CITY HAS PLANS FOR DWP MONEY CASH OWED FROM POWER CRISIS TO FUND UPGRADES.

Byline: Rick Orlov Staff Writer

Los Angeles officials said Friday that they plan to use the $166 million the city is owed for electricity sold during the state energy crisis to upgrade the system and avoid a rate increase - if they can find a way to actually collect the money.

The Federal Energy Regulatory Commission ruled Tuesday that the Department of Water and Power had not overcharged for electricity during the power crisis of 2000, a decision that cleared the way to unfreeze the funds owed it by a bankrupt power company and the California Independent System Operator, which coordinated energy purchases during the crisis.

City officials now are scrambling to figure out how to collect.

``That's the question now,'' Mayor James Hahn said. ``We don't know if the state will pay us or when. I'm glad FERC reached the same conclusion we had that the DWP did nothing wrong. Now, we have to figure out how to get the money.''

At least part of that answer might come in court.

Henry Martinez, DWP assistant general manager for power, said $54 million of the payment is owed by the Power Exchange, which is in bankruptcy proceedings, with the remaining funds owed by the CalISO.

``We'll put in a claim and see what happens. They owe us the money.''

CalISO spokesman Gregg Fishman said agency officials were studying the ruling to determine what steps it needs to take next.

``There are a lot of questions out there that we are looking to find the answers for,'' Fishman said.

City Council President Alex Padilla has introduced a motion to get the council involved in getting the funds paid to the city.

``The state never should have held up the payments and now we just want what we are owed,'' Padilla said.

Hahn, Padilla and other city officials said all of the money should be used by the DWP to repair its system and head off any future electricity rate increases.

The City Council this month approved an 11 percent increase in water rates. But, because the two systems are separate, revenue from the power fund cannot be used directly to offset the water system costs.

``In a sense, this is a windfall for the department, but we should use it to make sure the system is operating properly and we can head off future increases,'' said Councilman Tony Cardenas, who chairs the council's Commerce, Energy and Natural Resources Committee overseeing the DWP.

``What we heard about with the water rate increase was the need to work on the infrastructure. I think we should do that now with the power side and to work on the security of the system.''

Hahn agreed, saying he had no plans to use the additional money for other city programs.

As part of his $5.3 billion spending plan, Hahn transferred $60 million more than the normal 7 percent taken from the power side to balance the budget.

In all, the general fund is getting $239 million in the coming year from the DWP.

Hahn said he would not be taking any more money from the utility, but he wants to see the money used to develop renewable energy sources.

``Our goal remains to have the DWP have 20 percent of its energy needs from renewable sources by the year 2017,'' Hahn said. ``I'm interested in seeing as much money go in that as we can afford to reduce emissions and help clean up the air.

``If we can make the department more efficient and less reliant on gas and energy, we will all be better off in keeping rates low,'' Hahn said.

Padilla said he also supported the mayor's proposal.

``Renewable energy is one of the key issues for the DWP to look at,'' Padilla said. ``That's where I want to see us invest this money.''

Rick Orlov, [phone]

rick.orlov(at)dailynews.com