Austin Beutner hopes to sell L.A.'s share of a coal-fired
generating station in Arizona and is weighing a sale and
lease-back deal on the utility's landmark downtown building.
Los Angeles Times
15 June 2010
executive at the Los Angeles Department of Water and Power is
laying the groundwork for a sale of some of the agency's biggest
assets—including the utility's iconic downtown Los Angeles
headquarters—as it seeks to cover rising costs without raising
General Manager Austin Beutner said Monday that he would not
pursue any additional power rate increases for the remainder of
the calendar year. But that decision would come with a series of
tradeoffs, he said.
former investment banker, is hoping to generate $150 million by
selling city-owned natural gas reserves in Wyoming. He is
looking at unloading the city's stake in an Arizona coal-fired
power plant years ahead of schedule. And he said he is "serious"
about trying to sell the utility's 17-story office building on
Hope Street to a private buyer, who would lease offices back to
the agency on a long-term basis.
simple. If you can't raise rates, what are you going to do?"
"Do you want to
own a building, or do you want to have renewable energy?" he
said. "You pick. I don't care. If you like the building better,
that's fine. You can't have both. So policy is about making an
proposals are part of Beutner's new strategic plan for the
nation's largest municipal utility, which will be presented to
Mayor Antonio Villaraigosa's five-member DWP board Tuesday.
Beutner said the proceeds of the cost-cutting efforts would help
pay for upgrading the DWP's aging infrastructure, comply with
new government regulations and push ahead with Villaraigosa's
directive to get more energy from wind, solar and geothermal
headquarters, across from the Music Center in downtown, opened
in 1965 and was designed by A.C. Martin and Associates. Beutner
said the sale of the headquarters could generate $300 million.
LaBonge voiced strong doubts about selling off critical assets,
particularly the DWP headquarters, which is named after former
City Council President John Ferraro — LaBonge's boss for 16
"Mr. Beutner is
obviously a much better businessman than I," said LaBonge, who
voted against electricity rate increases earlier this year. "But
as a public official, I wouldn't want to see us sell assets that
we might have to buy back again."
into a major standoff with the City Council in March over a
series of proposed increases that would have boosted residential
rates from 9% to 28%, depending on the household. So far, the
council has approved a 4.8% increase effective July 1.
In the wake of
that dispute, Beutner decided to hold the line on future
increases for at least nine months, partly by cutting expenses
and partly by tapping DWP assets. Beutner hopes to cancel plans
for a new billing office in Van Nuys — a move that could save
$20 million — and is weighing a possible sale of 100 acres of
property that the DWP owns in Malibu.
The DWP is
already scheduled to divest itself of a 21% stake in the Navajo
Generating Station, a coal-fired power facility in Arizona, by
2019. But Beutner said he would act far more swiftly to sell
that stake, a move that could generate up to $500 million.
would be to sell the stake within two years while gradually
scaling back the city's use of coal from that facility, he said.
drew strong praise from Rhonda Mills, Southern California
program director of the Clean Power Campaign, an environmental
advocacy group. Mills said the Navajo plant would lose value as
new environmental regulations are put into effect across the
"It will cost us
more in the future than if we get out of it now," she said.
long-term strategic plan represents the latest shift in
direction for a utility that has had five general managers in
three years. During much of that time, Villaraigosa has promised
to ensure that the DWP gets 20% of its power from renewable
energy by Dec. 31 and 40% of its power from those sources by
Beutner said he would focus less on Villaraigosa's numerical
target for renewable energy and more on an overall goal: cutting
the utility's carbon emissions in half.
General Manager H. David Nahai said he retained Goldman Sachs to
study the possibility of selling the city's stake in Navajo and
purchasing back its power. Still, he voiced dismay at the notion
of a lease-back of DWP headquarters.
"We're going to
sell a gem of a piece of real estate, an iconic building, in the
lowest real estate market since the Great Depression? That does
not make sense," he said.
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As part of his
DWP strategic plan, Beutner said he wants a "ratepayer advocate"
to serve as a watchdog on behalf of the utility's customers.
That advocate should be housed in the office of City
Administrative Officer Miguel Santana, the budget advisor to
Villaraigosa and the council, Beutner said.
That marked a
change from two weeks ago, when Beutner said he wanted the
ratepayer advocate to serve in the office of City Controller
Wendy Greuel. Asked about that earlier statement, Beutner said
he "may have misspoken."
A June 7 DWP
news release also said the utility was working with Greuel to
create the ratepayer watchdog. Days later, Greuel released a
report sharply criticizing the DWP for threatening to withhold
$73 million from the city's budget unless it received its
planned rate increase.
that having a ratepayer advocate in the controller's office
would "politicize" the position. Greuel, in turn, said Beutner's
statement on the ratepayer advocate is "the exact opposite" of
what he told her two weeks ago.
obvious that his position changed after I released a critical
review of the Department of Water and Power," Greuel said.
"That's why this position needs to be independent."