L.A. City Controller Wendy Greuel reports on Lyin' DWP

June 10, 2010




CONTROLLER GREUEL RELEASES AUDIT PROVING DWP COULD HAVE TRANSFERRED DISPUTED $73.5 MILLION TO CITY
Independent Audit Reveals None of the Reasons Given by the
DWP for Refusing to Make Power Revenue Transfer Were Correct
(Los Angeles) -- City Controller Wendy Greuel released an audit today of the Los Angeles Department of Water and Power's (DWP) financial condition exposing that the Department did in fact have enough money to transfer the disputed $73.5 million to the City of Los Angeles. The Department also did not need a controversial Energy Cost Adjustment Factor (ECAF) increase to complete the Power Revenue Transfer.
"I can say with 100% certainty that the DWP did have the $73.5 million available to transfer to the City, and could have done so without putting itself in ANY financial jeopardy," said City Controller Greuel."My audit lays out in detail, that none of the reasons given by the DWP for refusing to transfer the money are supported by facts.As of April 1st, the DWP's Power Revenue Fund had approximately $752 million dollars in it, more than enough money to transfer the $73.5 million to the City."
The audit stems from the recent Energy Cost Adjustment Factor (ECAF) fiasco which left many questions about the DWP's financial condition unanswered. On April 5th, 2010, the DWP sent a letter to Controller Greuel which presented 5 main reasons why it could not transfer the $73.5 million.To provide an independent assessment of the situation, the Controller commissioned a review to examine the DWP's rationale and determine whether their reasons held up to scrutiny.
"It's hard to look at these numbers and not say that the DWP was trying to extort the City Council into passing its proposed ECAF increase.This audit is clear, there needs to be greater transparency at the DWP.The insulated culture and the lack of accountability in the Department must change," said City Controller Greuel."The DWP has lost the trust of the public through this debacle and it will require dramatic steps over the coming months and years to rebuild the confidence of the ratepayers."
Some of the specific findings of the audit include:
• The DWP had done a financial projection without an ECAF increase and their own numbers showed they would be able to maintain their targeted fund balances even after completing a full Power Revenue Transfer to the City.
• The DWP claimed that they needed to increase their Reserve Fund from $150 million to $300 million to maintain their bond rating.After reviewing credit rating analysis and documents from DWP's own financial advisor, there is no evidence that having $300 million in their reserve fund is required to maintain their bond rating.Bond ratings take into account many factors, and are not based on one specific criterion.
• The DWP also claimed they needed to maintain their bond rating for an upcoming $1.21 billion bond sale.They needed to sell these bonds to backfill their admitted practice of using operating revenue to pay for capital expenditures.This dangerous policy put the DWP at far greater risk than transferring $73.5 million to the City.
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News & Politics

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• dwp
• ladwp
• greuel
• water
• power