Freeman/LADWP Criticized for "Gouging" ,
 ----- Forwarded by Jeff Dasovich/NA/Enron on 03/08/2001 12:15 PM -----

	Scott Govenar <sgovenar@govadv.com>
	03/08/2001 12:12 PM
		 
		 To: Jeff Dasovich <jdasovic@enron.com>, Sandra McCubbin 
<Sandra.McCubbin@enron.com>, Susan J Mara <smara@enron.com>
		 cc: 
		 Subject: Freeman

It's about time!

By Mike Taugher

                       TIMES STAFF WRITER

                       An East Bay state senator is calling on the
                       governor to investigate what he called "price
                       gouging" by a taxpayer-supported agency in Los
                       Angeles.

                       "It's one thing to have some Texas guy ripping
                       you off, but it's another thing to have a public
                       agency in your own state," said Sen. Don Perata.
                       "I think they ought to give the money back."

                       The Oakland Democrat cited reports that put the
                       Los Angeles Department of Water and Power's
                       profits from sales to the state during the past
                       seven weeks at $400 million during a period when
                       the state's electricity bill has moved past $2
                       billion.

                       Perata, comparing the agency's electricity sales
                       to its raids on northern counties' water during
Los
                       Angeles' formative years, said a rebate is in
order
                       to prevent heightened conflicts between Northern
                       and Southern California.

                       "I think it's perfectly legal," Perata said. "I
think
                       it's immoral."

                       But Frank Salas, chief of staff for the Los
Angeles
                       agency, said his department is selling
electricity
                       at a reasonable 15 percent profit. He said recent

                       sales to the state have been in the range of $300

                       to $350 per megawatt-hour and that the $400
                       million profit figure cited by Perata was grossly

                       inflated.

                       "We would welcome an investigation," Salas said.
                       "If there is an investigation, we would be shown
to
                       be a good neighbor to the state and not a price
                       gouger."

                       Perata said that if Davis does not investigate
the
                       state's purchases from the Southern California
                       agency, he will file a formal request under the
                       public records law to force disclosure regarding
                       the purchases.

                       Details about the state electricity purchases
have
                       been shrouded in secrecy because the governor
                       says release of the information will allow power
                       generators to manipulate prices and drive them
                       higher.

                       "This whole area is a like a star chamber,"
Perata
                       said. "This stuff can't be proprietary if it
involves
                       public agencies."

                       Meanwhile, the head of the Los Angeles water
                       and power agency, who has been tapped by
                       Davis to lead the state's efforts to obtain
                       long-term electricity contracts, said that even
                       though the state is spending about $55 million a
                       day to keep the lights on, state coffers can be
                       refilled without raising consumer rates.

                       "There is no basis for any rate (increase) ...
                       maybe ever," said S. David Freeman, director of
                       the Los Angeles water agency.

                       Freeman was responding to an order issued
                       Wednesday by the state Public Utilities
                       Commission clearing the way for the state
                       treasury to be reimbursed for its power
                       purchases.

                       The PUC, meeting in San Francisco, delayed for
                       at least a week a decision on the more
                       controversial issue of how much the state should
                       be repaid. But it did issue an order that said
the
                       state Department of Water Resources is entitled
                       to reimbursement.

                       Pacific Gas & Electric Co. contends that under a
                       formula set up by lawmakers, the utility is
entitled
                       to collect its costs for buying power before
                       reimbursing the state. According to the utility's

                       calculations, that would mean it would keep all
of
                       the money paid to it by customers even though
                       the state today is buying up to one-third of the
                       electricity used each day.

                       Freeman countered that for every kilowatt-hour
                       the state purchases, its utilities are required
to
                       pass on the roughly 6 cents or 7 cents that
                       customers pay on their bills to buy those
                       kilowatt-hours.

                       "They are whistling Dixie," Freeman said. "The
                       law is very clear it is not their money."

                       PUC President Loretta Lynch said she hoped the
                       commission would decide the question next
                       week.

                       Freeman said he has deliberately kept his
                       distance in transactions between the state and
                       his employer and that he does not know how
                       much electricity the Department of Water and
                       Power is selling to the state. Freeman has been
                       working with Davis for the period of time Perata
is
                       examining.

                       "On my watch there was no price gouging,"
                       Freeman said.
alan.comnes@enron.com, angela.schwarz@enron.com, beverly.aden@enron.com, 