DWP Board Approved $2.8 Billion Budget.

LOS ANGELES--(BUSINESS WIRE)--June 17, 1999--

Generation Debt To Be Reduced by $750 Million in 1999-2000 Fiscal Year Bringing Debt Down to Less Than $2 Billion By June, 2000; Rating

Agencies Provide Improved Outlook

The Los Angeles Board of Water and Power Commissioners approved a budget on June 15 for fiscal 1999-2000 that supports $2.1 billion in revenues for the Power System and $688 million for the Water System.

The budget reflects a dramatic reduction of more than 24 percent, adjusted for inflation, in operating and maintenance costs compared with 1995-96 levels. In addition, the Department is funding expanded capital improvements to support load growth and to improve system reliability.

"We are most gratified that the 1999-2000 fiscal year budget for power will yield approximately $750 million for generation debt reduction. This additional cash will bring the generation debt down to less than $2 billion or less than half of the $4.1 billion when I took office in September 1997," said DWP General Manager David Freeman.

Freeman said that he was also pleased that the financial rating agencies have published ratings with an improved outlook for the DWP. In fact, one agency official cited DWP as a possible model for other utilities.

Freeman added that the Department is investing in increased capital improvements to support the growing customer loads as well as improved system reliability.

Capital expenditures for the Power System budget will be $219 million. About 63 percent of the capital program will be for infrastructure strengthening and improvements for new business.

The $688 million Water System budget includes a $253 million capital program. The major elements of this program are $65 million for water quality improvements, $64 million for water distribution system additions and betterments, $33 million for the cement lining of corroded water mains, as well as $13 million in funding for water recycling projects. The Water System operating budget includes $11 million for conservation programs.

For 1999-2000, the DWP anticipates providing a total of $133 million to the City from electric and water sales, reflecting the traditional five percent transfer of revenues to support general City government services including fire and police. The DWP contributes more money to City government than any taxpaying entity.

The DWP budget also includes funding for the Public Benefits program that includes energy efficiency, photovoltaics, Cool Schools tree planting, electric transportation services and assistance to low income customers. The Public Benefits program meets the requirements of AB 1890, California's Electric Utility Restructuring Act of 1996.

The proposed budget includes enhanced revenues as a result of load growth due to an improved local economy and an aggressive wholesale marketing of the Power System's existing generation and transmission assets. All of this additional revenue will be used for generation debt reduction.

The budget reflects a rate freeze during the transition and strategies for at least a five percent electric rate reduction for residential customers by 2002. Large industrial and commercial electric rates will be reduced to meet or beat the competition at the end of the transition period when real competition begins, Freeman said. "We will be highly competitive on price, reliability and quality of services. We will partner with the city in economic development by marketing Green Power for a cleaner environment and championing energy efficient and environmentally friendly technologies. We will work to create and expand the market for clean energy resources and hope to bring new manufacturing and assembly facilities to Los Angeles which will create new jobs," Freeman said.