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Sizzling Success

Los Angeles' DWP shines as most of California frets; the City Council should approve its expansion plan.

August 06, 2000

David Freeman, the general manager of Los Angeles' Department of Water and Power, could not have picked a better time to place before the City Council his 10-year, $1.7-billion plan to expand electricity generation capacity. While electric bills in San Diego have doubled in recent weeks and Californians throughout the rest of the state face the possibility of blackouts, L.A. residents have plenty of power and pay less for it than before. Freeman has demonstrated that his municipally owned utility can operate successfully in a competitive environment. His "2000 Integrated Resource Plan" would add generation capacity without increasing pollution or saddling Los Angeles with new debts. The City Council should give it swift approval.

To Freeman, the DWP's investment program for the next decade is not a mere business plan to assure continued supply of electricity to Angelenos. It's a poke in the eye to the state's struggling investor-owned power companies and helps ensure that the DWP will remain a valuable municipal asset. But he admits that the competitive environment that California's 1996 deregulation created is forcing him to work harder.

Clearly something is rotten in the state electricity system, but the rush to re-regulate is premature. Californians feel the pain of the state's 1996 power utilities deregulation in their pocketbooks. A week of sizzling heat has sent electricity bills skyward, and power shortages triggered drastic power cuts for many big commercial customers of the privately owned utilities. The Public Utilities Commission says Californians will pay billions of dollars in higher bills this year.

Gov. Gray Davis put state offices on a drastic power diet, and the attorney general's office is looking into the possibility of price fixing and criminal collusion within the state wholesale electricity market. Wholesale open-market prices are markedly higher this summer even when temperatures are relatively low and power is more plentiful, indicating some hindrance in competition. Unregulated power marketers--who buy contracts only to bid up the prices for resale--operate largely outside public scrutiny. State regulators should require greater transparency in the activity of the marketers.

At the heart of California's energy crisis is a shortage of supply. Continued conservation will be crucial if California is to avoid blackouts. The state clearly will have to expand generation capacity, so plant construction approval needs to be streamlined to speed up new building.

In Los Angeles, the DWP is trying to avoid the problems plaguing the rest of the state. Its $1.7-billion plan calls for re-powering some mothballed local power facilities, including the Valley generation station, Haynes and Scattergood, with natural gas generators. To help finance the project, the DWP plans to sell its share of the polluting Mohave Generation Station. The $265 million it will gain from that is key to financing its power generation expansion program.

The DWP's plan proposes to do for its 3 million customers what the rest of the electric industry should be doing for the state: build more capacity to meet future energy demands. In the aftermath of the rush to deregulate, the stodgy old municipal utility has some new sparkle.

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