Mayor Disputes DWP Sale of Power

Awash in electricity, the city of Los Angeles is in the midst of a power struggle that has potentially serious implications for the energy-starved state, with the mayor and utility chief clashing over how to make the most of its vital and valuable surplus.

The behind-the-scenes dispute pits Mayor Richard Riordan, a Republican and multimillionaire advocate of free-market principles, against the Department of Water and Power’s general manager, S. David Freeman, a liberal Democrat who has run nonprofit utility companies for nearly three decades.

The two officials see the seriousness of the dispute somewhat differently. The mayor’s office characterizes the two men as genuinely at odds, while Freeman and people close to him see the conflict as more about style than substance.

Though Riordan hired Freeman three years ago and only two weeks ago praised the energy czar for helping the city utility avoid deregulation and its accompanying chaos, city officials said the mayor has criticized the power chief at increasingly tense private meetings for selling the public utility’s excess power to state authorities at nominal prices and on credit.

In the state’s mind-bogglingly complex energy bazaar, such power is then resold to the electron-strapped private utilities that serve tens of millions of Californians: Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric.

“We are owed $170 million from the power grid and ultimately from Edison and PG&E;,” Riordan told a gathering of 150 downtown businesspeople Thursday. “The problem is, we don’t know if we are going to get paid that money.”

In effect, the mayor proposes that the DWP, the nation’s largest municipal utility, function a little more like the freewheeling electricity providers that are widely blamed for contributing to the current crisis.

At the business luncheon, he indulged in intercity rivalry when asked if the DWP should seek the maximum price for surplus power or show mercy to strapped private utilities. “If it’s San Francisco,” he quipped, “no mercy.”

While saying that protecting city taxpayers and utility customers should be a primary goal, Riordan allowed that some power could be sold at a 10% discount on long-term contracts.

In his office with Freeman on Wednesday night, sources familiar with the meeting said, the mayor had an aide hastily type up his formula and hand it to the DWP chief: electrons for cash and a tough stance on recovering debt.

Freeman on Thursday denied that he and the mayor differed significantly on the issue, and said he had not been given any directive by Riordan. Freeman said he and the mayor agreed that the DWP should keep selling excess power and keep working to collect debts.

But he also said that as a longtime public utility boss, he felt some responsibility to other utilities and Californians to provide electricity, even on credit.

“I’m cautiously optimistic that we’re going to collect every penny that’s owed us,” he said. “And besides, I’m very proud of the fact that our power plants have in fact been minimizing the blackouts throughout the state yesterday and today.”

On Wednesday, the DWP provided a crucial 300 to 700 megawatts per hour, or 10% to 20% of its output, to the state power grid as controlled blackouts rolled across much of California. Meanwhile, the 3.8 million Los Angeles residents whom the DWP serves had power aplenty.

“If you think about it,” he said. “the state is having an earthquake and we’re helping.” It’s traditional, he said, for utilities to help each other out when they are in trouble.

Whatever sharp differences exist between the mayor and the power chief, developments in Sacramento may blunt or obliterate them. Freeman said that a move by the state’s Water Resources Board to ante up about $400 million to reimburse electricity generators selling to the grid means that the DWP will get cash.

“The concern that we are throwing good money after bad is about to end,” he said. “That still leaves open a concern we have about collecting what’s owed us. But the only way we’re going to collect that is if the Legislature puts together a package that keeps these companies from going bankrupt. They have not yet failed to make payments in a timely fashion to us.”

Some city officials speculate that Freeman is being generous--energy giants have played him for a “patsy,” one Riordan associate complained--to become the state’s energy guru and head a proposed state power authority, which Freeman and others have advocated.

Freeman chuckled at the speculation that he was job-hunting, then added: “It’s important for the state to have somebody who’s going to build some . . . power plants and finance some conservation and run the transmission system and help pull this ol’ wagon out of the mud.”

His employment contract expired in September, the 75-year-old said, and he previously told City Council members that he would stay at least until the mayoral election this spring. “I’m just working until they fire me. Or I leave. Whichever comes first. It’s a close race.”

*

Times staff writer Noaki Schwartz contributed to this story.