$59 million loss with Department of Water and Power’s new billing system

Feb. 01--Problems with the Department of Water and Power's new billing system has resulted in a dramatic decline in revenue for the power utility, with officials being told receipts in November were down $59 million, or 19 percent.

In a memo to city executives obtained by the Daily News, Jeff Pelitola, director of rates and financial planning, said more studies are needed to determine why the revenue was so far below expectations.

November was the first full month a new customer information system took effect, and officials had hoped to correct earlier problems in which customers were billed two and three times above what they should have paid.

"Continued cash receipts at this level will have a detrimental impact on Power System cash reserves," Pelitola said.

The problem appears limited to the power system, which brings in the most revenue to the agency. Pelitola said water system revenue appeared to be in line with what had been projected.

The problem goes beyond the utility itself, however.

Each year, the DWP transfers up to seven percent of its revenue to the city, which amounted to $250 million in 2013-2014. In addition, it has an impact on the utility users tax paid by all customers that goes to the city.

This year, the users tax is projected to generate $681 million for the city's general fund.

Aides to Mayor Eric Garcetti said they were looking into the problem.

DWP spokesman Joe Ramallo said the problem was not unexpected.

"The revenue shortfall currently being experienced is a temporary delay in recovery of revenue associated with delays in billing and collections, and our decision to stop customer disconnections for nonpayment," Ramallo said.

"We expect to recover this money over time as we continue to work with our customers through the transition to our new billing system. The impact to LADWP's financial condition is manageable."

Ramallo said the DWP has sufficient cash reserves to cover any immediate losses and work is proceeding on the billing system.

"We said there would be a problem with revenues due to the delayed bills," Ramallo said. "This is an indication of that.

"You have to remember we are talking about power revenues each year of more than $2 billion. So, while this is a lot of money, it has to be looked at in terms of the total budget."

Ramallo said fixes are being made to the system daily in the hopes of straightening out the problem as soon as possible.

The $59 million computerized billing system has been in the works for three years, and it replaces a 30-year-old system that has been unable to keep up with the variety of bills the utility now sends out.

Also, the new system is designed to eventually send out monthly bills to residential customers to even out the flow of revenue and try to reduce the size of the bills paid by customers.

As a result of the problems discovered in October, the City Council instructed the DWP to not cut off any customer's power and also not to go after them for unpaid bills.

City Administrative Officer Miguel Santana said he was made aware of the revenue problem this week and officials are working to find the cause.

"What I'm concerned with is what the potential impact could be not only this year but next year," Santana said. "At this point, all we know is that revenues are down."

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