For months now, L.A. city officials have touted the Department of Water & Power as being immune from the effects of the power crisis plaguing the rest of the state. There would be no rolling blackouts in L.A., no rate increases and no utility bankruptcies, they have repeatedly assured Angelenos.

But things may not be as rosy as they seem.

In recent weeks, it has become increasingly clear that the DWP is not immune to the state's energy crisis. The utility is facing soaring natural gas costs and an uncollected tab from excess power sales approaching $200 million. It also faces a protracted political battle with Sacramento over just how much it should charge the state for power, at the same time it faces a lengthy leadership transition as former general manager David Freeman has become energy adviser to Gov. Gray Davis.

And while the DWP remains in an enviable position for the present, there is concern that the agency could be drawn deeper into the crisis, particularly as that crisis drags on into next year.

"We're seeing some cautionary flags emerge. There are trends out there now that, if they go unchecked, could affect its financial picture," said Stephen Erie, a political science professor at UC San Diego who has long tracked regional water, power and transportation issues.

That feeling is shared by at least one key member of the L.A. City Council, which has jurisdiction over the utility.

"The feeling of immunity from the power crisis is clearly behind us," said L.A. City Council President Ruth Galanter, who also chairs the council's commerce, energy and natural resource committee. "We have quite a challenge before us, both with the natural gas prices and with all the politics going on here with the power crisis."

Gone for now is any discussion of across-the-board rate decreases that were on the table as recently as earlier this year.

"As long as these natural gas prices stay up, we might not be able to reduce rates as quickly as we had hoped to," Galanter conceded.

Natural gas woes

Indeed, the biggest concern is over the natural gas prices. The DWP is now spending $400 million a year on natural gas to fuel roughly one-third of its generating capacity. That's more than double the $180 million it spent in the fiscal year ended June 30, 2000, but it's still only a small portion of the DWP's $2.5 billion annual budget.


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