys in an attempt to win an injunction prohibiting the city from moving ahead with the job cuts that most observers believe are essential to the DWP’s survival in a deregulated electric power market.

While the union sought to force the utility to negotiate over the extent of the layoffs, the department’s general manager, S. David Freeman, described the court case as a key test of his ability to run the utility in a new era.

The judge, while indicating that he is leaning toward the DWP, took the injunction request under submission and promised to issue a written ruling shortly.

As the arguments unwound in court, Freeman took his case to another critically important audience--the Wall Street bond brokers, investment bankers, utility executives and potential competitors attending a national conference on utility deregulation at the Ritz-Carlton in Marina del Rey.

Freeman, who has spent his long career running public utilities, took strong issue with those participants who expressed doubt about the ability of public power agencies to survive the rigors of a free market in electricity.

“They are here to tell you that public power needs to roll over and play dead,” Freeman said. “Well, I’m here to tell you, they’ve got another thought coming so far as [DWP] is concerned. . . . We feel we are fully capable of staying in the electric business, all phases of it, certainly the distribution and transmission business.”

He even made light of the utility’s staggering $4 billion in debt, most of it associated with long-term investments in power plants, notably Utah’s huge coal-fired Intermountain Power Project, which supplies a third of the city’s electric energy.

“Over the last decade or so, we’ve invested an awful lot of money in Utah,” he said. “In fact, I would say we have invested enough money in Utah to where we ought to own the state. But we don’t even own the power plant.”

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To overcome the shadow of past decisions, Freeman wants the DWP to invest in conservation and environmentally clean sources of power from solar cells to wind farms, fuel cells to micro-turbines, and other emerging technologies.

But crucial to realizing his vision are his efforts to dramatically downsize the utility’s work force. Nearly three months ago, Freeman announced plans to eliminate 2,000 jobs by Feb. 1.

The layoffs, which target engineers, managers and white-collar workers, are considered essential to slash operating costs, generate savings to pay off the power plant debt, and prepare for full-fledged competition between power suppliers in 2003. Until then, the DWP may resist efforts to open its service area to competition.

Although he reached an agreement on a new contract with DWP’s largest union, the International Brotherhood of Electrical Workers, that provides significant financial inducements for blue-collar workers to retire early and for skilled linemen to stay on the job, he has yet to conclude negotiations with the unions representing the engineers, architects and managers.

At bargaining sessions, Freeman and DWP officials have refused to negotiate over the layoffs, expressing a willingness to discuss only the terms of buyout and severance packages.

So Superior Court Judge Kurt J. Lewin was asked Thursday to temporarily stop the layoffs and compel the DWP to bargain over how many job cuts really are necessary.

At the outset, the judge seemed skeptical of the union’s legal position.

“The thought occurred to me that maybe you’d like me to enjoin deregulation,” he told the union’s attorney. “I don’t have the authority to do that.”

As Freeman muttered sotto voce encouragement from a seat in the audience, whispering, “That’s right. That’s right,” Lewin added: “They’re going to be out of business if deregulation comes in, if they don’t [lay employees off].”

Lewin appeared to embrace legal arguments made by Senior Assistant Los Angeles City Atty. Frederick N. Merkin that management has no obligation to negotiate layoffs with a union when the nature of the enterprise’s work has changed.

The municipal utility says that it has already abandoned an entire line of work--designing and building power plants--and is therefore entitled to make layoffs without consultation.

Engineers and Architects Assn. lawyer Howard Z. Rosen countered that the DWP would not be harmed if the judge would order its management to talk. Rosen appeared to be getting nowhere until he advanced an obscure 1983 appellate court case from Sacramento that he argued would buttress his point.

The judge said he would read the case and issue a written decision later.

In response to questions about how urgently a decision was required, Merkin told the judge that DWP employees would receive preliminary notices of layoffs on Monday and formal notices Feb. 16. However, no layoffs would take place until at least March 2.

The judge said he would try to decide by then.

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Later in March, another arm of the city bureaucracy, the Employee Relations Board, has scheduled two days of administrative hearings on whether the layoffs--which by then may already have taken place--are justified. If the board decides they are not, it could force the DWP to rehire those who were discharged, with back pay.

Ultimately, the issue is likely to be decided by an appellate court.

Meanwhile, competitors to California’s private and public utilities are busy drawing up plans and seeking to capture a share of the nation’s biggest power market.

Freeman cautioned his luncheon audience that few consumers will see any significant reduction in the cost of power during the next four years while utilities and their customers pay off as much of the debt on their power plants as possible.

After that, “we’re going to have a free-for-all,” Freeman said.