Not wilting under the public spotlight so far but faced with heightened public criticism from state elected officials, the Los Angeles Department of Water and Power (LADWP) tried hard last week to stand its ground on information about its power trading in late 2000 that on the surface appears to contradict testimony the utility’s representatives gave under oath to legislators in May.

The apparent contradiction was seized upon last Thursday in a state legislative hearing in Sacramento in which LADWP was accused of potentially engaging in market speculation and attempts to drive up prices, which would be illegal.

Mark Ward, LADWP’s wholesale trading director who testified to the committee earlier in the spring, assured the committee the municipal utility was not trying do a so-called “ricochet” trade involving PG&E’s trading arm, an affiliate of Baltimore-based Constellation Energy and the state transmission grid operator, Cal-ISO. However, the basis for Ward’s conclusion did not include any follow-up questioning by the utility of the traders doing the deal at the time (November 2000). The traders have since gone on to other jobs with the massive utility. It perplexed state legislators and their staffs involved in a now more-than-year-old investigation.

Late last Thursday, a California state senate energy price investigative committee grilled Ward and other LADWP representatives, other smaller municipal utilities, and Williams Energy Trading about alleged “ricochet” power trades taking place during the state’s 2000-2001 energy crisis. Elected officials were harshest in their comments toward LADWP, inferring that the huge local government-run enterprise was not taking the state’s ongoing probe seriously enough.

While reiterating that he was “deeply disturbed” by what he characterized as LADWP’s apparent slow responsiveness to year-long subpoenas from the state senate’s Select Committee to Investigate Price Manipulation of the Wholesale Energy Market, the ranking Republican member, Sen. Bill Morrow, at one point said there was a “marked difference” in the attitude of the other utilities compared to LADWP.

In the hours of testimony and questioning from the state senate investigative committee, headed by Sen. Joe Dunn, it became apparent that LADWP’s status as the nation’s largest muni and its exemption from state jurisdiction were a growing source of frustration for the state elected officials. Where the major private-sector utilities are part of the Cal-ISO and closely regulated by the California Public Utilities Commission, LADWP, in contrast, is subject mostly to local regulation by the city government structure in Los Angeles.

LADWP adopted a decidedly indignant stance last week, firing back at accusations from Dunn who inferred that new information regarding trading transactions in the state’s 2000-01 energy crisis may have indicated the huge public sector utility officials earlier lied when they said LADWP had not engaged in any trading aimed at driving up wholesale electricity prices.

In a prepared statement for news media before the legislative hearings, LADWP General Manager David Wiggs said his utility specifically did not “engage in any trading of power across state lines to avoid state price caps,” and that in the future he hoped Dunn “will be more cautious in making allegations when he does not have all of the facts at his disposal.” LADWP has “cooperated fully” with Dunn’s special committee and it “will continue to do so.”

“I want the record to be very clear on this point,” Wiggs said. “We testified truthfully. LADWP played by the rules and did not try to avoid price caps during the energy crisis or any other time.”

By making its excess power capability beyond the city’s requirement available throughout the state during the electricity crisis in the closing months of 2000 and the first half of last year, Wiggs said LADWP acted like a “good neighbor,” including allowing power companies to use available transmission line space to move power where it was badly needed. He said the questionable transaction identified in an e-mail and on an audio tape of trading discussions submitted by the PG&E trading unit netted the city-run utility $1,250.

“The deal was about helping a fellow utility bring much-needed energy into the marketplace, and nothing more,” Wiggs said in a prepared statement, noting that the entire basis for Dunn’s allegations was centered on the PG&E trader’s use of the word “ricochet” to describe a Nov. 11, 2000 transaction in which LADWP’s transmission lines would assist PG&E’s affiliate in moving power from Arizona to northern California.

A closer look at telephone tapes, according to Wiggs, show that “neither LADWP nor (PG&E) intended this power to leave the state, and that LADWP notified the state’s independent grid operator (Cal-ISO) at the time the trade was in progress.” Cal-ISO reportedly let the trade stand the first hour, but blocked it the second hour, noting it was inappropriate, according to a source close to the situation. However, Dunn and his staff at the legislative hearing released transcripts of recordings from other parties that cast doubt on the municipal utility’s interpretation. In those tapes, traders seemed to clearly indicate the Cal-ISO would not allow a ricochet deal like the one being consummated.

LADWP’s strongly worded rebuttal said that the state senator apparently “confused” the PG&E trader’s use of the word “ricochet” with its use in the internal Enron memos that have documented intended strategies to manipulate the wholesale power market in California. The muni argued that Enron used the term, but only internally and so no utility used the word “ricochet” to describe trading across state lines.

“We are obviously concerned when a key state official suggests representatives of the LADWP would perjure themselves under oath when giving information to a state senate committee,” Wiggs said.

Although drawing short of accusing LADWP’s Ward of perjury, Dunn hammered away at what the muni’s people have said under oath and what is revealed by tapes of the transactions in question. A source of concern for Dunn, Morrow and the other state senators was the apparent contradictions between a tape provided by PG&E’s trading arm and one from the LADWP, which Ward at one point noted had been subjected to some editing or after-the-fact commentary.

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