Facing $300-million shortfall, DWP resumes automatic bill collections

The Los Angeles Department of Water and Power resumed sending out automatic notices to customers who are short on their bills this week, months after halting the practice amid alarm over erroneous charges.

The effort is meant to help mop up a revenue shortfall of more than $300 million.

Assistant general manager of customer service Sharon Grove said automatic collections have been resuming in phases, starting with commercial customers who have owed more than $10,000 for more than 90 days. Other delinquent customers will start getting notices within the next four months.

The agency suspended its automatic collections in November after a new customer service system sent out erroneous, sometimes vastly inflated bills to Los Angeles customers. Staffers continued to pursue payment for customers who chronically left their bills unpaid, but did so manually instead of automatically.

The problems chipped into a shortfall in revenue: The agency has collected roughly $313 million less than it would have expected at this point in the year, including $223 million less in power system revenue, Chief Financial Officer Philip Leiber told a City Council committee Wednesday.

The DWP has stressed that payments will ultimately be collected -- just later than usual. Lieber estimated that the resumed collections would help close about 60% of that gap by the end of June. Agency staffers say they would continue catching up on payments after that.

“This is not money that is not expected to be collected at some point,” DWP spokesman Joseph Ramallo said.

To handle calls about the collections, the DWP has hired 49 customer service representatives, adding to an existing group of about 300, according to the agency.

Leiber assured the Energy and the Environment Committee that the current shortfall would not affect its annual transfer of more than $200 million to the city general fund, which pays for basic services. Operating expenses and capital expenditures are under budget and cash reserves remain sufficient, he said.

City Councilman Felipe Fuentes questioned whether lower-than-expected collections from the utility users tax would cause cash flow problems. Leiber said that while the DWP has collected roughly $12 million
less than expected in taxes, that number should shrink to “low single digits” by the end of the fiscal year.

However, city ratepayer advocate Fred Pickel suggested that the revenue shortfall may not be entirely temporary, citing indications that weather, better conservation or the economy may have driven down energy usage. Pickel told the committee that the situation “will bear monitoring.”

The DWP has also announced that it is creating a committee to review past and continuing problems with the new billing system, “to bring a high level of attention to resolving future issues.” Earlier this month, Assemblyman Raul Bocanegra (D-Pacoima) called for a state audit to investigate how the system was rolled out, declaring it “a boondoggle from the start.”

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