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Electricity ratepayers to benefit from DWP settlement

The Los Angeles Department of Water and Power, accused of overcharging in the 2000-01 energy crisis, is to get most of what it charged. Much of the rest will go toward ratepayer relief.

December 19, 2009|By Nancy Rivera Brooks

Customers of Southern California Edison and California's other big investor-owned utilities won't see a refund on their bills from the Los Angeles Department of Water and Power -- but they'll be getting $113 million in relief just the same.

The DWP was accused by the three big utilities and state agencies of overcharging for electricity during the energy crisis that hit California and other Western states in 2000 and 2001. The L.A. utility, however, wasn't paid, as complaints worked their way through the regulatory and legal process.

Under a settlement of the dispute, the DWP is emerging with most of what it charged for the power it sold during the meltdown, which was marked by soaring electricity prices and rolling blackouts.

DWP ratepayers were largely insulated from the power crisis because the utility's system operates separately from the power grid that serves Southern California Edison, Pacific Gas & Electric Co. and San Diego Gas & Electric Co.

Under the settlement approved Thursday by the Federal Energy Regulatory Commission, the DWP will receive about $146 million for electricity it sold during the energy crisis. In all, the DWP was owed nearly $168 million for power. With interest, the total pot in an escrow account grew to more than $277 million. But the interest earnings and then some will wend their way to the 11.4 million electricity ratepayers at Edison, PG&E and San Diego Gas & Electric -- not to the DWP.

The money will go into balancing accounts, which in the arcane world of utility accounting are used to offset factors that might cause rates to rise.

"You won't be able to look at your bill and find a refund from the Los Angeles Department of Water and Power. It just offsets the current cost of electricity," said Frank Lindh, general counsel for the California Public Utilities Commission, one of the parties that pursued the DWP and other suppliers in court and at the Federal Energy Regulatory Commission.

In 2004, the federal agency found no evidence that the municipal utility had used improper bidding to manipulate power prices during the crisis. Nevertheless, the DWP and 18 other government-owned power suppliers were sued in 2006 by Edison, PG&E and some state agencies in an effort to reverse hundreds of millions of dollars in alleged overcharges.

The DWP didn't admit wrongdoing in the settlement.

Both sides claimed victory.

"It is now abundantly clear that [the DWP] behaved appropriately," said S. David Freeman, the utility's interim general manager, who also was general manager during the power crisis. "We kept the lights on for Angelenos and helped Californians during an unprecedented time for our state. This settlement is a win for our ratepayers and the city, and I take great pride in knowing that we did the right thing."

"The settlement represents a substantial benefit to electricity customers in California," utility commission President Michael R. Peevey said. He thanked the DWP and the city of Los Angeles for "agreeing to pay us these refunds."


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