With the distraction of the Democratic Convention in town thisweek, Los Angeles elected officials face a critical vote today onthe city’s future strategy for remaining relatively energyindependent through its operation of the nation’s largest municipalelectric utility.

Some of the city’s legislative and fiscal experts have raisedconcerns bout selling the city’s 20% interest in the Nevadacoal-fired Mohave Generating Plant in a multi-interest deal thatmust be wrapped up with Arlington, VA-based AES Corp. by nextmonth. By holding onto its interest in the facility, they argue thecity could earn $190 million in additional wholesale power revenuesover the next few years, which is equal to what it would net byselling its interest in the Mohave asset.

The city needs to either go-ahead with the sale this week, or itwill miss the opportunity to sell its interest along with pendingsales of the interests held by Southern California Edison andNevada Power in the same plant, according to a spokesperson for theLos Angeles Department of Water and Power (LADWP). So far, the citycouncil is taking up the issue without a recommendation from itsenergy and environmental committee, which approved it for a votewithout taking a stand.

Los Angeles political leaders are very aware that because ofCalifornia’s volatile wholesale electricity market this summer, itslocal government-run, $3 billion utility has made a small killingon the wholesale market and remained seemingly immune from powershortages for its 1.3 million customers .

LADWP has a peak-demand of between 4,500 and 5,000 MW, withanother 2,000 MW it can call on to sell into the over-heatedwholesale market. Since last summer, LADWP reportedly amassed anextra $140 million in revenues from selling wholesale power,including $35 million alone last month.

General Manager S. David Freeman, who is convinced he canbalance reliability, price and environmental concerns, is proposingthat the city make a “strategic shift” away from out-of-statecoal-fired and nuclear generation to more generation within thegreater LA metropolitan area. “We want our business and residentialcustomers to know they can count on their power supply,” he said.”And the efficient, clean-burning units will produce far lesspollution than the existing plants.”

The 10-year, $1.7 billion resource plan, which was approved lastmonth, calls for extensive re-powering of LADWP’s in-state naturalgas generating plants. It proposes to add 2,300 MW of cleaner, moreefficient natural gas-fired power. Freeman said LADWP would pay forthe program entirely through cash-no financing. (In the past threeyears, LADWP has cut it generation debt from $4.1 billion to under$2 billion, and its goal is to be “generation debt free by ’03.”)

The plan envisions producing power at under-market rates in thetimeframe of 2004-2010. LADWP’s math calculates that it can repowerfor about 2.8 cents/Kwh and sell that power at 4 cents, while itprojects the retail market to be around 4.7 cents/Kwh.

Freeman’s latest plan to upgrade LADWP’s power plant fleet inCalifornia has been lauded by economic development leaders in andaround the city, but it still needs to find enough politicalsupport to give up about 400 MW of competitive priced, albeit morepolluting, generation capacity from Mohave.

©Copyright 2000 Intelligence Press Inc. All rights reserved. Thepreceding news report may not be republished or redistributed, inwhole or in part, in any form, without prior written consent ofIntelligence Press, Inc.