Senate Vote on Power Official to Be Delayed

SACRAMENTO -- The state Senate will put off voting to confirm S. David Freeman as head of the state public power authority until lawmakers learn more about his role at the Los Angeles Department of Water and Power during the electricity crisis, the Senate leader said Sunday.

Senate President Pro Tem John Burton (D-San Francisco) said the vote, previously scheduled for today, would be delayed in light of an e-mail recently received by Senate investigators that says the Los Angeles utility has been involved in a “ricochet” power-trading scheme.

Enron Corp. traders and others familiar with California’s electricity market have described “ricochet,” or “megawatt laundering,” as the exporting of power to other states so that it can be brought back and sold at a higher price.

“I’d be surprised if [S. David Freeman] was involved in such unseemly behavior,” Burton said. But delaying the vote “seems to be the prudent thing to do, so that members know the facts before they vote, instead of getting into a brouhaha or a big stink on the floor based on a newspaper article,” he said.

A November 2000 e-mail by a power trader that was recently received by Senate investigators and obtained by The Times warns other power traders to “beware of ricochets with LDWP.”

Written by an employee with the unregulated trading division of Pacific Gas & Electric Corp., the e-mail says that the California Independent System Operator, which manages much of the state’s transmission grid, “is savvy to L.A.’s attempts to circumvent ricochets by showing an export and import of equal megawatts” at the California border “in order to hide the ricochet nature of the transaction.”

DWP officials swore under oath to federal and state investigators last month that, in 2000, the utility did not engage in “ricochet” transactions, as defined by Enron attorneys and traders. In a memo written in 2000 but made public last month, Enron traders described ricochet as a scheme in which they bought electricity in the California market, scheduled it for export to another state, then bought back an equivalent amount of power to be sold to California grid operators at a higher price.

Power market experts say such transactions are difficult to prove. But by exporting and then importing power, a company could circumvent federal price caps in California and worsen Cal-ISO’s supply situation, making grid operators more desperate to avoid blackouts and thus more willing to pay high prices.

Freeman said Friday that he had no knowledge of DWP’s having engaged in such schemes while he was general manager of the utility. DWP’s assistant general manager for power, Henry Martinez, said his traders use “ricochet” to define a kind of transaction different from the one described by Enron.

A DWP ricochet, said Martinez, involves scheduling electricity to flow on a transmission line to the California border, then bringing it back without having crossed the border.

Sen. Joe Dunn (D-Santa Ana), chairman of the Senate committee investigating the collapse of the state’s power market, has said he will hold hearings about the PG&E; e-mail as early as this week.

Bill Simon Jr., the Republican nominee for governor, on Sunday used the matter to attack Gov. Gray Davis. Since early 2001, the governor has leaned heavily upon Freeman as an energy advisor.

At a news conference at DWP headquarters, Simon called on Davis to find someone other than Freeman to head the public power authority.

The governor, Simon said, has lashed out at private energy companies for gouging California consumers during the crisis, but ignores alleged overcharging by the DWP. Simon referred to a 2001 Cal-ISO report that found that the DWP had charged, on average, more than many private companies for its electricity.

“What we haven’t heard from the governor,” said Simon, “is an explanation as to why he has hired ... individuals who have been implicated in gouging California ratepayers.”

In March, Freeman won the approval of the Senate rules committee to head the Consumer Power and Conservation Financing Authority. He can stay in the job until August without a confirmation vote of the full Senate.