Business & Economy

LADWP overcharged customers $67.5 million, audit finds

File: The Reflecting Pool surrounds the Los Angeles Department of Water and Power's headquarters in downtown Los Angeles.
File: The Reflecting Pool surrounds the Los Angeles Department of Water and Power's headquarters in downtown Los Angeles.
Kevin Ferguson/KPCC

The Los Angeles Department of Water and Power overcharged customers $67.5 million following the rollout of a flawed billing system in 2013, an independent monitor has found.

The new figure updates earlier estimates of $44 million and is included in a revised settlement agreement that could be approved as early as Friday, according to the LADWP and an attorney representing the utility’s customers.

The new settlement "provides for the return of every penny owed to our customers," LADWP General Manager David Wright said in a written statement Tuesday.

Under the revised settlement, current customers would get a credit for the full amount they were overcharged. Anyone who is no longer a customer would get a refund, according to Tom Merriman, an attorney representing customers. Wright said customers should start receiving those payments by next summer.

The utility’s troubles began in September 2013, when it first introduced the new billing system, which it says it paid PricewaterhouseCoopers $70 million to design and implement. Four separate class-action lawsuits followed when customers began complaining they were getting enormous bills based on bogus charges.

The four lawsuits were eventually rolled into one. Plaintiffs were represented by Merriman’s firm, Landskroner Grieco Merriman LLC, in the settlement negotiations.

When the initial settlement was reached in August 2015, it drew protests from some of the attorneys who had been excluded from negotiations, along with criticism from consumer advocates.

Jamie Court with Consumer Watchdog argued the preliminary settlement was flawed because it wrongly accepted DWP’s decisions about how much customers were overbilled, forced consumers to agree to refunds without knowing how much they would get and voided important consumer rights like having claims heard by a neutral third party.

But Merriman said the revised settlement proved critics wrong.

“Basically, what this proves is the system we put in place, the process we put in place, of having a court-appointed monitor verify every computer query being used to identify people who were overbilled and the amounts they were due, is working and has worked,” Merriman told KPCC.

He also said the attorneys would all be paid as part of the settlement agreement — even those who were left out of the negotiations.

Merriman couldn’t say exactly how much those attorney fees would be, but he did say DWP agreed to an upper limit of $19 million as part of the settlement. That money would be divvied up among the lawyers and would be in addition to the $67.5 million which goes to repay customers.

Judge Elihu Berle, who’s been overseeing the case, could decide as early as Friday whether to approve the new settlement.

What the settlement means for customers

Merriman said customers will get an announcement in the mail within 90 days of the settlement’s approval.

That announcement will inform customers of their rights and how much they are owed.

Customers can dispute the amount in their notice if they feel it is inaccurate. They can also file for additional damages related to the case.

“You may have had late fees at the bank because you got overbilled at the department. Well, you can make a claim for that,” Merriman said. “And there’s a whole slew of claims you can make, and the process will be laid out on how you file to recover those additional funds.”

If customers are satisfied with the amount they’re getting, they don’t have to do anything else.

What the settlement means for DWP

DWP is pursuing a class action suit of its own against PricewaterhouseCoopers to recoup its costs and those incurred on its customers.

Either way, DWP must repay all $67.5 million the independent monitor found it had overcharged its customers.

In addition, the settlement calls for the utility to put in place certain customer service performance metrics and submit to court oversight even after the money is repaid.

“It’s the concept that you have a court-appointed monitor and you have specific metrics that have to be met, specific reforms that have to be adopted, and the monitor will do ongoing reporting and auditing for the court to confirm whether or not LADWP is complying with the terms of the settlement,” Merriman said.

DWP said it is in the process of adopting the required metrics.