APPARENT POWER MISTAKE PAYS OFF SALES NET CITY OF L.A. $500,000 A DAY.

Byline: Joseph Giordono Staff Writer

The city of Los Angeles has enjoyed an excess of power while other regions suffer for two reasons: it overbuilt power plants at the peak of the energy crisis two decades ago, and ducked energy deregulation in recent years.

What seemed like a fatal mistake that pushed the Department of Water and Power to the brink of bankruptcy has yielded huge dividends in the energy crisis: nearly $500,000 in profits a day from selling excess power, officials say.

``Our customers are free to light up whatever holiday decorations they have. We have an abundance of power,'' said Frank Salas, the DWP chief of staff.

According to DWP officials, the agency is on track to increase its generating capacity, lower rates by 10 percent and completely pay off $4.1 billion in debt by 2003.

The agency had accumulated the debt when building such power plants as the coal-fired Intermountain Power Project plant in Utah and the Palo Verde nuclear facility in Arizona. The cost of those plants became insupportable and fuel costs fell over the last 20 years,so the DWP considering selling the plants at a discount to reduce its debt.

The DWP has also not yet begun deregulation, giving it the advantage of producing its own power rather than having to buy it on the open market.

Instead, the city-owned agency has been able to send 1,200 megawatts to 1,500 megawatts to other power-starved regions of the state.

Last year, DWP officials signed long-term contracts with 21 of its largest customers - those who have annual electricity bills over $1 million - to carry them through the deregulation process, which could be completed by 2004.

The energy boon is not permanent, however. Salas warned that if this winter proves to be extra-cold and the power supply continues to shrink, usage warnings might have to be issued at some point.

But years of building up the department's infrastructure has allowed the agency to begin to meet growth in energy demands, officials said.

In fact, the Haynes Generating Station in Long Beach is producing energy almost exclusively for sale outside of the city, Salas said.

And while customers outside of the DWP service area are asked to sacrifice a bit of holiday cheer, city officials say they have no plans to cut back on public light displays.