LADWP hires firm to ‘end confusion’ over power trading and wheeling practices

LOS ANGELES, Calif., July 3, 2002 — In order to provide a detailed accounting of the role the Los Angeles Department of Water and Power played during the energy crisis, General Manager David H. Wiggs recently announced he has hired an energy industry law firm to conduct an internal review of the voluminous records documenting LADWP’s trading and marketing practices.

“During the energy crisis, LADWP played a key role in keeping the lights on for all Californians,” Wiggs said. “Recently, there has been a lot of confusion regarding what the Department did during that period. Mayor Jim Hahn asked me to provide him a full accounting, and this internal analysis will provide the mayor, the board of commissioners and me with the facts so we can better answer questions about the Department’s role during the energy crisis.”

The LADWP hired the Washington, D.C.-based firm of Van Ness Feldman based on its extensive background in the energy industry and familiarity with the Department. Van Ness Feldman, LADWP’s outside counsel on issues before the Federal Energy Regulatory Commission, has extensive experience in conducting internal audits of utility transactions.

Van Ness Feldman will interview more than 40 LADWP employees, including the Department’s traders, marketers and management. The interviews will provide information on how power trades are made, with whom and how trades are documented. A second phase will consist of a review of taped telephone calls of the transactions to assess LADWP business practices and procedures. The final report will be delivered in September.

Last week, the Senate Select Committee to Investigate Price Manipulation of the Wholesale Energy Market raised questions about the LADWP’s role in transactions that some say bore a superficial resemblance to private-sector trades that avoided price caps.

An initial Department analysis of telephone transcripts shows LADWP traders fulfilling a request by a private energy trading firm to transmit energy from Arizona to Northern California for a fixed fee. The LADWP grossed $1,250. The energy was later sold by another private energy firm to the Independent System Operator for the maximum price allowed under state rules and provided to residents in Northern California.

To assist the Committee in its investigation, LADWP officials made the estimated 26,000 hours of tape-recorded telephone calls available to its staff, and turned over thousands of pages of documents, Wiggs said.

During the crisis, according to Wiggs, the LADWP enacted a “California First” policy, under which it offered its surplus electricity for use in California, and provided access on its transmission lines to energy providers that needed to transmit power throughout the state.

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