Key Figures Trade Views of Energy Picture


Some of the major players in the state's energy crisis met in a Hollywood studio Saturday for a sometimes contentious panel discussion in which they resoundingly criticized federal regulators and disagreed over possible solutions.

Although there was no clear consensus on strategy, Gov. Gray Davis' chief energy advisor, S. David Freeman, echoed sentiments the governor has expressed in saying the end of the electricity shortage is in sight.

A combination of new power plants and increased conservation, along with long-term, lower-rate contracts between the state and energy providers, should create a 15% power surplus within several years, he said.

"The same companies that are charging an arm and a leg now are negotiating five- and 10-year contracts at prices that are reasonable," Freeman said, though not specifying which producers. "By 2003, I'm certain we will have this problem behind us."

Critics have widely disputed this claim. And some of Saturday's other panelists--including the president of Southern California Edison, the president of Sempra Energy, a state utilities commissioner and the speaker of the state Assembly--said they were not as confident about the future, especially if the federal government doesn't step in with price caps.

During last week's visit to California, President Bush reiterated his opposition to such intervention.

The Federal Energy Regulatory Commission "is on a sit-down strike," said Carl Wood, of the state Public Utilities Commission. "They should start regulating or just announce they are out of the business."

Several of the 12 panelists also complained that the federal agency is not regulating the cost of transporting natural gas through pipelines--a price that has skyrocketed by a factor of 30 in recent years.

Natural gas is the primary fuel for most new power plants.

John Stout, senior vice president of Texas-based Reliant Energy, blamed those exorbitant fuel costs for the high prices his company has been charging on the spot market in California.

Half-jokingly introduced by the moderator as the "bad guy," Stout said the company's rates--if the cost of natural gas were factored out--would be lower than those the investor-owned utilities like Edison had charged before deregulation.

"Two-thirds of every dollar we get goes to natural gas," he said.

Stout was the sole panelist to also defend the federal regulators, saying they audit Reliant every time its prices go up.

Freeman disputed Stout's assertions and math, saying there is no proportional correlation between high electricity prices and the increase in costs of natural gas--a business, he noted, Reliant is also involved in.

"You're in the gas business and the gas people are ripping us off as bad as the electrical people," he said.

Loretta Lynch, president of the Public Utilities Commission, found evidence that power generators scaled back electricity production and then benefited from the resulting high prices. Documents uncovered by The Times in April showed Freeman's own agency at the time, the Los Angeles Department of Water and Power, may also have engaged in driving the electricity prices skyward.

As a municipal utility, the DWP has so far avoided the perils of deregulation, and managed to profit from it by selling its excess power on the market. Now, Freeman is in the ironic position of pushing his former agency to sell its surplus power this summer to the state, instead of on the open market where it could generate larger profits.

The current assistant general manager of DWP said he is negotiating such a contract, but there are risks. "We are purchasing on the spot market the gas we need to produce the power," he said.

Freeman sounded more confident about the contract. "We want one and we're going to get one."

Asked afterward if he would have made such an agreement if he were still at the DWP, Freeman said, "Of course."

Saturday's KFWB (AM-980) Energy Summit was held in the CBS studio that most recently housed the sitcom "Two Guys and a Girl" and consisted of two panels of six speakers each. Freeman gave the keynote address and joined the first discussion.

The second forum dealt with a wider range of ideas on how to cope with the crisis, but was noticeably short on concrete plans. One speaker said "two guys and a girl" could do a better job finding a solution, while actor and conservationist Ed Begley Jr. discussed the potential of solar and wind power and recounted a drive he took across the country in a hybrid car recently, which cost him $72 in gasoline.

Assembly Speaker Bob Hertzberg (D-Sherman Oaks) proposed a plan in which large power consumers would negotiate their own contracts with energy suppliers, while residents and small business owners would still get their electricity from the utilities.

And a UCLA economist claimed that speculation of major economic fallout from the rate increases is overstated. "Even if you pay higher rates, the average consumer is going to pay less overall than the consumer in Arizona and Nevada," said Chris Thornberg. "It's not going to have the economic impact that some people think."

The president of the California Chamber of Commerce, Allan Zaremberg, disagreed. He said companies that use lots of power--drywall manufacturers and food processors, for example--would be compelled to leave the state, creating a vacuum that could have dire economic effects.

"Nobody has got an endgame here," he said.

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