Crisis Prompts a Threat and Offer From Riordan

Declaring that he must think of Los Angeles residents’ welfare first, Mayor Richard Riordan threatened Wednesday to stop selling the city’s electricity reserves to the state unless payment is guaranteed upfront.

Riordan, a Republican, delivered the news in a letter to Democratic Gov. Gray Davis, who was in Washington working with regulators and utility executives on a rescue plan for the ever-deepening energy crisis.

The mayor elaborated on his letter at a hastily called news conference, offering the city’s help addressing the energy problems--by building a new power plant, for instance. But he coupled the offers with a demand that the city benefit in return. His comments drew a sharp retort from one power industry official, who accused Riordan of misrepresenting and exploiting the issue.

At his news conference, the mayor said the city’s Department of Water and Power has already supplied more than $200 million worth of electricity to the California Power Exchange as a “good neighbor.”

But from now on, a Riordan aide said, the DWP will broker deals only if the purchase is backed up by a letter of credit or bonds. Riordan specifically cited $130 million in outstanding payments that come due Tuesday, most owed by Pacific Gas and Electric, saying he is worried that city taxpayers will end up footing the bill.

“In the event that the investor-owned utilities, such as Southern California Edison or PG&E;, do not pay . . . for power received, the residents of Los Angeles will ultimately pay for the cost of energy provided to other parts of the state,” Riordan said.

PG&E; spokesman John Nelson sharply criticized the mayor, saying his letter is misleading because it makes it seem as if the utility is behind in payments, even though the next billing cycle isn’t until Tuesday.

“Mayor Riordan has managed to outgreed the greedy out-of-state power generators,” Nelson said. “The state is in the middle of an energy crisis, and rather than [providing] leadership, the city of Los Angeles is joining the dog pile.”

Jesus Arredondo, a spokesman for the Power Exchange, said similar demands are becoming more common as the cash-starved utilities complain loudly about financial doom. But he said it is “premature to be making statements that could be construed as alarmist.”

Under deregulation laws passed in 1996, the Power Exchange, in concert with the California Independent System Operator, is in charge of keeping energy flowing throughout the state.

The DWP and other municipal utilities make and deliver their own power, and have been insulated from the skyrocketing wholesale prices that have sent private utilities reeling.

The DWP is deemed one of the most successful operations of its kind, serving an estimated 3.8 million customers in the city with power generated mostly by coal-fired plants.

Riordan, standing under three huge stage lights that burned for more than half an hour until he arrived late for his City Hall news conference, also proposed a deal to build a new coal-fired plant in Utah to serve California.

But the city would only go through with such a plan if the state provided financial backing, and locked into a long-term contract to buy the energy, probably for a minimum of five years. Riordan said the plant could be built and operating within two years, would cost between $300 million and $400 million, and would serve up to 400,000 customers.