Report: L.A. Power Agency Made Big Profit During Energy Crisis

LOS ANGELES (AP) 9.10.01, 8:25a --

During the peak of the state's power crisis, the Los Angeles Department of Water and Power earned far greater profits selling electricity to the rest of the state than agency officials previously acknowledged, it was reported Monday.

DWP officials have insisted for months that the agency sold power for just 15 percent above its costs. In fact, the DWP's profits from electricity sales to power-starved areas of the state averaged 56 percent last year, according to a newly completed audit obtained by the Los Angeles Times under the California Public Records Act.

The finding will likely reinforce charges by some consumer advocates that the public power company effectively helped its customers at the expense of those suffering blackouts and rate hikes. The audit may also undercut efforts by Gov. Gray Davis and others to blame rising energy costs on private, out-of-state generating companies.

The audit was ordered in May by the DWP's new general manager, David Wiggs. It was conducted by PricewaterhouseCoopers and targeted a 13-month period beginning in May 2000.

The DWP became a key player in the energy crisis last year when the state's deregulation of electricity began to backfire, with supply from private generators contracting and wholesale prices skyrocketing.

The DWP -- which had opted out of deregulation -- cranked up its generating capacity and sold the extra electricity into the California market, helping to avert even more blackouts.

At the same time, though, the DWP and other publicly owned utilities charged some of the highest prices during the crisis, official reports later showed.

Records show that during the worst 13 months of the crisis ending in May, the DWP profited $200 million on sales of $680 million, the Times said. The agency says it is still owed $180 million.

In an interview with the Times last week, former DWP chief S. David Freeman, who now heads Davis' new statewide power authority, insisted that he had issued "standing orders" to sell power at a profit of no more than 15 percent.

Freeman made the same assurance in July in a letter to U.S. senators probing the energy meltdown.

He told the Times he has not seen the audit, but said if profits were higher than 15 percent, then "I'm not embarrassed about it. It says nothing more than there's enterprise at (the) DWP."

Wiggs said that his staff had found no documentation as of Friday to confirm the existence of a strict pricing policy during Freeman's tenure, but he said that even if the profit margin was higher than publicly stated, it was not excessive.

"We charged just and reasonable rates," Wiggs told the Times, adding that the DWP now offers the state electricity with no profit margin.

But for consumers'-rights activists, the findings were new ammunition.

"Taking advantage of residents in one part of the state to benefit residents in another part is not fair," said Harry Snyder, senior advocate for Consumers Union, the nonprofit that publishes Consumer Reports. "This kind of behavior is what we expect from banks, savings and loans and insurance companies -- not a public agency."

-- PHO (owennos@bigfoot.com), September 10, 2001