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----- Forwarded by Mark Palmer/Corp/Enron on 07/10/2001 07:47 PM -----
"Leopold, Jason" <Jason.Leopold@dowjones.com< 07/10/2001 07:32 PM To: "'pat.dorinson@mirant.com'" <pat.dorinson@mirant.com<, "'mark.palmer@enron.com'" <mark.palmer@enron.com< cc: Subject: LADWP =DJ LADWP, Run By Davis Adviser, Cashed In On Calif Crisis Dow Jones Capital Markets Report via Dow Jones By Jason Leopold Of DOW JONES NEWSWIRES LOS ANGELES (Dow Jones)--On a single day in June 2000, the Los Angeles Department of Water and Power, the largest municipal utility in the country, raked in $5 million selling California surplus power for $1,000 a megawatt-hour - about 30 times the average price the utility charged the month before. That sale, reported by the California Independent System Operator and confirmed by the LADWP in an interview last June, was one of many instances in which the municipal utility cashed in on California's power crisis. On Monday, the Department of Water Resources, the agency that has been purchasing California's bulk power needs in lieu of the state's cash-strapped utilities, released a detailed report of spot-market power purchases showing the LADWP charged the state an average of $242 a megawatt-hour for power from Jan. 18 through May 31 this year. That price is about $35 higher than those charged by most of the out-of-state generators Gov. Gray Davis has criticized repeatedly as price gougers. Potentially embarrassing for the Davis administration, however, is that the LADWP was formerly run by General Manager David Freeman, who in April became Davis' top energy adviser. Steve Maviglio, press secretary to Davis, said Texas-based generators are primarily to blame for the high wholesale prices that crippled the state's two largest utilities. "Anywhere they wear cowboy hats, they probably have handkerchiefs across their face, because they are robbing us blind," he said. "The bad guys are clearly the out-of-state generators." Freeman's trademark is a white Stetson. The former LADWP chief, who last September quipped that a "blind pig could make money" under California's faulty deregulation setup, didn't return calls for comment. Freeman took a leave of absence from the LADWP in January to negotiate long-term power contracts on behalf of the state. Power To Sell According to the DWR report, the LADWP brought in $331 million selling power to the state between Jan. 18 and May 31 this year. The LADWP, which didn't take part in the state's deregulation debacle and which isn't under the jurisdiction of federal energy regulators, also cashed in throughout 2000. The utility has 7,000 megawatts of generation capacity but only needs about 5,500 MW to serve its retail customers, freeing it to sell as much as 1,000 megawatts to the ISO at prices comparable to what the generators were charging. The LADWP did so well that it was able to pay down $200 million in debt and will reduce its customers' rates in 2002. "It just shows you that enterprise is where you find it," Freeman said in an interview last year. Last July, ratings agency Fitch concluded that California's electricity shortage provided LADWP "an opportunity for the sale of surplus power at favorable prices which added to the municipal system's coffers." According to a report by the ISO, manager of the state's electricity grid, the LADWP overcharged California for power from May 2000 through February 2001 by as much as $20 million. Maviglio said the state will pursue refunds from the utility. On Tuesday, an LADWP spokesman defended the utility's power prices, saying the costs of producing electricity were extremely high. The ISO has estimated that the state was overcharged nearly $9 billion for electricity sales in the 12 months ended May 2001. On Monday, settlement talks between state officials and generators over the refunds broke down. Other municipal utilities, including the Sacramento Municipal Utility District and private companies like BC Hydro in Canada, have also racked up enormous sums selling surplus power to California at the last minute. -By Jason Leopold, Dow Jones Newswires; 323-658-3874; jason.leopold@dowjones.com (END) Dow Jones Newswires 07-10-01 1557EDT (AP-DJ)--07-10-01 1557EDT :TICKER: EIX PCG SRE :SUBJECT: EUTL CA COBO MU PETR Copyright © 2001 Dow Jones and Company, Inc. Received by NewsEDGE/LAN: 7/10/01 12:57 PM
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