Power Crisis II

The L.A. Department of Water and Power’s glistening new reputation as a “good guy” Green utility is fading in the summer sun. Despite extremely lofty goals, the DWP‘s solar-electric program has gone into a sudden and hard-to-pin-down eclipse. It’s part of what some environmentalists and informed sources inside the DWP describe as a “Green malaise” afflicting the massive publicly owned utility after the departure of DWP chief and legendary public-power executive David Freeman to serve as Governor Gray Davis‘ energy czar. And it comes just as a malaise of sorts appears to have afflicted the career of Freeman himself, whose confirmation as chairman of the new California Power Authority is now in jeopardy. Which in turn points up growing questions from state investigators about the practices of the DWP.

Although its reputation soared during the state’s power crisis, the DWP has long been derided by knowledgeable environmentalists as “the dirtiest public utility in the West,” on account of its reliance on out-of-state coal-fired plants and old natural-gas-fired plants. But the power crisis brought fresh legitimacy to the DWP, just a few years after Freeman brought it out of a huge hole, halving its $8 billion debt. In contrast to California‘s private utilities, which were overwhelmed by the very deregulation scheme they played such a major role in lobbying through the state Legislature in 1996, the DWP was an oasis of stability and energy-policy sanity, and provided power for the rest of the state when its private utilities became insolvent last year. Better yet, from a progressive standpoint, the massive public utility’s longtime bias toward conventional power plants was turning in the direction of conservation and renewable energy. Or so it seemed.

But the old ways die very hard, if at all. “The company,” as some of its denizens rather incongruously call it, has suffered through a number of embarrassments since its halcyon moment of popularity during the California power crisis. It now risks seeing its reputation sink back into the past, though perhaps not to the level of Chinatown, the classic movie of DWP corruption. Although Freeman has said that he instructed DWP energy traders to sell power to the state‘s Department of Water Resources, which took over power buying for the nearly bankrupt private utilities last year, at no more than a 15 percent premium over cost, the DWP actually sold its power to the state’s desperate power buyers at up to a 56 percent premium. “I don‘t know where Freeman’s 15 percent figure comes from,” says state Senator Joe Dunn, chairman of the special Senate committee investigating the power crisis. “All available facts show unrestrained practices by DWP.”

And the Dunn committee has uncovered material strongly suggesting that DWP traders engaged in “ricochet” trading practices with the state akin to those employed by the now quite infamous Enron Corp., in which power was transmitted outside California at a lower price, then sold back to the state at a higher price. A Senate investigator is at DWP headquarters this week going through various materials, including recorded conversations of DWP energy traders.

Because of all this, Freeman‘s confirmation vote in the Senate has been placed on hold by Senate President John Burton (D--San Francisco). Freeman’s appointment was already controversial, having run into the crossfire of the gubernatorial campaign and receiving only a narrow 3-2 endorsement from the Senate Rules Committee in the spring.

Since Burton halted the confirmation vote last week, another troublesome matter for Freeman has emerged. While California was preparing to embark on its ill-fated voyage into electric-power deregulation in 1997, Freeman, then interim chief of the state‘s power grid, negotiated a contract with 1992 presidential candidate Ross Perot’s Perot Systems to develop a software system for the state‘s electric-power market. Dunn’s committee has uncovered evidence suggesting that the deal was flawed, and that Perot‘s people used their knowledge of the state software system they developed to suggest ways in which out-of-state power generators could manipulate the California market. The Texas billionaire, former standard-bearer for the Reform Party, will testify before the Senate committee this month. Dunn, an Orange County Democrat, who made a fortune as a trial lawyer fighting tobacco companies, is concerned that Freeman also did deals with Perot as head of the DWP. Freeman would not comment about any of these developments to the Weekly.

Not only is Freeman’s confirmation in doubt, so too may be his Green legacy at the DWP. With a mere 2 percent (3 percent, according to DWP) of its power coming from renewable energy sources, the DWP trails far behind California‘s other major municipal utility, the Sacramento Municipal Utility District, which Freeman also ran. SMUD generates 10 percent of its power from renewables. As does Pacific Gas & Electric. And Southern California Edison is more Green than that. Freeman set up a number of Green energy and conservation programs at the DWP. One of the most high profile is the solar-electric program.

The DWP has established the goal of producing 100 megawatts of electricity by 2010 from distributed solar-electric systems using photovoltaic cells mounted on private homes and businesses. Right now, it’s less than 2 percent of the way toward that. And the program oddly stalled last spring, with the DWP issuing solar-shutdown orders to new homeowners in the program and even padlocking their systems. An April letter from the DWP told solar-power users that their systems would be shut off for “two to three weeks” while the utility finished “enhancing our internal procedures . . . to ensure the safety of our field workers.” But the two weeks of enhancing procedures is dragging into three months, and homeowners have been told that August 15 is the new date by which they can expect to put their solar systems back online.