DWP Head Draws on 50 Years’ Experience

Gov. Gray Davis had to call Texas to reach the negotiator he hopes can strong-arm power generators into signing affordable electricity contracts with California.

There, among the polished skyscrapers of Houston’s energy conglomerates, S. David Freeman was wrangling to buy natural gas for the Los Angeles Department of Water and Power. With his white cowboy hat, Tennessee twang and 50 years of experience, Freeman, 75, is comfortable in Houston’s energy alley.

Soon, though, out-of-state power players will be meeting Freeman on his own turf.

For the next several weeks, Freeman will work as California’s chief negotiator, hashing out the prices and terms of electricity sales for the state. Davis desperately hopes the contracts will rescue the state from an electricity market so expensive it has nearly pushed California’s largest private utilities into bankruptcy.

“His job . . . is to get the very best possible deal for the ratepayers of California,” said Davis in a news conference Wednesday, after the state opened 39 sealed bids for electricity sales. “His job will be to take the most favorable bids that came in today and consummate those into contracts.”

Freeman is roundly praised as an ideal choice. He’s got a career as wide and deep in public power as anybody in America. Since 1997, he’s been the general manager of the publicly owned utility that serves 3 million in Los Angeles. Before that, he headed the Tennessee Valley Authority, Lower Colorado River Authority, New York Power Authority and Sacramento Municipal Utility District.

“David understands how the business works,” said Gary Ackerman, executive director of the Western Power Trading Forum, which represents power generators and brokers. “We appreciate having good, tough negotiators on the other side.”

Freeman also helped shape California’s experiment with deregulation. Former Gov. Pete Wilson appointed him in 1996 to oversee establishment of two agencies intended to foster competition and prevent blackouts as the government loosened controls over the electricity industry.

Politicians promised cheaper electricity through deregulation, but it has mushroomed into a crisis of epic proportion. The state’s two largest utilities are billions of dollars in debt, and rotating blackouts darkened parts of the state last week.

Though Freeman initially put faith in deregulation, he has since called it a mistake.

“Deregulation and the marketplace are terms of endearment; they’re magic--people believed in that,” said Freeman in September. “Nobody studied the underlying situation of supply. We just assumed the marketplace was going to perform brilliantly, and the facts weren’t examined.”

Freeman’s predecessor at the DWP opted out of deregulation. The utility kept its power plants while private utilities auctioned theirs off. In the last two years, Los Angeles has earned more than $200 million selling electricity into California’s market. State Sen. Steve Peace (D-El Cajon) has criticized Freeman for profiting at the expense of private utilities. But even Peace agrees that Freeman is an ideal negotiator.

“You need a pirate to fight a pirate,” Peace said.

Freeman laughs at the comment, noting that his boss--Los Angeles Mayor Richard Riordan--has accused him of not getting the highest price for the city’s electricity.

“In terms of marketing power for Los Angeles,” Freeman said, “I feel good that I’m being criticized for charging too much and too little.”

Last fall, Freeman joined other municipal utility chiefs in petitioning federal regulators to impose caps on wholesale electricity in California. The petition was rejected. Now Freeman finds himself as an unpaid, temporary negotiator of contracts that could range in length from three months to 10 years.

“It is in the interest of the entire state of California, including Los Angeles, that we obtain the electricity at the lowest possible price,” Freeman said. “That will be my sole objective.”

Earlier this month, Freeman and state Treasurer Phil Angelides drafted a proposal for a public power authority that could purchase transmission lines and finance power plant construction. Should such an authority be created--Senate President Pro Tem John Burton (D-San Francisco) is carrying a bill--Freeman has been mentioned around the Capitol as a possible leader.

On Wednesday, after hearing from the governor, Freeman flew from Houston to Sacramento. Thursday morning, he promised to get to work quickly on negotiating long-term contracts.

But first Freeman did something he said he felt compelled to do: He visited the Air Resources Board a few blocks away. The board was in the midst of a hearing on whether to retreat from its mandate that car makers offer for sale a certain quota of zero-emission vehicles by 2003. Manufacturers have resisted the requirement.

Freeman’s presence set off murmurs in the standing-room-only crowd, and the board chairman interrupted testimony to hear from him.

Freeman urged board members not to abandon their roles as national leaders in the fight for clean air.

He called “outrageous” the claims of General Motors that electric cars will only worsen the state’s electricity crisis. Even 250,000 such vehicles would consume only a tiny fraction of the state’s supply, Freeman said.

“If we don’t get this electricity problem solved in this state by 2003, 2004, we won’t have the money to buy any kind of cars.”

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Times staff writer Miguel Bustillo contributed to this story.