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Hundreds of South Los Angeles residents converged this week at the SCOPE (Strategic Concepts in Organizing and Policy Education) headquarters on Florence Avenue to protest an impending rate increase by the Los Angeles Department of Water and Power (LADWP).

The LADWP says the rate increase (about 4 percent beginning in January) is necessary to update old infrastructure like water mains and transformers. They also reported last month that a portion of the increase is necessary because too many customers have conserved water during the drought—and have the lower bills to show for it—thereby putting a dent in the LADWP balance sheet. The department also stated that the rate increase may lead to as many as 6,700 new jobs, primarily for replacing the 70- to 80-year-old water mains which for the past few years have been breaking with regularity throughout the city..

Practically all LADWP customers are disappointed with the proposed rate increase, according SCOPE. Eric Huerta of SCOPE said the increase will disproportionately hurt low-income households and the working poor.

“A lot of folks are one paycheck away from being homeless, and they have to make choices between medicine and food,” said Huerta whose organization works to create economic opportunities for low-income communities of color.

The proposed rate hike will reportedly depend on how much water and power is used by each residence; the average increase may range anywhere from $10 to $90 a month after five years.

“They’re all saving money right now,” said LADWP Chief Financial Officer Jeff Peltola. He said the increase is necessary “to ensure that we have enough money to fix our leaks, to have customer service … all those different things.” Peltola said customer conservation has resulted in a $5 savings on each bill; the rate hike will reportedly raise the bill by $2 per customer.

The LADWP says it also has “drought-related” costs such as spreading conservation awareness and enforcing restrictions on water use. The department said it has collected roughly $110 million less than usual this past fiscal year.

However, a lot of customers simply don’t trust the LADWP. Computer malfunctions in billing last year saw customers receive much higher invoices following months-long delays in regular mailing. Customers in the early 1990s saw a rate increase following measures suggested by the LADWP to reduce water use. This year, one couple in Van Nuys got a $51,649.32 water bill, and in August the department settled a class-action lawsuit for overhanging customers with late bills—although most households will see only about $10 each.

In that legal action, a judge recently made minor revisions to the settlement. Consumer rights attorney Jack Landskroner, of Landskroner Grieco Merriman LLC, issued the following statement regarding the positive ruling by Los Angeles Superior Court Judge Elihu Berle.The landmark classaction lawsuit (Antwon D. Jones vs. City of Los Angeles)was brought on behalf of all customers who were overbilled $44 million by the LADWP.

“Given the magnitude of this settlement, we welcome the efforts of the court to make sure that every detail is considered. We are confident that with some minor revisions, the settlement will be approved on Dec. 21. This settlement has already been endorsed by the independent mediator, Judge Dickran Tevrizian, as well as including input by Fred Pickle, the LADWP Ratepayer Advocate. However, we recognize that a settlement that affects so many people often takes time to make sure it’s as good as it can be, and we support the court’s careful efforts in this process. Our goal is to make sure every ratepayer gets 100 percent of their money back as soon as possible.”

Case Overview

In 2010, the LADWP hired the consulting firm PricewaterhouseCoopers (PwC) to modernize the utility’s nearly 40-year-old billing system. In 2013, they implemented the PwC’s $18 million computer billing system. The conversion failed miserably, producing tens of thousands of inaccurate bills and hour-long phone hold times as ratepayers tried to get their bills corrected. The faulty billing system overcharged thousands of customers by estimating meter readings and by failing to charge some commercial customers at all. Landskroner began investigating utility billing problems after the 2009 launch by PwC of a new water billing system for the Cleveland Water Department, which also turned disastrous. His knowledge of the Cleveland billing fiasco helped Landskroner to understand the necessary comprehensive reforms approved in the groundbreaking LADWP settlement.

Recap of the settlement

Under terms of the pending settlement, LADWP addressed the errors created by the PwC billing system, its impact on its customers and agreed to:

Review and audit the accounts of every single customer. Approximately 1.6 million accounts will be reviewed/audited.

Customers who were overcharged will receive a full credit (100 cents on the dollar) to their account, if either they were overcharged or they will receive refunds if their account is closed.

It will not be necessary for the majority of ratepayers who were overbilled to file a claim. Credits or refunds will be generated automatically and noted on customer’s bills.

  • Customers that incurred incidental expenses related to these billing errors are able to submit a claim for reimbursement of costs, with supporting documentation.

  • If an audit shows that a residential customer owes money for back services provided but has not been billed for those services, the LADWP will only be allowed to bill for the prior to 9 months (270 days) of services. The LADWP legally can currently charge up to four years.

  • Commercial accounts would be responsible for paying for services for up to four years;

  • Customers that owe for back services that had not been timely billed will have up to 4 years to pay back any verified balance – interest and penalty free with qualifying small businesses permitted to apply for an extension beyond four years, if under a hardship.

Paul Bender Consulting, an independent third-party expert in utility billing systems, which will monitor the settlement terms for the court to ensure that the settlement terms are implemented and the LADWP data is accurate. (Bender was the consultant who successfully implemented sweeping improvements to the Cleveland Water Department that was plagued by similar catastrophic billing problems, staffing inefficiencies and complaints of poor customer service.)

Within 540 days from the final settlement approval, the LADWP will be responsible for 90-95 percent completion of remediation of all system errors and to improving call times and customer service.

A third party will administer the settlement. For a copy of the stipulation of settlement, go to www.lgmlegal.com.