Business & Economy

LADWP's botched billing rollout leads to $681M in uncollected debt

File: LA Department of Water and Power building in Los Angeles.
File: LA Department of Water and Power building in Los Angeles.
Omar Bárcena

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The botched rollout of the Los Angeles Department of Water and Power's new billing system prompted so many customers to hold off paying their bills that their combined debt swelled to $681 million, according to a state audit.

That figure includes both delinquent debt and bills that had simply not yet been paid. But it represents a significant increase over the $436 million  the DWP would normally have listed as receivable bills.  The DWP says it is in the process of collecting past-due debts totaling about $245 million.

The state audit finding is just one of many scathing critiques about how DWP handled the development of its new customer information system, or CIS, a project that, according to the audit, ended up costing more than twice what it was initially budgeted for.

The new system was intended to replace a 40-year-old, technologically antiquated billing and customer service system and underwent more than three years of integration and testing, according to the audit.

Even then, it wasn't ready for prime time, and auditors questioned the utility's decision to launch it at all.

Auditors concluded that DWP "minimized or ignored the severity of the issues that existed at the time it made the decision to launch CIS" and, in addition, failed to disclose the problems when updating the board.

DWP also failed to heed reports from its own quality assurance expert "that no aspect of the project was ready" and that the "scope, quality and schedule [of CIS] were all at the lowest possible rating and needed immediate attention."

The report recommended DWP create a committee to oversee its information technology projects; improve its reporting on project scope, system testing and quality assurance concerns; and put in place a process that would require board approval for any projects that could significantly impact business operations or customer relations.

In a statement responding to the audit on Tuesday, DWP General Manager Marcie Edwards said the utility agreed with the company's recommendations but faulted its consultant on the project, PricewaterhouseCoopers.

Edwards noted its own independent, third-party review of what went wrong found that PricewaterhouseCoopers "intentionally misrepresented its ability to implement the new customer billing system," failed to disclose that it hadn't been able to implement a similar system for the Cleveland Water Department and breached its contract.

Last week, City Attorney Mike Feuer filed a lawsuit against PricewaterhouseCoopers, Edwards said in the statement, adding that DWP has been open about the problems in its billing system and has since taken steps to fix them.

This story has been updated to clarify the nature of money owed to the DWP by ratepayers, based on revised information from the DWP.

This story has been updated.