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----- Forwarded by Jeff Dasovich/NA/Enron on 03/08/2001 12:15 PM -----
Scott Govenar <sgovenar@govadv.com< 03/08/2001 12:12 PM To: Jeff Dasovich <jdasovic@enron.com<, Sandra McCubbin <Sandra.McCubbin@enron.com<, Susan J Mara <smara@enron.com< cc: Subject: Freeman It's about time! By Mike Taugher TIMES STAFF WRITER An East Bay state senator is calling on the governor to investigate what he called "price gouging" by a taxpayer-supported agency in Los Angeles. "It's one thing to have some Texas guy ripping you off, but it's another thing to have a public agency in your own state," said Sen. Don Perata. "I think they ought to give the money back." The Oakland Democrat cited reports that put the Los Angeles Department of Water and Power's profits from sales to the state during the past seven weeks at $400 million during a period when the state's electricity bill has moved past $2 billion. Perata, comparing the agency's electricity sales to its raids on northern counties' water during Los Angeles' formative years, said a rebate is in order to prevent heightened conflicts between Northern and Southern California. "I think it's perfectly legal," Perata said. "I think it's immoral." But Frank Salas, chief of staff for the Los Angeles agency, said his department is selling electricity at a reasonable 15 percent profit. He said recent sales to the state have been in the range of $300 to $350 per megawatt-hour and that the $400 million profit figure cited by Perata was grossly inflated. "We would welcome an investigation," Salas said. "If there is an investigation, we would be shown to be a good neighbor to the state and not a price gouger." Perata said that if Davis does not investigate the state's purchases from the Southern California agency, he will file a formal request under the public records law to force disclosure regarding the purchases. Details about the state electricity purchases have been shrouded in secrecy because the governor says release of the information will allow power generators to manipulate prices and drive them higher. "This whole area is a like a star chamber," Perata said. "This stuff can't be proprietary if it involves public agencies." Meanwhile, the head of the Los Angeles water and power agency, who has been tapped by Davis to lead the state's efforts to obtain long-term electricity contracts, said that even though the state is spending about $55 million a day to keep the lights on, state coffers can be refilled without raising consumer rates. "There is no basis for any rate (increase) ... maybe ever," said S. David Freeman, director of the Los Angeles water agency. Freeman was responding to an order issued Wednesday by the state Public Utilities Commission clearing the way for the state treasury to be reimbursed for its power purchases. The PUC, meeting in San Francisco, delayed for at least a week a decision on the more controversial issue of how much the state should be repaid. But it did issue an order that said the state Department of Water Resources is entitled to reimbursement. Pacific Gas & Electric Co. contends that under a formula set up by lawmakers, the utility is entitled to collect its costs for buying power before reimbursing the state. According to the utility's calculations, that would mean it would keep all of the money paid to it by customers even though the state today is buying up to one-third of the electricity used each day. Freeman countered that for every kilowatt-hour the state purchases, its utilities are required to pass on the roughly 6 cents or 7 cents that customers pay on their bills to buy those kilowatt-hours. "They are whistling Dixie," Freeman said. "The law is very clear it is not their money." PUC President Loretta Lynch said she hoped the commission would decide the question next week. Freeman said he has deliberately kept his distance in transactions between the state and his employer and that he does not know how much electricity the Department of Water and Power is selling to the state. Freeman has been working with Davis for the period of time Perata is examining. "On my watch there was no price gouging," Freeman said.
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