According to an audit by the Los Angeles City Controller's office, the Department of Water and Power was not in the financial jeopardy top officials had said it was in when claiming the department could not provide a promised $73.5 million transfer to the city's general coffers without hiking energy rates. The audit, released Thursday by City Controller Wendy Greuel, concluded that the DWP could have handed over the cash without requiring the energy rate increase.
“The recent Energy Cost Adjustment Factor [ECAF] fiasco left both the City and the Department of Water and Power with a virtual black eye,” Greuel said in a letter to the City Council, “The political antics led to mistrust by the public not only of their representatives but of the process as well.”
The cash was much needed at City Hall as it faced a $485 million deficit and was scrambling to balance its budget. DWP leaders said they couldn't hand over the money until the City Council approved a rate hike, which it ultimately did. An electricity rate increase of nearly 5 percent goes into effect next month. The City Council got its cash.
According to the letter, the audit report concluded that “none of the reasons given by the DWP factually supported its decision to refuse to make the transfer.”
The report found that the DWP's own numbers and calculations showed that they “would be able to maintain their targerted fund balances even after completing a full Power Revenue Transfer to the City.”
The DWP had also claimed that they needed to increase their Reserve Fund to $300 million in order maintain their bond rating. According to the audit, “there is no evidence that having $300 million in their reserve fund is required to maintain their bond rating.”
Greuel called the lack of transparency “deeply troubling” and blamed the DWP for unnecessarily impacting the city's fiscal crisis and contributing “to the downgrading of the city by bond rating agencies.”
“At best, the DWP overzealously protected its financial condition,” she said. “At worst, the DWP attempted to exort the City Council into passing its proposed ECAF increase.”
According to KPCC (89.3 FM), DWP's interim general manager Austin Beutner said that “there may be several errors of fact in the report.”