DWP chief Ron Nichols resigns as controversies mount

The Los Angeles Department of Water and Power, mired in a series of controversies over employee perks, rate hikes and customer service problems, lost its general manager Thursday as Ron Nichols announced he is stepping down.

Nichols becomes the latest in a revolving door of leaders to cycle through the nation’s largest municipal utility, which has seen five general managers since 2007. Mayor Eric Garcetti is now searching for a replacement who will face obstacles on several fronts.

Despite repeated demands from elected officials since September, Nichols has been unable or unwilling to produce records showing how two nonprofit trusts created to help improve relations with the utility’s largest employee union have spent more than $40 million in ratepayer money over the last decade.

Nichols could not adequately explain to the DWP’s governing board what those trusts — the Joint Training Institute and the Joint Safety Institute — have accomplished, even though he has co-managed them with the union’s leader for three years.

Nichols also has taken heat for a new $162-million computerized billing system that sent as many as 70,000 late or inaccurate bills to customers in recent months. The system erroneously withdrew large sums directly from customers’ bank accounts via an autopay function, in some cases resulting in overdrafts and penalties for the customers.

Nichols didn’t mention either scandal in his resignation letter to Garcetti, saying, “my decision to leave is my own and is for personal reasons.” His last day will be Jan. 31.

Garcetti briefly noted an ongoing audit of the nonprofits in his subsequent press release about Nichols’ departure, but did not dwell on the recent difficulties. “I thank Ron for his service to our city as head of a department that serves every L.A. resident and business,” Garcetti said. “I’m focused on continuing to reform the DWP to cut costs, improve customer service and increase transparency.”

The mayor’s office has not indicated who will replace Nichols, but a source close to the deliberations said it will most likely be someone from outside the agency.

While most public utility jobs are about as vanilla as government work gets, the head of the Los Angeles DWP is never far from controversy.

The storied agency faces massive obstacles procuring electricity and water for millions of customers living in parched Los Angeles: strict state mandates to get power from renewable sources, legal obligations to replenish water diverted from the Owens Valley in the early 1900s, a fickle Sierra snow pack that sometimes runs dry, and increasing competition for water from the Colorado River.

On top of all that, the DWP leader must respond to demands from the mayor, the City Council and, increasingly, Brian D’Arcy, business manager of the city’s most politically powerful public employees’ union.

That means it’s not enough to be a talented engineer; the agency head has to also be a consummate politician.

“I don’t think there’s a deep bench of people out there who possess all the skills we need,” said former U.S. Rep. Mel Levine, who Garcetti installed as president of the DWP Board of Commissioners in September. “But I hope we find one.”

The DWP, which claims to charge customers less for electricity than surrounding investor-owned utilities, is expected to seek an increase in water and power rates before Garcetti’s first term ends in 2017. That could complicate his run for reelection if he can’t show he achieved reform of an agency whose high salaries and benefits, compared to other city workers, have long rankled L.A. voters.

People familiar with Garcetti’s mindset said he did not question Nichols’ competence, but the mayor made it known he wanted a more assertive leader to help control expenses and to challenge D’Arcy as the administration tries to change a tangle of work rules that have increased the utility’s labor costs.

Nichols, 60, became the agency’s fifth general manager in five years when former Mayor Antonio Villaraigosa hired him in early 2011. His three-year tenure, while brief by most standards, brought a period of relative stability to an agency that desperately needed it.

But the ground beneath Nichols’ feet began to shift when his agency’s biggest union, the International Brotherhood of Electrical Workers Local 18, threw its support and about $4 million in campaign funds behind Garcetti’s chief rival in the 2013 mayoral race.

Not surprisingly, Garcetti made cutting costs at the DWP a central issue of his campaign. The new mayor has been in a running battle with union leaders ever since.

The latest salvo came Wednesday, when Garcetti supported City Controller Ron Galperin’s unusual decision to subpoena D’Arcy to explain under oath what happened to the nonprofits’ $40 million. A subpoena had also been prepared for Nichols, who avoided it by arriving at Galperin’s office Wednesday morning with a box of documents for the auditors.

Galperin spokeswoman Suzy Jack declined to say what was in the box or describe what Nichols said during the interview, citing the confidentiality of the audit process.

Nichols had previously said he would like to turn over the nonprofits’ financial records, but claimed he did not have copies and couldn’t get them without approval from the nonprofits’ boards of directors. The boards are split 50-50 between management and union appointees and their vote has been deadlocked, Nichols said.

Some observers, like ratepayer advocate Fred Pickle, have been skeptical of that explanation, saying Nichols, as co-administrator of the trusts, had the right to inspect and copy the records any time he wanted.

But on Thursday, DWP board president Levine told The Times that D’Arcy had in the last few months threatened to sue Nichols personally if he made the records public. “Here’s a guy who was told by his colleague, ‘you breathe a word of the information the mayor wants and I’ll sue you.’ That’s a hell of a position to be put in,” Levine said.

Nichols declined to be interviewed for this report, but confirmed through a DWP spokesman that D’Arcy had threatened to sue him. D’Arcy did not respond to repeated requests for comment.

Regardless of how they felt about Nichols, veteran observers of the DWP are concerned about what they see as a constant power vacuum in the troubled agency’s executive offices, and about the mayor’s ability to institute meaningful reforms.

David Nahai, who ran the DWP from 2007 to 2009, declined to comment on Nichols’ tenure, but warned that the revolving door to the general manager’s office has to end.

“The next GM must be given the authority and support to lead the organization,” Nahai said. “If employees believe the GM is there only temporarily, they will naturally gravitate toward leadership they believe has longevity. In this case, that’s the union.”

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Twitter: @jackdolanLAT

Times staff writers Michael Finnegan and David Zahniser contributed to this report.