DWP Takes Leap Forward to Prepare for Energy Competition; Utility's Debt Slashed by $1.5 Billion in Two Years.

LOS ANGELES--(BUSINESS WIRE)--Nov. 2, 1999--

Preparing the Los Angeles Department of Water and Power (DWP) to compete in a deregulated energy marketplace, General Manager S. David Freeman announced today that the department has slashed generation debt by $1.5 billion, launched a model green power program, secured more than $1 billion in long-term customer contracts, increased revenues from several sources and gained increased confidence from Wall Street since he became head of the nation's largest municipal utility two years ago.

Freeman today presented a two-year progress report to the Board of Water and Power Commissioners, and emphasized that the department must continue to implement a disciplined approach to creating a fiscally stable public utility that will be able to provide low rates and reliable service to its millions of customers.

"We are out of the red and into the black and are prepared to meet competition head-on," said Freeman. "This utility will pack a powerful punch with our low rates, superior service and commitment to the community and its economic growth," he added.

Freeman took the reins of DWP two years ago when the Department was faced with more than $4 billion in generation debt and had the largest workforce per kilowatt-hours in the industry. Many observers believed DWP could not meet the challenges it faced.

"We're proving the critics wrong," said Freeman. "DWP's best days are ahead of us. This utility will be a model municipal utility in America that customers want to stay with," he said. Already, two dozen of DWP's largest industrial customers signed long-term contracts to stay with the utility well past the opening of a competitive marketplace. These contracts are valued at more than $1 billion.

The DWP is also accelerating efforts to promote energy efficiency and the use of clean sources of power. Freeman reported to the commission that DWP had already signed up more than 16,000 customers to the utility's `Green Power for a Green LA' program that offers Angelenos the option to purchase renewable energy from natural sources such as solar, wind and hydro.

"We're going to make Los Angeles the green power capital of the world," said Freeman. "We're cleaning the air, reducing the threat of global warming and creating new jobs in the process. I call that a win-win-win situation," he said.

Additional report highlights included:

-- Expanded the revenue garnered from the wholesale electricity

market, resulting in revenue of $143 million over the past two

years;

-- DWP maintained an Aa3 credit rating and had removed the "under

pressure" caveat from Moody's Investor Service;

-- Negotiated new coal contracts which represent a present value

savings of $67 million; and

-- Transferred $230 million to the City of Los Angeles general

fund.

Freeman also highlighted several areas of progress in the water side of DWP's operations over the past two years. These achievements include:

-- Settling the 20-year Owens Valley dispute over dust pollution

from the dry lake;

-- Launching a three-year, citywide water fluoridation program;

and

-- Reaching an initial agreement on water quality for the city's

open reservoirs.

DWP serves more than 3.7 million people in Los Angeles and was established almost 100 years ago to provide the water and electric services to Los Angeles residents and businesses.