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Split Between LADWP And CA-ISO Widens

Split Between LADWP And CA-ISO Widens

The continuing public split between the nation's largest municipal utility and California's nonprofit, state-chartered transmission grid operator is widening with finger-pointing involved in the plans for heading off potential power shortages this summer. Left unresolved is the more than two-year-old discussion attempting to bring the Los Angeles Department of Water and Power (LADWP), a transmission- and generation-rich muni, into the state's fold.

Prospects statewide for pockets of insufficient peak power when the weather heats up have accentuated the rift because the state grid operator, California ISO (Cal-ISO), is looking at possible net shortfalls while LADWP is facing the summer with excess power to sell even in most peak-load situations.

"Put simply, they (Cal-ISO) have a problem and we don't," said LADWP's outspoken general manager, S. David Freeman, following a public ceremony with city political leaders Thursday celebrating the city utility's slashing more than $2 billion of its generating plant debt in the last 2-1/2 years. "We have surplus, and they don't. Their problem is our opportunity."

Freeman said the department's last complete fiscal year (1998-99), LADWP earned net revenue of almost $100 million in wholesale power sales.

Cal-ISO President/CEO Terry Winter a day earlier had referred to LADWP as somewhat of an outcast within the state, noting that the state's other major municipal utilities (more than two dozen) operate under the ISO and the three investor-owned utilities' control areas, but LADWP is outside of all that, operating like the out-of-state import generators do.

"On this reliability question, LA is really well positioned to provide reliable service in this summer peak," said Bruce Hamer, a LADWP wholesale marketing director. "There is a fear among us that the Cal-ISO will argue in Sacramento (to the state political leaders) that our not being a member of the ISO contributes to less reliability of California's power supply.

"That simply is not true as far as we are concerned because the reality is that we (LADWP) has built the system to benefit the city first, and next we go out of our way to help our neighbors in the state. It is grossly unfair to suggest that we contribute to the lack of reliability in any way."

At the center of the animosity is the inability of the Cal-ISO and LADWP to agree on terms for the massive muni turning over to Cal-ISO its transmission system, which represents a little more than one-quarter of the state's infrastructure for delivering high-voltage bulk power. Cal-ISO argues they cannot disadvantage the three large investor-owned systems that have been put under the state nonprofit's operations, and LADWP contends that it would have to raise rates for its customers to pay charges that it considers too high and unfair.

"If they would make me an offer where I could break even, I would join," Freeman said.

The proposed Cal-ISO pricing model disadvantages the large munis, LADWP contends, maintaining what it calls "serious concerns." Ultimately, Freeman indicated that the state legislature may pass some legislation this summer that helps resolve the issue for both the IOUs and municipal utilities.

Richard Nemec, Los Angeles

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