LADWP strongly denies Sen. Dunn’s allegations it avoided price caps

LOS ANGELES, June 27, 2002 — Los Angeles Department of Water and Power General Manager David Wiggs has strongly denied a series of allegations by Senator Joe Dunn (D-Santa Ana) concerning the department’s involvement in a 2000 energy transmission transaction with Pacific Gas & Electric’s unregulated trading unit, PGT.

“The Department of Water and Power did not engage in any trading of power across state lines to avoid state price caps,” Wiggs said. “The Department has cooperated fully with the State Senate’s investigation, and will continue to do so. The Department hopes that in the future, Senator Dunn will be more cautious in making allegations when he does not have all the facts at his disposal.

“During the energy crisis, the Department of Water and Power acted as a good neighbor to help other energy providers in the state obtain power, through the sale of surplus electricity, and through allowing power companies to use available space on our transmission lines. We helped utilities move surplus power to areas where it was badly needed to avoid rolling blackouts,” Wiggs continued. “We had an obligation to protect Los Angeles’ ratepayers and taxpayers, but we were always fair and transparent in our transactions.

“The transaction in question netted LADWP a grand total of $1,250,” Wiggs added. “This deal was about helping a fellow utility bring much-needed energy into the marketplace, and nothing more.”

Over the weekend, Senator Dunn released documents to the news media that purported to show LADWP had engaged in trading practices reminiscent of allegations against Enron — specifically that California-generated power had been sold across state lines and then sold back into California at unregulated prices to avoid price caps.

However, according to Wiggs, the entire substance of Dunn’s case against LADWP rests on an e-mail from a PGT trader. The trader used the word “ricochet” to describe a November 11, 2000, transaction in which LADWP’s transmission lines would assist PGT in moving power from Arizona to Northern California. For its assistance, PGT would pay LADWP $1,250.

Telephone records of the transaction show clearly that neither LADWP nor PGT intended this power to leave the state, and that LADWP notified the state’s Independent System Operator, which controls power distribution in the state, at the time the trade was in progress.

According to Wiggs, Dunn apparently confused the PGT trader’s use of the word “ricochet” with the use of the word “ricochet” in an infamous Enron memo that Congress uncovered last spring. In the Enron document, “ricochet” was one of many colorful terms used to describe a series of predatory trading practices. Enron used this word, but only in internal communications. Outside of Enron, 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. “I want the record to be very clear on this point. We testified truthfully. LADWP played by the rules and did not try to avoid price caps during the energy crisis or at any other time.”

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