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Decision to Keep Coal Plant Generates Criticism

The 2001 sale of only half of DWP's interest in a Nevada power facility that has since closed remains controversial.

October 01, 2006|Evelyn Larrubia | Times Staff Writer

S. David Freeman calls it "an 'L.A. stupid' story," a missed opportunity that cost taxpayers millions and made it easier for the DWP to put off finding more environmentally friendly fuels.

Ron Deaton, on the other hand, defends it as a decision rooted in logic: In the face of a statewide energy crisis, never turn your back on a cheap source of electricity.

Here's what happened: Five years ago, when Freeman still managed the Los Angeles Department of Water and Power, officials made a remarkable decision to get rid of its interests in a coal-burning Nevada power plant partly responsible for sullying the skies above the Grand Canyon.

The Mohave Generating Station produced more than a million tons of carbon dioxide a year and caused further environmental harm by using a pristine waterway to float coal from a mine to the plant. Federal regulators were pushing hard on the operators -- one of which was the DWP -- to shut down the plant or spend $1 billion on emission scrubbers and other pollution controls.

At the time, California was suffering from an energy crisis that caused scattered blackouts across parts of the state; power was at a premium. But because the DWP had more than enough, having restarted several local natural-gas plants, Freeman decided the time was right to cash out Mohave to make room for cleaner fuels and upgrade local gas-powered plants.

"It's a project that I knew was sick, and [I] persuaded the City Council to sell it while prices were high," Freeman said.

But after the council approved the deal, Deaton -- then the city's chief legislative counsel, and City Administrative Officer Bill Fujioka convinced council members that it was a mistake to sell a source of cheap power.

Following that advice, they reneged on the deal, selling only half of the DWP's 20% interest, in November 2001, for $95.2 million. The city kept the remaining 10% interest.

Jump ahead to Jan. 1, 2006: The still-polluting coal plant was ordered closed. For months, operators struggled to find a profitable way to reopen, but they announced in June that the plant would never burn coal again.

Had the DWP sold all of its Mohave interests, it would have made an additional $94.8 million.

"How many solar projects could we have put up for that?" asked Rhonda Mills of the Center for Energy Efficiency and Renewable Technologies, an advocacy group.

Deaton, now the DWP's general manager, counters that it's indisputable that in 2001 it made financial sense to keep at least a share of Mohave -- it gave the city cheap power for four more years. Selling it to someone else would not have improved the environment, he said.

"There wasn't going to be any difference in air quality," he said. "The question was whether the city was going to get the financial benefits ... or somebody else."

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