As Los Angeles Mayor Antonio Villaraigosa prepares to pick the next general manager of the Department of Water and Power – his sixth in three and a half years – the massive utility is quietly backing away from his ambitious goal of generating 40% of its power from renewable sources by 2020.
That shift, initiated under the leadership of First Deputy Mayor Austin Beutner, is only the latest at an agency marked by upheaval as it pursues the mayor’s lofty environmental agenda.
Since Villaraigosa took office in 2005, the nation’s largest municipally owned utility has been in a state of churn. Multimillion-dollar initiatives have been announced, then abandoned. Executives have been installed, then jettisoned.
Leadership turnover – five general managers over the last three and a half years and four DWP board presidents since 2006 – has caused the utility to lurch from one environmental strategy to the next, investing time and ratepayer dollars on projects, only to see them scrapped.
The DWP is on track this year to hit a key environmental goal, securing 20% of its energy portfolio from wind, solar and other renewable sources. But that accomplishment has come at a cost, with the utility now considered by many officials to be the most politically contentious agency in the city.
Three ballot measures have been drafted to impose new oversight at the utility. Council members now routinely demand to review DWP decisions. A dispute over rate hikes, sought last spring to help pay for new environmental initiatives, exploded into a highly public standoff that briefly threatened the city’s overall financial standing.
And at one point last year, an organizational psychologist was brought in to sort out frictions between top utility managers.
Villaraigosa set the 40% renewable target during his second-term inaugural address, part of his bid to make Los Angeles “the greenest big city in America.” But Beutner has dismissed that figure as “arbitrary,” and the DWP, faced with resistance to the higher electricity rates needed to obtaincleaner power, is looking to scale back the target, according to a draft plan being circulated by the utility.
The proposed 20-year plan calls for the DWP to reach a 33% renewable energy target by 2020, putting it in line with state regulations. That move would cut costs to the utility’s residential and business customers by up to $2.4 billion over 20 years.
DWP spokesman Joe Ramallo said that plan does not stray at all from Villaraigosa’s inaugural vision. The utility always planned to get to 40% in part by using more renewable power sources and partly by making its customers more energy efficient, he said.
That view was not shared by former DWP General Manager H. David Nahai, who said the DWP’s latest plan “constituted a U-turn” from the mayor’s 2009 inaugural speech, Nahai said.
Beutner, who has been running the DWP on a temporary basis since April, has questioned the 40% goal, the brainchild of his predecessor, S. David Freeman. In an interview, he also said Villaraigosa’s previous target of 35% had no science or “economic means testing” behind it.
A better strategy, Beutner said, would be to make steady progress while keeping the city’s power reliable. “Clearly we need to have more energy from renewable sources,” he said. “Whether we can cost-effectively and reliably add that much renewable energy remains to be seen.”
The debate over the renewable energy goal is just one example of the utility’s shifting strategies.
Consider the effort to develop geothermal energy: In 2006, Villaraigosa’s appointees to the DWP board purchased thousands of acres near the Salton Sea for $5.5 million. Led by Nahai, the utility spent two years in talks with officials in Imperial County about tapping the land’s rich supply of underground steam and sending it along a Green Path transmission line.
By October 2009, Nahai was out. Two months later, his replacement, Freeman, scrapped the geothermal plan, along with Green Path and other environmental initiatives backed by Nahai.
For Freeman, 84, it was his second stint heading DWP. Instead of the geothermal plan, he chose to pursue the development of a massive solar energy farm that, he predicted, would cover up to 80 square miles of dry lake bed in the Owens Valley.
Four months later, Freeman was pushed out as well, replaced by Beutner, a former investment banker who insisted on a more cautious approach to the solar initiative, including figuring out how much it would cost.
“Solar on that scale has never been done in this country. Never,” said Beutner, who is Villaraigosa’s top advisor on job creation. The DWP is now studying a solar project that is one-twentieth the size of Freeman’s, officials said.
Villaraigosa spokeswoman Sarah Hamilton disputed the notion that the mayor and his aides have had a hand in destabilizing the DWP, which has an annual budget of roughly $4 billion. And she noted that the City Charter, which was overhauled by voters in 1999, specifically gave the mayor more authority over the utility.
“The mayor is ultimately responsible for the direction of the city, as outlined in the charter,” she said.
In addition to rapid turnover in the DWP’s executive offices, Villaraigosa also has had frequent changes in his appointees to the commission that oversees the utility.
Villaraigosa’s first DWP commission president, Mary Nichols, was rotated out of her leadership post in 2006 after she questioned whether the utility was capable of reaching the mayor’s renewable energy goal, two former city commissioners said. She left the panel altogether a few months later to become chairwoman of the state Air Resources Board.
Commission President Nick Patsaouras quit in 2008 after the mayor’s office blocked his effort to create a ratepayer advocate. Patsaouras said it made no sense to stay in the post when his views were at odds with the mayor’s.
Nahai, yet another commission president, was moved to the general manager post by Villaraigosa in 2007. Within a year, he found that major decisions were being driven by Villaraigosa’s team.
Nahai said that in 2008, the mayor’s office struck a deal with the DWP’s employee union to draft a solar measure – without consulting him. Months later, Nahai learned that he could not revise the DWP’s organizational chart without the consent of Villaraigosa’s office.
The mayoral involvement became even more pronounced in May 2009, when Villaraigosa named Freeman as his deputy mayor for environmental issues. Freeman “wanted a very direct, almost daily role in how the department was run,” Nahai said.
Nahai said he learned of the mayor’s promise to eliminate the DWP’s reliance on coal by 2020 – and to push that year’s renewable goal from 35% to 40% – only after Freeman had inserted the pledge in Villaraigosa’s 2009 second-term inaugural address.
Beutner acknowledged that frequent turnover has hurt the agency but said he expects a permanent general manager to be named by the year’s end. He said Villaraigosa’s office is not “any more guilty of interference” in the utility’s affairs than the City Council.
Freeman had a more critical view, saying the utility is in a “quiet crisis,” with council members meddling in the utility and the mayor’s green agenda going unaddressed. “The public should be given a picture of what’s not happening at the DWP,” he said.
Brian D’Arcy, who has run the labor union representing DWP workers for the last 18 years, had an equally dim view, saying the utility is more politicized than at any time in recent memory. “We bought more expensive [renewable] power, just to get to a goal,” D’Arcy said. “And everybody has responsibility for that, including the council, because they all went along with what they were told.”
That 20% renewable energy goal, made by Villaraigosa during the 2005 campaign, remains in peril. DWP executives warn they will not be able to sustain that achievement, let alone reach future goals, without a major infusion of money.
Those fears explain, in part, why the mayor pressed for a series of rate increases last spring, igniting a nasty public fight with the 15-member council. The standoff prompted City Controller Wendy Greuel to accuse utility leaders of misleading the public and unnecessarily plunging the city into a financial crisis.
Council members responded to that fight by calling on voters to create a so-called ratepayer advocate to serve as an independent watchdog at the utility. Some civic leaders dismissed that idea, saying it would do little to shield DWP leaders from mayoral pressure.
“It won’t go to the heart of the problem as we see it, which is the need for a more qualified, independent commission and general manager free from political interference,” said Los Angeles attorney George Kieffer, a prominent city activist and expert in public policy.
Beutner, who took the DWP post after the rate hike dispute ended, subsequently dropped plans for further increases until April at the earliest. Freeman, who has since left city government, responded by warning that the utility is backsliding on Villaraigosa’s big-ticket environmental goals.
“When Austin says he’s not going to ask for any more rate increases for the rest of this year, I don’t know how the environmental progress is going to be made,” he said.
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