Los Angeles DWP rating seen as safe from its management turmoil

Turmoil at the Los Angeles Department of Water and Power, including a former general manager’s guilty plea to felony bribery, should not affect its Kroll Bond Rating Agency ratings.

LADWP holds Kroll’s AA-plus rating on its water system revenue bonds and AA on its power system revenue bonds. The outlook on both ratings is stable.

“We are aware of the recent guilty plea by the Department’s former general manager filed earlier this week in U.S. District Court, and the related ongoing FBI investigation involving the utility and the office of the City Attorney,” KBRA said in an emailed statement. “The Department’s current management team has considerable experience and tenure, as well as a deep bench.”

David H. Wright, 62, of Riverside, the former general manager of LADWP, pleaded guilty to one count of bribery on Dec. 6, a crime that carries a statutory minimum sentence of 10 years in federal prison, according to the U.S. Attorney’s Office for the Central District of California. He was scheduled to be arraigned on Friday.

Wright served as LADWP’s general manager from Sept. 2016 to July 2019, when Los Angeles Mayor Eric Garcetti asked him to resign.

He was replaced by the chief operating officer, Marty Adams, who remains at the helm.

The federal criminal charges allege that Wright accepted a bribe from a lawyer in exchange for his official action to secure a three-year, $30 million no-bid LADWP contract for the lawyer’s company.

The water and power agency has faced turmoil over the past several years, including questions raised about the rollout of a billing system that resulted in customers receiving bills several times what they owed.

The FBI investigation that snared Wright began when federal officers seized documents as part of an investigation into the billing system. The city had settled a class-action filed over the inaccurate DWP bills sent out starting in 2013.

In view of the detailed findings contained in the December 6, 2021 plea agreement, KBRA said in the statement, it “will continue to discuss with management what measures it plans to implement to avoid the recurrence of a similar situation.”

While reputationally disappointing, KBRA said it “does not expect this matter will impact LADWPs credit ratings, which take into account the holistic credit profile of the Department which remains strong.”

The other two agencies that rate LADWP’s bonds have yet to weigh in on the charges.

It holds ratings of Aa2 from Moody’s Investors Service and AA-minus from Fitch Ratings for its power system revenue bonds; and Aa2 from Moody’s and AA from Fitch for its water system revenue bonds. All come with stable outlooks.